Lexington debtors who file for protection by filing bankruptcy under Chapter 13 may at some future point find themselves unable to honor the terms to which they agreed. This could happen if the wage-earner loses their job after filing for Chapter 13 and agrees to make payments according to the plan approved by the court.
No longer having a salary to continue making payments according to the terms agreed on by the court puts debtors in untenable positions. Suddenly, the protections they enjoyed under the terms of the bankruptcy — automatic stays on foreclosures and other collection activities — are in immediate jeopardy.
What's a debtor to do?
Sometimes, when it rains, it pours. But that does not necessarily mean that you are without options. Your situation could be salvaged by:
- Dismissing your Chapter 13 bankruptcy
It may seem counterintuitive to voluntarily dismiss your own filing (and all the protections and stays it offers you), but it is a strategic move in some cases.
- Converting your Chapter 13 to a Chapter 7 bankruptcy
If the terms of your Chapter 13 repayment plan were contingent upon your continued employment, without that job you might now pass the Means Test for filing under Chapter 7. But it's essential to consult with your Lexington bankruptcy attorney before taking this action.
Both your vehicle and any equity that you have in your home could be in jeopardy, because unlike in a Chapter 13, these assets get sold by the trustee and the proceeds from the sale go to your creditors.
- Modify your loan while protected by Chapter 13 bankruptcy
Payments can be deferred under Chapter 13. If you have already exhausted this option, it could still be possible to seek a loan modification. Don't wait to inquire about this, as the clock is ticking.
Keep trustee in the information loop
It's always prudent to keep the trustee abreast of any and all changes that could potentially affect your ability to meet the terms of your three- or five-year repayment plan. You and your attorney should also begin strategizing how to resolve your dilemma as soon as you realize that your situation is about to change markedly.