A Chapter 13 bankruptcy case is commonly called a “wage earner’s” bankruptcy. That is because the debtor must have a regular income to pay the monthly Chapter 13 plan payment. Losing your job could affect your ability to pay your post-petition payments, like your home mortgage or car loan, or may cause you to miss plan payments.
If your income interruption is brief, and you only miss one or two plan payments, the bankruptcy trustee will work with you to catch up. The trustee may allow you to extend your payments (if available) or simply give you time to pay. The bankruptcy court could also modify your payments according to your new income.
You must also make arrangements to make up any missed post-petition payments that are not included in your monthly plan payment. If you do not pay your monthly house or car payment, the creditor could ask the court for relief from the bankruptcy stay. In some cases it may make sense to surrender a vehicle or even real estate that you cannot afford to keep. Your attorney can review these options with you to successfully restructure your bankruptcy plan.
If the loss of income continues, you may be forced to consider converting your case from a Chapter 13 to a Chapter 7. In Chapter 7 you can eliminate your responsibility for most of your debts through a discharge. In some cases your can also keep property through a reaffirmation agreement with your creditor.
A job loss is a stressful situation and may significantly impact your bankruptcy case. Keep your attorney informed of any changes that occur in your finances. Your attorney can recommend changes to your plan that are in your best interest.