Keeping up on your Chapter 13 payment isn't always easy, but it's necessary. You'll need to refile if you don't pay your Chapter 13 payment and the court dismisses your Chapter 13 for nonpayment. Refiling a Chapter 13 case comes with difficulties. So it's usually best to ask the court to reinstate the original Chapter 13 case before it's closed.
If you must refile your Chapter 13 case, expect to encounter the following problems:
If the court has already closed your Chapter 13 case and your financial situation has changed, you might want to consider whether Chapter 7 bankruptcy would be a good fit. Our quick ten-question bankruptcy quiz can help.
If you don't comply with the plan payments or work with the Chapter 13 trustee appointed to your case to catch up when you fall behind, the trustee will file a motion asking the bankruptcy court to "dismiss" or close your case. At the dismissal hearing, you'll have an opportunity to ask the judge for time to catch up, and if the judge agrees, your case will remain open. If the court grants the trustee's dismissal request, your Chapter 13 case will come to an end.
You're expected to pay your Chapter 13 payment promptly each month. If you don't pay on time, interest and fees can build, and when they go unpaid, the Chapter 13 trustee won't have enough money to pay the amounts owed under the plan.
Usually, the Chapter 13 trustee will work with you if you have an unexpected expense. But you must inform the trustee immediately and follow the trustee's payment instructions to get your plan back on track.
Your primary concern should be your creditors. They'll be able to start collecting from you once the bankruptcy court dismisses your case and you lose creditor protection because your Chapter 13 plan is no longer in place.
You might, or might not owe as much as you did before filing Chapter 13. You'll get credit for all of your Chapter 13 payments. However, any interest stayed during bankruptcy will be added to what you owe. So balances on credit cards, medical bills, personal loans, and other unsecured debt could be higher than before you filed if the court dismissed your case before the plan paid on those debts.
Also, prepare yourself to handle unresolved mortgage, car loan, and judgment lien problems. Your creditors can resume wage garnishments, foreclosures, and repossessions if your Chapter 13 plan didn't bring the balances current (and there's a good chance it didn't).
You'll have to start all over again with a new Chapter 13 case because you can't actually "refile" your old, dismissed case. A few things to consider moving forward:
Plan to pay a bankruptcy attorney to prepare a new petition, schedule, and plan based on your current situation. You'll also pay a new filing fee and take another credit counseling course if it's been more than 180 days since you completed the first course.
Depending on the reason for the dismissal, you might also need to retain new counsel. Some bankruptcy lawyers steer clear of clients who struggle with Chapter 13 payments because of the additional work involved.
Bankruptcy courts frown on serial bankruptcy filings because of the potential to abuse the automatic stay—the order that stops most creditor collection actions. If you file a new case within one year of the previous case's dismissal, the automatic stay will last only 30 days unless you successfully motion the court for an extension.
Because the motion can be costly and could fail, consider another approach—proposing a well-thought-out repayment plan that's unlikely to draw an objection from the trustee and creditors. Once the court confirms the plan, the plan itself will bind your creditors to its terms, preventing them from taking action against you as long as you remain in compliance. You won't need the automatic stay any longer.
If you file soon after the court dismisses your previous filing, expect the trustee to ask why you'd be successful in the new case. If your income hasn't increased and your expenses haven't decreased, it could be challenging to convince the trustee that a meaningful enough financial or personal change has occurred.
Also, negative Chapter 13 bankruptcy notations remain on your credit report for seven years. The time begins when you file the new case, so filing again will likely extend the reporting period substantially. Learn more about life after bankruptcy.
Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help.
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