What Happens if You Can't Make Chapter 13 Payments?

If you can't keep up with your Chapter 13 payments, you generally have four paths: ask the court to modify your plan and lower the payments, request a hardship discharge, convert the case to Chapter 7, or do nothing and risk dismissal. The worst thing you can do is stay silent and hope it works itself out. Bankruptcy trustees deal with income drops, medical emergencies, and job losses constantly — they are not going to be shocked that your circumstances changed. What matters is that you act before you fall seriously behind, not after.

This is general information, not legal advice for your specific case. Chapter 13 plans and local trustee practices vary, and the choice between these options usually turns on details — your income, what debts you have, how much of the plan you've completed — that a bankruptcy attorney needs to see to advise you properly.

First: don't panic, and don't go silent

A single missed or short payment doesn't automatically blow up a Chapter 13 case. Trustees see this often enough that most have a process for it. What actually damages your case is falling repeatedly behind without telling anyone, because that's what eventually leads the trustee or a creditor to file a motion to dismiss.

If you know a payment is going to be late or short, or you've had a real change in circumstances — job loss, reduced hours, a medical crisis, divorce — call your bankruptcy attorney (or, if you don't have one, the trustee's office handling your case) as soon as you know. The earlier you raise it, the more options are realistically still open.

Option 1: Modify the plan

Under 11 U.S.C. § 1329, you, the trustee, or an unsecured creditor can ask the court to modify a confirmed Chapter 13 plan. For someone whose income has dropped, modification typically means asking to:

• Lower the monthly payment amount
• Extend the length of the plan (within the maximum the Bankruptcy Code allows)
• Temporarily suspend payments for a defined period, in some districts
• Adjust which debts get paid what, within what the law permits

Modification keeps your case moving toward a full completion and a regular discharge — it's usually the preferred option if your reduced income can still support some ongoing payment plan. It requires notice to creditors and the trustee, and the court has to approve it.

Option 2: Ask for a hardship discharge

A hardship discharge under 11 U.S.C. § 1328(b) is a narrower, harder-to-get option for people who can't complete their plan at all — not even a modified version of it. Courts apply three requirements together:

1. Your failure to complete the plan is due to circumstances beyond your control and not your fault — for example, a disabling injury or illness that prevents you from working;
2. Your creditors have already received, through the plan so far, at least as much as they would have gotten if your case had instead been a Chapter 7 liquidation; and
3. Modifying the plan instead isn't realistic given your situation.

If the court grants it, you get a discharge — but it is more limited than the discharge you'd get by completing the plan. It does not wipe out debts that would survive a Chapter 7 case anyway (the categories in 11 U.S.C. § 523(a), like most student loans, many tax debts, and domestic-support obligations), and it doesn't cover certain long-term debt payments under § 1322(b)(5) that were being paid through the plan. In practice, a hardship discharge is for people who genuinely cannot pay going forward and whose case has already delivered real value to creditors — not a shortcut around a plan you'd simply rather not finish.

Option 3: Convert to Chapter 7

Under 11 U.S.C. § 1307, you generally have the right to convert your Chapter 13 case to a Chapter 7 case. Chapter 7 doesn't involve ongoing plan payments the same way — instead, a trustee reviews whether you have any non-exempt assets to sell, and most consumer filers with little or no non-exempt property receive a discharge of qualifying debts within a few months.

Conversion can make sense if your income has dropped enough that no repayment plan is realistic, but keep in mind:

• Whether you qualify for Chapter 7 depends on the means test administered by the U.S. Trustee Program — income limits and calculations are updated periodically, so confirm current figures at justice.gov/ust rather than relying on an old number.
• Property you can protect ("exempt") in Chapter 7 depends on exemption laws that are adjusted periodically — check current amounts through the U.S. Courts bankruptcy pages and your state's exemption statutes, since federal and state exemption choices vary by state.
• If you're behind on a mortgage or car loan, converting doesn't erase that arrearage protection Chapter 13 was giving you — a secured creditor may be able to resume repossession or foreclosure once the case converts, depending on your circumstances.

This is exactly the kind of decision where a consultation with a bankruptcy attorney matters — converting is often better than dismissal, but whether it's better than modifying your existing plan depends on your specific debts and assets.

Option 4: Dismissal — and why it's the option to avoid

If you don't act, and payments keep falling behind, the trustee or a creditor can file a motion to dismiss the case, or in some situations you can request voluntary dismissal yourself under § 1307(b). Once a case is dismissed:

• The automatic stay ends immediately (see 11 U.S.C. § 362) — the legal shield that was pausing collection calls, wage garnishment, repossession, and foreclosure goes away.
• Creditors, including a mortgage lender that had paused a foreclosure, can resume exactly where they left off — sometimes very quickly.
• You do not get a discharge of your debts. You still owe what you owed, generally with the balance the plan was supposed to be paying down still outstanding.
• You may be able to file a new bankruptcy case later, but a new filing after a recent dismissal can come with a shortened or even absent automatic stay depending on your filing history — another reason to get advice before you dismiss or let a case lapse rather than after.

What to do if you're struggling with a payment

1. Call your attorney or the trustee's office now — before you miss the payment if at all possible, or immediately after if you already have.
2. Get your numbers together — current income, expenses, and what changed, so whoever is advising you can see whether a modified plan is realistic.
3. Ask specifically about modification first — it's usually the least disruptive path if any ongoing payment is workable.
4. If modification isn't realistic, ask about conversion vs. hardship discharge — and let your attorney explain which debts each path would and wouldn't resolve.
5. Don't ignore court notices or trustee mail — a motion to dismiss is often filed with notice and an opportunity to respond; missing that window is how people lose the case by default.
6. If you can't afford an attorney, contact your court's self-help resources, a legal aid organization, or a law-school bankruptcy clinic. The U.S. Trustee Program maintains a list of approved credit-counseling agencies if you need current counseling.

A warning about debt-relief companies

If you search online for help with a struggling Chapter 13 case, you will find for-profit "debt-relief" and debt-settlement companies, and non-attorney "petition preparers" offering to fix your case for an upfront fee. Be cautious: non-attorneys are legally barred from giving you legal advice about your bankruptcy case, and some of these companies charge fees for services a legal aid office or court self-help center provides for free or at low cost, or push settlement products that don't actually address a bankruptcy case in progress. If you're in an active Chapter 13 case, the people who can actually help are your bankruptcy attorney, the Chapter 13 trustee's office, or a U.S. Trustee–approved credit-counseling agency — not a company that found you through an ad.

This article is general legal information, not legal advice, and doesn't create an attorney-client relationship. If your Chapter 13 payments are in trouble, talk to a licensed bankruptcy attorney about your specific case — and be wary of for-profit debt-relief or debt-settlement companies and non-attorney petition preparers offering to handle it for you.