Chapter 13 offers borrowers who overextend themselves financially the opportunity to rearrange their debts and institute a court-approved repayment plan while abiding by some financial restrictions, providing much-needed relief to thousands of individuals. Of course, not all who attempt a Chapter 13 repayment plan actually succeed in making all the payments on time. In some cases, this can cause major complications for the borrower and may even entirely derail the procedure.
If a borrower does fall behind on payments, the trustee overseeing the bankruptcy must examine the situation and determine if it justifies dismissal by a court. If so, then the court may choose to dismiss the bankruptcy.
If the trustee recommends dismissal, a borrower may petition to reinstate the plan, if he or she can provide compelling evidence that he or she has the ability to resume payments. The borrower may also petition the court to approve another repayment plan he or she can more reasonably manage. If the borrower does not remain engaged with the process and showing an effort to make the repayment plan work, the court will quickly dismiss it and send the borrower back to square one and beyond.
It is crucial to note that once a court dismisses a bankruptcy, creditors associated with the underlying debt may pursue payment from the borrower. If you hope to avoid creditors pursuing you over your own Chapter 13 complications, it is necessary to carefully examine your circumstances to identify a repayment plan that you can achieve or repurpose your income more efficiently to abide by your existing repayment plan. Be mindful to fully address these issues so that they do not sideline you on the way to financial freedom.