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Dismissal of a Chapter 13 bankruptcy due to late payments

Not everyone is able to make their debt payments on time, and this exactly the reason why many of us are forced into Chapter 13 bankruptcy proceedings. However, with Chapter 13, we are still required to make monthly payments. Although those monthly payments are made to be small and easily affordable -- financial conditions can change in a heartbeat forcing us to be late on those payments.

If the payments are consistently late, then the bankruptcy trustee may decide to file a motion to dismiss, which means that the debtor could be at risk of losing all the great benefits that the Chapter 13 proceedings are set to provide. This would be an enormous loss, so individuals threatened by a motion to dismiss in their Chapter 13 proceedings will want to try and defend against the motion.

One way of avoiding dismissal would be to ask for income deductions directly from the debtor's paychecks. Essentially, this wage garnishing strategy requires the debtor's employer to send a portion of his or her paychecks directly to the bankruptcy court, so that there is no chance the debtor will be tempted to spend the money on anything other than the required bankruptcy payment obligation. It is important to keep in mind, though, although the duty to send the money falls on the employer, the responsibility that this duty is carried out falls onto the debtor, who must check to ensure the appropriate amount has been sent.

Plan modifications are also possible in some cases, where a debtor can apply to have his or her monthly debt obligations reduced or have the term of the bankruptcy extended due to a change in financial circumstances. There is also what is known as a "hardship discharge," where a debtor falls under dire circumstances and creditors have already received at least as much as they would have under Chapter 7 proceedings. With a hardship discharge all remaining debts will be discharged, but these are difficult to obtain and not often granted.

If you have a question about defending yourself against Chapter 13 dismissal, it is wise to speak with an Ohio bankruptcy attorney who will be familiar with such matters. An attorney can help you formulate a suitable strategy to try and prevent the dismissal of your case.

Source: Legal Zoom, "Can You Stop a Chapter 13 Dismissal for Late Payments to the Trustee?," Patricia Dzikowski, accessed March 11, 2016

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