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What happens if I miss a Chapter 13 payment?

On Behalf of | Feb 3, 2023 | Personal Bankruptcy

Making the decision to file for bankruptcy is not an easy one. You may have made this choice after a lengthy time of struggling to keep up with your payments and watching your unpaid balances continue to grow. Debt collectors, wage garnishment and threats of foreclosure may all be things you experienced as a result of your unpaid debt. By filing for bankruptcy, you found a way to make collection efforts stop and regain control of your financial situation. 

For many Pennsylvania consumers, Chapter 13 is the ideal bankruptcy option. This choice allows one to make payments on his or her debt, consolidated into one manageable payment. However, things are not always in your control, and you may not be able to make your Chapter 13 payments on time. It is important to know what will happen if you miss a payment and what types of penalties you can expect. 

Understanding reorganization bankruptcy 

Chapter 13 bankruptcy is known as reorganization bankruptcy. This means that your debt is now one manageable payment that you will make, freeing you from multiple unmanageable payments while also meeting the demands of your creditors. You will pay a portion of your unpaid debt in this way for a period of three to five years, after which there will be a discharge of remaining balances. In many cases, being slightly late on your payment will not have a significant impact on the outcome of a bankruptcy case. 

If you are more than a month late, however, it could affect your ability to receive a successful discharge of remaining balances at the end of the process. The court could decide to dismiss your case, or it could convert your case to Chapter 7. This means the court will have the ability to liquidate certain assets for the repayment of debt. You will begin making payments according to the terms of your bankruptcy plan approximately 30 days after the filing date. 

Navigating the bankruptcy process 

Bankruptcy can be a confusing process, and you may be unsure of the right option for you. A Chapter 13 bankruptcy filing could be the best way for you to secure your future and regain your financial footing. However, you will benefit from an understanding of what to expect from this process and what will happen if there are issues while under bankruptcy protection.