Chapter 13 bankruptcy can be a great option for New Jersey residents who want to relieve themselves of their debts and can make monthly payments on the debt.
While a Chapter 7 bankruptcy discharges all qualifying debts, Chapter 13 bankruptcy involves paying off the debts through a three to five-year payment plan. Chapter 13 bankruptcy is often a more attractive option if you own a home because you are likely to keep your home through the process.
However, a Chapter 13 bankruptcy plan operates much like any other debt. You must make monthly payments or face penalties.
Our life situations tend to change, especially over a longer period, such as three to five years. A job loss, illness or other unexpected situation could make it difficult or impossible to keep making your Chapter 13 payments.
Financial hardship
Most bankruptcy courts can modify a Chapter 13 payment plan if you experience financial hardship. The hardship must typically be unexpected and out of your control.
For example, being laid off from a job and losing your source of income is likely a valid example of hardship, while gambling away your money so you cannot make your Chapter 13 payment is not.
You should not ignore the problem, miss the payment and hope the problem will go away on its own. The court will either discharge your bankruptcy or convert it to a Chapter 7.
Both these options have negative consequences. If your bankruptcy is converted to Chapter 7 and you own a home, a court could order your home to be sold to pay off the debts.
Talk with your trustee
Generally, if your payment is only a few days late, a court will not immediately act. However, you should talk to your bankruptcy trustee, explain the situation and tell them when you will pay.
While there are no guarantees, this might be enough to convince the court to hold off while you work out a way to make your missed payments.
