Chapter 13 If You Cannot Complete Your Plan

• Library: Chapter 13 Bankruptcy (Nolo) (2020 Ed.)

CHAPTER 13: If You Cannot Complete Your Plan

Dismiss Your Case

Convert Your Case to Chapter 7 Bankruptcy

Seek a Hardship Discharge

Debts That Are Not Discharged

Debts That Are Not Discharged If the Creditor Successfully Objects

Despite your best efforts to keep a handle on your finances and make your regular plan payments, you may be unable to complete your plan. If this happens to you, take solace in the fact that you aren't alone—a significant percentage of Chapter 13 debtors eventually find themselves in this position.

If you can't complete your plan, you have three options: Dismiss your case, convert it to a Chapter 7 bankruptcy, or ask the court to grant you a hardship discharge.

Dismiss Your Case

You have the absolute right to dismiss your Chapter 13 bankruptcy case at any time, as long as:

• The court doesn't believe that you filed your bankruptcy case in bad faith (see Ch. 11).
• You didn't start in another type of bankruptcy (typically, Chapter 7) and then convert to Chapter 13 bankruptcy.

If you converted to Chapter 13 from a different type of bankruptcy, you have to file a noticed motion asking the court for permission to dismiss your case. (See Ch. 11 for information on noticed motions.) The court may deny your request—and order you to convert to Chapter 7 bankruptcy—if it feels that you are abusing the bankruptcy system. Or, it may grant your request but attach conditions, such as issuing a sanction barring you from filing for bankruptcy again for a certain period of time.

If your case is dismissed, there are several important consequences:

• All liens that you had removed from your property in your Chapter 13 case are reinstated.
• All money you have paid the trustee that has not yet been disbursed to your creditors will be returned to you, less the trustee's expenses.
• The automatic stay ends, which means that your creditors are free to go after you and your assets for payment.
• Interest (and in some cases penalties) that stopped accruing during your bankruptcy will be added on to your debts.
• You cannot refile for bankruptcy—Chapter 13, Chapter 7, or any other kind—within 180 days if you dismissed your case after a creditor filed a motion asking the bankruptcy court to lift the automatic stay.

If you change your mind and decide that you want your case to proceed, you can file a motion with the bankruptcy court within ten days of the dismissal asking that your case be reinstated. Unless you have a history of filing and dismissing...