If you file for Chapter 13 bankruptcy, you will be required to submit a debt payment plan to the bankruptcy court that outlines how much you can afford to pay on your debts based on your income and what debts you want to keep. The Chapter 13 payment plan uses only your disposable income to pay on your debts. Payments are made to a court-appointed trustee. Secured debts, such as your home loan, are paid first. Any amount remaining from your payment is applied toward your unsecured debts, such as credit card balances.
Stopping a Chapter 13 Bankruptcy
One of the benefits of filing a Chapter 13 bankruptcy is that you can stop the process at any time; you do not even need to have a hearing. However, while there are many valid reasons for stopping a Chapter 13 plan, there are repercussions for doing so that should be carefully weighed before making a decision. Discussing the subject with your trustee or a bankruptcy attorney is advisable.
Reasons to Stop Chapter 13
Stopping a Chapter 13 bankruptcy can be prudent in certain situations. For instance, if your creditors petition the bankruptcy court to allow them to repossess your property and the whole reason you applied for a Chapter 13 bankruptcy was that you hoped to retain those properties, you may decide that you no longer want to file bankruptcy. Alternatively, in determining your debt payment plan, you may find that your income is inadequate to allow you to retain your assets so you would rather file a Chapter 7 bankruptcy, which involves complete liquidation. You may also want to dismiss your Chapter 13 filing if you incur new debt, such as ongoing medical expenses that are not covered by insurance or the birth of a child; this way, you could wait 180 days and restart the process in order to include the new debt.
How to Stop a Chapter 13 Payment Plan
In order to stop a Chapter 13 payment plan, you will need to file a debtor’s motion to dismiss with the bankruptcy court and send a copy to your trustee and all your creditors. The motion form requires simply that you provide basic information about your case and that you list your reasons for wanting your case dismissed. A dismissal hearing will be scheduled. During that time, any objections will be heard. If there are no objections or the bankruptcy judge otherwise rules in your favor, your Chapter 13 bankruptcy will be dismissed.
After You Stop Chapter 13
After you stop a Chapter 13 payment plan, you will become liable for all your debts in full, regardless of what was settled or dismissed through Chapter 13 proceedings. Further, once your bankruptcy is dismissed, you will no longer be protected from collection efforts by your creditors (e.g., lawsuits, wage garnishment). If you stop your Chapter 13 bankruptcy, you will also be liable for the pre-bankruptcy amount of your debt, plus arrears, as well as various administrative fees (e.g., court administration fees, trustee fees). You will, however, be reimbursed any funds you paid to your trustee, minus those already disbursed to your creditors and those used to cover the administration of your Chapter 13 plan. Also, you will have to wait a minimum of 180 days before you can refile for a Chapter 13 bankruptcy.