Significance

• Debtors who file for Chapter 13 bankruptcy agree to make regular monthly payments toward their debt for a time period of three to five years. Failing to make monthly payments on time voids the bankruptcy plan and has serious ramifications for the debtors. Debtors may find their debt situation becomes much worse than it was before filing for a Chapter 13 bankruptcy once the case dismisses.
  
  

Time Frame

• The bankruptcy court may dismiss your Chapter 13 bankruptcy after just one missed payment. Most trustees will petition your case after two consecutive missed payments. However, dismissal times may vary from one jurisdiction to another. Courts will typically give debtors 30 days to make up missed payments before formally dismissing the case.
  
  

Effects

• If the bankruptcy court dismisses your Chapter 13 case, you will be prohibited from filing Chapter 13 bankruptcy for 180 days. All creditors will resume collection efforts upon dismissal of your Chapter 13 case. Debts will be due along will accrued interest since no debts are officially discharged until the completion of a Chapter 13 repayment plan.
  
  

Considerations

• Your lawyer or trustee may be able to temporarily postpone or reduce your monthly debt payment if you apply for a hardship discharge or payment modification. You should not hesitate to contact your lawyer if you are unable to make a monthly payment so that you can closely examine your options.
  
  

Expert Insight

• Justin Harelik, a Bankrate financial adviser, advises that debtors participating in a Chapter 13 repayment plan make all efforts to make monthly payments or contact their attorney and/or trustee promptly when financial hardship occurs. Failing to complete a Chapter 13 repayment plan will likely increase debt and financial hardship.