If your Chapter 13 payments are too high, you have five real options: modify the plan, ask the trustee for a short payment suspension, convert the case to Chapter 7, seek a hardship discharge, or voluntarily dismiss. The right choice depends on why the payment has become unaffordable and whether the problem is temporary or permanent. What you should not do is wait. Missing payments without a plan of action is the fastest way to lose the case entirely, and every option below works better when you move before you fall behind.
Modify the Plan
A formal plan modification is the usual fix when payments no longer fit your budget. If your income has dropped, your expenses have gone up, or something significant has changed since confirmation, the Bankruptcy Code lets you ask the court to adjust the monthly amount, the length of the plan, or how much goes to particular groups of creditors.1Office of the Law Revision Counsel. 11 U.S.C. 1329 – Modification of Plan After Confirmation
You, the trustee, or an unsecured creditor can request a modification any time after confirmation and before you finish paying. In practice, two moves do most of the work for someone who’s struggling: lowering the monthly payment and stretching the plan out longer. If your plan currently runs three years and your income is below your state’s median, the court can extend it up to five years for cause, spreading the same obligation across more months.2Office of the Law Revision Counsel. 11 U.S.C. 1322 – Contents of Plan The plan can also be adjusted to account for new health insurance costs if you’ve had to start paying for coverage.1Office of the Law Revision Counsel. 11 U.S.C. 1329 – Modification of Plan After Confirmation
Your attorney files a motion with updated income documentation, current expense schedules, and evidence of what changed. Creditors get notice and can object; if one does, the court holds a hearing. The modified plan has to satisfy the same legal requirements as the original: priority debts paid in full, secured creditors adequately protected, and unsecured creditors receiving at least what they’d get in a Chapter 7 liquidation.1Office of the Law Revision Counsel. 11 U.S.C. 1329 – Modification of Plan After Confirmation Within those limits, a modification can meaningfully bring the payment down when your financial picture has genuinely worsened.
Ask the Trustee for a Short Payment Suspension
Not every rough patch calls for a formal modification. If a medical emergency, a temporary layoff, or an unexpected repair blows up one or two months but you can handle the plan long-term, some Chapter 13 trustees will allow a short-term suspension of payments. The missed amounts are typically folded into later payments, or picked up later through a modification if needed.
This is informal, and it varies significantly by district. Not every trustee offers it, and those who do set their own limits. The practical step is to call your attorney the moment you know you can’t make a payment. Your attorney can contact the trustee’s office and see whether a suspension is available before the missed payment triggers a motion to dismiss. Waiting until you’re already delinquent narrows what anyone can do for you.
Seek a Hardship Discharge
If your situation has deteriorated so badly that you can’t finish the plan and no realistic modification would fix it, you may qualify for a hardship discharge. This lets the court discharge certain debts even though you haven’t completed all your payments. The bar is high.3Office of the Law Revision Counsel. 11 U.S.C. 1328 – Discharge
You have to show three things. First, that you can’t keep up with payments because of circumstances you shouldn’t fairly be blamed for, such as a permanent disability, a serious chronic illness, or a long-term job loss with no realistic prospects for recovery. A temporary cash crunch does not qualify. Second, that unsecured creditors have already received at least as much through the plan as they would have gotten in a Chapter 7 liquidation. Third, that modifying the plan isn’t a workable alternative.3Office of the Law Revision Counsel. 11 U.S.C. 1328 – Discharge
A hardship discharge is also narrower than the discharge you’d get for completing the plan. Priority debts like child support and past-due taxes survive it. So do most debts that would be non-dischargeable in a Chapter 7, including student loans, fraud-related debts, and obligations from willful injury to another person. Secured creditors keep their liens, so if you stop paying your mortgage or car loan after a hardship discharge, the lender can still foreclose or repossess. It primarily eliminates remaining unsecured debt. That can still be meaningful relief, but it does not wipe the slate clean.
