A Chapter 13 bankruptcy prevents creditors from taking your money to pay off debts. In the process of repayment, unforeseen circumstances may halt paying off debts. Such cases can relate to lessening income or losing your sole income generator: employment.
In that case, you may need to modify your repayment plan to lessen the impact of a job loss on your ability to settle debt.
Impact of a job loss on paying off debts
Experiencing a job loss during Chapter 13 bankruptcy may increase your worries. Without a steady income, you may encounter difficulties in both your professional and personal life. Some of the specific challenges you could face include:
- Difficulty making the required plan payments
- Struggles in managing other debts
- Potential inability to meet basic needs
This can further strain your anxieties and make it even more challenging to meet your repayment obligations.
Modifying the repayment plan
If your income drops because of a job loss, your bankruptcy options include requesting a Chapter 13 plan modification or a hardship discharge. Lowering or “modifying” a monthly plan payment after an income loss is not an easy attempt. However, you may need this to continue paying off creditors. To request a modification, you must take the following steps:
- File a motion with the court that outlines the reasons for the modification
- Provide supporting documentation
- Wait for the court to review your case and determine whether to approve or deny it
If approved, the court will issue an order modifying your repayment plan. They may adjust your monthly payments or extend the repayment period.
In some cases, if your income drops significantly, you may have the option to switch to Chapter 7 bankruptcy. However, your eligibility still depends on the needed requirements for the switch. In any case, it’s crucial to inform your bankruptcy trustee immediately about any changes in your employment status. Doing so allows you to explore available options and find the best solution for your situation.
