Significance

• The Chapter 13 repayment plan is based on your budget and what you should be able to afford to pay each month. This amount is ordered by the court to be paid, and if you do not pay it to the trustee on time, you could be in contempt of court and run the risk of your bankruptcy being dismissed. If that happens, the creditors can start collections actions against you immediately.
  
  

Give Notice

• If you cannot manage your Chapter 13 bankruptcy repayment plan, contact the U.S. trustee immediately. He may be willing to modify your plan based on your current situation, possibly lowering or deferring payments. It helps if you can also show the trustee a recent event such as a job loss that has created financial hardship.
  
  

Hardship Discharge

• If you have encountered one or more complications that have made it impossible for you to handle your court-ordered Chapter 13 repayment plan, the bankruptcy judge may be willing to grant you a hardship discharge. Problems such as serious illness can change your financial situation significantly. If your situation is not likely to change and it does not look like you will be able to make your payments in the future, the court may find that a hardship discharge is the best solution for everyone involved.
  
  

Conversion to Chapter 7

• You can also ask the trustee permission to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy. In the past, the only financial circumstances taken into consideration in your bankruptcy were the ones in place when determining whether you could afford a repayment plan. Today, many trustees are taking into consideration changes in circumstances. If they won't grant you a hardship discharge because of a change in circumstances, they may allow you to convert. This means that you would be subject to the Chapter 7 laws and laws regarding how much property you may keep. These laws vary from state to state.
  
  

Ask for Dismissal

• If the trustee or court will not modify your plan or grant a hardship discharge, you may want to ask for a dismissal of your bankruptcy. This would remove the court ordered repayment plan. It would also remove the protection against creditors that you receive in a bankruptcy. You could be sued for your debt. Even though this could happen, you may determine that it would be best for you to negotiate with creditors directly and on your own terms.