Loss of Income while in a Chapter 13 BK

[Anonymous]

Has anyone experience a loss of Income while in a Chapter 13 BK, if so what options were available to you?

Thank you!

[Horseshoez]

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@Anonymous wrote:

Has anyone experience a loss of Income while in a Chapter 13 BK, if so what options were available to you?

Thank you!

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While I didn't lose my income during my Chapter 13, I have read anecdotal reports of other folks who have.  I believe you have four options:

• Stop paying and have your case dismissed (not a good result).
• Find another job quickly and keep on with your plan.
• Work with your attorney to have your plan restructured.
• Work with your attorney to convert to a Chapter 7.

[jmw1]

If this happens, talk to your lawyer as early as possible. When you are told that you've been laid off, you tell your lawyer first TODAY. That was in my boilerplate from the lawyer after confirmation. You will have more options when the lawyer is the first person to find out.  The trustee motion to dismiss might take over two months to file, but you don't actually want to let your case sit with arrears. You'll have to find another job ASAP.  Try to find a new job within 90 days.

The easiest option is to suspend the payments for the required number of months to find a new job and then make them up over the remainder of the chapter 13. 

If income goes down permanently, then the dividend to unsecured creditors will have to go down. But it can't be lower than the liquidation amount in a BK7.  So I'd have a talk with the lawyer before making the move to reduce income if it's voluntary income reduction. It just may not be possible to quit a job and you might have to gut through your current job.

I think there might be extra CARES Act extensions to 84 months for 13s depending on your confirmation date. Talk to your lawyer to find out if those extra protections apply to you.

[Kewl017]

I had a decrease in income due to a company buyout. Basically got demoted. I talked with my lawyer and was able to convert to chapter 7. Just got my discharged this month. If you can convert, I would highly recommend it. I already re-established my credit and sitting with some cards that have a 3K and 5K limits.

[despritfreya]

The above responses are excellent.  I only want to add that COVID relief allowing an extension of a Chapter 13 Plan to 84 months expired at the end of March, 2022.  The Bill recently signed by President Biden, which increased the debt limit for Chapter 13, as far as I know, did not include reviving the ability to extend the Plan.

Des.

[TRC_WA]

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@despritfreya wrote:

The above responses are excellent. 

Des.

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Only a year after the original post... but yeah.