When the courts grant someone a Chapter 13 bankruptcy in Michigan, the debtor must keep up with their monthly payments. On-time monthly payments help keep their bankruptcy in good standing.
Falling behind on payments can put their bankruptcy at risk. In fact, falling severely behind on their payments could result in court action against their bankruptcy case. Here are some things people should know before falling behind on
Chapter 13 bankruptcy payments.
They may be able to adjust their payments
When someone experiences a financial emergency, there’s a chance they can adjust their payments. Notifying their bankruptcy trustee can help them get help with their monthly payments.
Their Chapter 13 bankruptcy may get canceled
When people miss their Chapter 13 payments, the courts can take action to remedy the situation. One of the actions the courts can take is to cancel the Chapter 13 case altogether.
When that happens, full repayment of debts can come due again. One recourse is to file for Chapter 13 bankruptcy protection again. Refiling can start the process over, which can help individuals get back on track.
Their Chapter 13 bankruptcy may change to Chapter 7
When someone falls behind on their Chapter 13 payments, there’s another option the courts can take. The court can decide to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy. Under the terms of a Chapter 7 bankruptcy, the court can liquidate all nonexempt assets to take care of the outstanding debt.
Falling behind on Chapter 13 payments due to a financial emergency can happen. Knowing what to do when an emergency occurs can help prevent long-term problems.