Convert to Chapter 7
You have an absolute right to convert a Chapter 13 case to a Chapter 7 at any time, and any agreement waiving that right is unenforceable.4Office of the Law Revision Counsel. 11 U.S.C. 1307 – Conversion or Dismissal Conversion replaces the multi-year repayment plan with a liquidation. A Chapter 7 trustee sells your non-exempt assets to pay creditors, and most remaining unsecured debt is discharged. If you have little non-exempt property, this can end the bankruptcy faster and eliminate the monthly payment entirely.
The tradeoff is real. In Chapter 13, you keep your property and pay over time. In Chapter 7, non-exempt assets are sold. If you’ve built equity in a home or acquired other valuable property since filing, conversion could put it at risk. When you convert, the Chapter 7 estate generally consists of property you owned on the original filing date that you still have on the conversion date. Courts disagree about whether post-filing appreciation, such as a home that’s gained equity, belongs to the Chapter 7 estate or stays with you. If you convert in bad faith, the estate expands to include everything you own at the time of conversion.5Office of the Law Revision Counsel. 11 U.S.C. 348 – Effect of Conversion
Conversion also revives any secured debt defaults that weren’t fully cured under the Chapter 13 plan. If you were three months behind on the mortgage when you filed and hadn’t caught up through the plan by the time you converted, that default comes back at full strength.5Office of the Law Revision Counsel. 11 U.S.C. 348 – Effect of Conversion For someone whose main goal was saving a house from foreclosure, conversion usually defeats the purpose.
Voluntarily Dismiss the Case
If nothing else works, you can ask the court to dismiss the Chapter 13 case. As long as it wasn’t previously converted from another chapter, the court must grant the dismissal; it’s your right.4Office of the Law Revision Counsel. 11 U.S.C. 1307 – Conversion or Dismissal
Dismissal ends the bankruptcy and, with it, the automatic stay that’s been holding creditors back. Collection efforts resume immediately: wage garnishments, lawsuits, foreclosure, repossession. You still owe every debt that hasn’t been paid through the plan. Any progress on arrears through Chapter 13 payments is credited, but outstanding balances remain your responsibility. Some people dismiss voluntarily because they want to refile later with a stronger plan, but the Bankruptcy Code restricts the automatic stay if you file again within a year of dismissal, so timing matters.
What Happens If You Just Stop Paying
Doing nothing is the worst option. When you miss payments, the trustee or a creditor can ask the court to dismiss the case or convert it to Chapter 7, depending on which outcome better serves creditors. The statute lists specific grounds for that, including failure to make timely payments and defaulting on the terms of a confirmed plan.4Office of the Law Revision Counsel. 11 U.S.C. 1307 – Conversion or Dismissal Falling behind on post-filing domestic support obligations is an independent ground for dismissal, even if every other plan payment is current.
If the court dismisses, you lose the automatic stay and creditors pick up where they left off. If the court converts to Chapter 7, a trustee takes over and liquidates your non-exempt assets, which is the opposite of what most Chapter 13 filers were trying to accomplish. The court will hold a hearing before doing either, and you get a chance to explain and propose a fix. Showing up with a modification already prepared is far more persuasive than showing up with excuses.
A Note on Taxes
People often worry that debt wiped out through bankruptcy will come back as taxable income. It won’t. Debt discharged in a bankruptcy case is specifically excluded from gross income, whether the discharge happens at the end of a completed Chapter 13 plan, through a hardship discharge, or after conversion to Chapter 7.6Office of the Law Revision Counsel. 26 U.S.C. 108 – Income From Discharge of Indebtedness In exchange, the IRS requires you to reduce certain tax attributes, such as net operating loss carryovers, capital loss carryovers, and basis in property, reported on Form 982.7Internal Revenue Service. About Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness For most individual filers the impact is minimal, but mention it to your tax preparer in the year the discharge happens.
Whichever option fits your situation, the sooner you talk to your bankruptcy attorney, the more you can do. Judges see plenty of debtors who fell behind and did nothing about it. Being early is what separates the cases that survive from the ones that don’t.