If you’re falling behind on Chapter 13 payments, your case is at risk but not automatically lost. The trustee will likely file a motion to dismiss soon after a missed payment, and a judge will set a hearing. Before that hearing, you can usually cure the default, ask the court to modify your plan, convert to Chapter 7, or in narrow circumstances request a hardship discharge. The one option that never works is silence.
How Fast the Trustee Moves
Plan payments must begin within 30 days of filing your plan or the order for relief, whichever comes first.1Office of the Law Revision Counsel. 11 USC 1326 – Payments Trustees track every incoming dollar, so a missed payment gets noticed quickly. Either the trustee or a creditor can then ask the court to dismiss your case or convert it to Chapter 7, citing failure to make timely payments.2Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal
A late payment doesn’t dismiss the case on its own. You’ll receive notice of the motion, and the judge will schedule a hearing. The gap between the motion and the hearing is your working window. Use it to catch up, respond, or file a modification. If you do nothing, expect the judge to grant the dismissal.
Catching Up Before the Hearing
Bringing the plan current before the hearing is the fastest fix. Many trustees will withdraw their dismissal motion once the arrears are paid, because collecting for creditors is the point of the office. Call your attorney and the trustee immediately, even before you have the full amount in hand. Good-faith communication counts in bankruptcy court.
If the judge does dismiss the case, you generally have 14 days from entry of the dismissal order to file a motion to reinstate.3United States Bankruptcy Court Middle District of Pennsylvania. Reinstate Case You’ll need to show you can resume payments and explain what went wrong. Miss the 14 days and reinstatement is gone; the only remaining path is filing a new case, which carries its own problems (see below).
Dismissal has real consequences. The automatic stay lifts, so creditors can resume wage garnishments, bank levies, lawsuits, foreclosure, and repossession.4Office of the Law Revision Counsel. 11 US Code 349 – Effect of Dismissal You owe the full original balance on each debt, minus whatever the trustee actually distributed.
Modifying Your Plan When Income Drops
If you still have some income but can’t sustain your current payment, a plan modification is often the right call. You can ask the court to lower the monthly payment, extend the plan up to the five-year maximum, or restructure which creditors are paid and how much.5Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation Job loss, cut hours, a medical event, or a divorce that changes household income are common triggers.
You file a motion to modify the confirmed plan along with updated income and expense schedules. The trustee and affected creditors get notice and a chance to object. During the review period, you’re generally expected to pay at the proposed new rate. The judge approves the modification only if the revised plan still satisfies the legal tests: unsecured creditors must receive at least what they’d get in a Chapter 7 liquidation, and you must commit all your disposable income.
Mortgage arrears need special attention. Chapter 13 lets you cure past-due mortgage payments over the life of the plan while staying current on the regular monthly mortgage going forward.6United States Courts. Chapter 13 – Bankruptcy Basics If you fall behind on the arrearage payments inside the plan, a modification can re-spread the remaining balance. But if you’ve also fallen behind on the regular post-petition mortgage payments, the lender can seek stay relief regardless of what your plan says.
Converting to Chapter 7
When your income has dropped so far that no realistic modification would work, converting to Chapter 7 may be the better path. You have an absolute right to convert, and the court cannot deny it.7Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal That said, most courts will apply the means test to decide whether you qualify for Chapter 7 on conversion. If your income exceeds the state median for your household size, you may not qualify.
The filing fee for converting from Chapter 13 to Chapter 7 is $10.8United States Courts. Bankruptcy Court Miscellaneous Fee Schedule You’ll update your schedules, attend a new meeting of creditors, and cooperate with a Chapter 7 trustee reviewing your property for non-exempt assets.9United States Courts. Chapter 7 – Bankruptcy Basics
One important protection applies when you convert in good faith: the Chapter 7 estate only includes property you owned on the date you originally filed Chapter 13, not anything acquired afterward.10Office of the Law Revision Counsel. 11 USC 348 – Effect of Conversion If the court finds bad faith, the estate expands to everything you own at the conversion date. The trade-off is simple: you stop making monthly payments, but you lose the ability to protect property that Chapter 13’s repayment structure was shielding.
The Hardship Discharge
A hardship discharge is rare but worth knowing about. The court can grant a discharge even though you haven’t finished the plan, but only if three conditions are all met: the failure to pay is due to circumstances for which you shouldn’t justly be held accountable, unsecured creditors have already received at least what they would have gotten in a Chapter 7 liquidation, and further plan modification isn’t feasible.11Office of the Law Revision Counsel. 11 USC 1328 – Discharge
Courts interpret those prongs strictly. Expect to need medical records or similar documentation showing the hardship is real and permanent, not temporary. A job loss alone rarely qualifies unless you can show you exhausted every alternative, including modification.
A hardship discharge also wipes out fewer debts than completing the plan. Anything that would be non-dischargeable in Chapter 7, including student loans, most tax debts, child support, alimony, and debts from fraud, survives a hardship discharge too.12Office of the Law Revision Counsel. 11 US Code 523 – Exceptions to Discharge Finishing all five years of payments yields a broader discharge that can eliminate some debts Chapter 7 cannot.
Creditors Can Target One Asset Without Dismissing the Case
Creditors don’t always wait for full dismissal. A mortgage lender or auto lender whose payments have stopped can file its own motion to lift the automatic stay on that one piece of collateral. The court must grant relief if the creditor’s interest isn’t being adequately protected, which usually means you’ve stopped paying.13Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
The default objection deadline is 14 days from service of the motion.14Cornell Law School. Federal Rules of Bankruptcy Procedure Rule 4001 If you can’t show a realistic plan to catch up, the judge lifts the stay on that specific asset. The bank can then start foreclosure or repossession under state law while the rest of your bankruptcy continues. This is how most people lose homes in Chapter 13: not through full case dismissal, but through a targeted stay-relief order they didn’t respond to.
Other Defaults That Can End the Case
Plan payments aren’t the only way to fall out of compliance. Federal law requires you to keep filing tax returns and paying current taxes throughout your Chapter 13 case; failing to do so can trigger dismissal or conversion.15Internal Revenue Service. Understanding Federal Tax Obligations During Chapter 13 Bankruptcy The same goes for domestic support obligations. If you owe child support or alimony and fall behind on payments that come due after filing, the court can dismiss on that basis alone.6United States Courts. Chapter 13 – Bankruptcy Basics
These are easy to overlook because they’re separate from the check you send the trustee each month. The code treats them as conditions of your continued eligibility. Your attorney and trustee may remind you, but staying current on taxes and support for the entire three-to-five-year plan is on you.
Why Refiling Is a Weak Backup
If your case is dismissed and you file a new bankruptcy within one year, the automatic stay in the new case lasts only 30 days. You can ask the court to extend it, but you’ll need to prove by clear and convincing evidence that the new filing is in good faith, meaning your circumstances have genuinely changed since the dismissal.16Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay
Multiple dismissals make it worse. If you had two or more cases dismissed within the past year, the automatic stay doesn’t go into effect at all when you file again. You’d need a motion within 30 days asking the court to impose it, again proving good faith.16Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay Without the stay, creditors can keep garnishing, foreclosing, and repossessing while your bankruptcy is pending, which defeats most of the reason to file. Saving a troubled case through cure, modification, or conversion is almost always better than letting it die and starting over.