Let’s assume that you never file bankruptcy, and at some point you lose your job and yo don’t have enough money to cover your house payment or your car payment. That create more of an income problem, rather than a debt problem, because if you want to keep your house and car, you must continue paying for your house and car. Well, that’s that same situation in bankruptcy because bankruptcy cannot eliminate your requirement to pay for the house and car if you want to keep the house and car.
The impact of a job loss on your bankruptcy case will vary, depending on the type of bankruptcy you file. In a Chapter 7, there is no payment monthly to a trustee because the people that qualify typically don’t have any income left over after they pay their mortgage, car loan and all their living expenses. If you are facing a situation where you can no longer make your house payment or car payment, it could lead to foreclosure of the house or repossession of the car after the Chapter 7 is over, and a typical Chapter 7
case is only open for 90 days.
In a Chapter 13 case, a job loss may provide a valid reason for requesting a break in payments to the trustee for 60-90 days. If that does not provide enough relief, and your Chapter 13 is only paying unsecured debt, then your case could easily be converted to a Chapter 7, if you meet the qualifications. If your Chapter 13 is paying for a car (or other secured debts like home mortgage arrears, property taxes or furniture) then we can determine the minimum amount to which the Chapter 13 plan payment might be lowered. However, if the Chapter 13 plan payment amount is already at the minimum, then a decrease in income can create a situation where the Chapter 13 plan can be dismissed for infeasibility. You could convert to a Chapter 7 bankruptcy, but if you don’t have enough money to pay for your car that was being paid through the Chapter 13, then you could lose it. If you experience a job loss, contact our office as soon as you can so that we can review your options.