What Happens If You Default on a Chapter 13 Plan?

Defaulting on a Chapter 13 plan gives the trustee grounds to ask the court to dismiss your case, and if the judge agrees, the automatic stay ends, your debts snap back to their pre-bankruptcy terms, and creditors can immediately resume garnishments, repossessions, and foreclosures. You usually have a short window to fix the problem before that happens — by catching up, modifying the plan, converting to Chapter 7, or in narrow circumstances asking for a hardship discharge. What you can’t do is ignore it.

What Counts as a Default

Missing plan payments is the most common trigger. Federal bankruptcy law lists “material default by the debtor with respect to a term of a confirmed plan” as grounds for dismissal, alongside the separate ground of failing to make timely payments in the first place.¹ Technically, one missed payment breaches your court order. Many trustees won’t move to dismiss over a single lapse, but they have the right to, and some do.

Payments aren’t the only way to fall out of compliance. Other defaults include:

Not filing your federal income tax returns with the court for tax years while the case is open, which is an independent ground for dismissal.²
Taking on new debt without court approval. Your plan was built around a fixed budget, and most plans expressly prohibit new credit.
Letting insurance lapse on collateral your plan covers, such as a financed vehicle or a mortgaged home.
Falling behind on child support or spousal support obligations that came due after you filed.¹

How the Trustee Reacts

When you default, the Chapter 13 trustee files a motion asking the court to dismiss your case or convert it to Chapter 7. The motion doesn’t end your case by itself. It sets a hearing, and you’re entitled to notice and a chance to respond before the judge rules.

Response rules vary by court. Some districts require a written objection filed a week or more before the hearing, and if you miss that deadline the judge may enter a dismissal order without holding the hearing at all. Contact the trustee’s office as soon as you know you’re going to miss a payment, and file any required response early.

How to Keep Your Case Alive

A default doesn’t automatically end your case. Several routes can keep it going, or at least let you exit on better terms.

Catch Up

If the problem was temporary and you can bring the plan current, the trustee will usually withdraw the motion. Trustees exist to distribute payments to creditors, not to shut cases down, and they generally prefer this outcome.

Modify the Plan

If your finances have genuinely changed, you can ask the court to lower your monthly payment, extend the plan, or shift priorities among your debts. You’ll have to document the change with pay stubs or other evidence. Judges don’t approve modifications on your word alone.

Convert to Chapter 7

You have the right to convert a Chapter 13 case to Chapter 7 at any time, and that right cannot be waived.¹ Plan payments stop. A different trustee may liquidate non-exempt assets to pay creditors, but the case moves faster and can still end in a discharge. This route makes sense when your income has dropped so far that no realistic plan payment would work. You do have to qualify under the Chapter 7 means test.

Dismiss the Case Yourself

If your case was originally filed as a Chapter 13 and not converted from another chapter, you have an absolute right to dismiss it, and the court must grant your request.¹ This lets you control the timing rather than waiting on the trustee. The downstream consequences are the same as any other dismissal, so this is about timing, not avoidance.

Request a Hardship Discharge

This is the hardest option to obtain. A hardship discharge wipes out remaining eligible debts without completing the plan, but you must show all three of these things: your inability to finish is due to circumstances genuinely beyond your control, such as a disabling injury; unsecured creditors have already received at least what they would have received in a Chapter 7 liquidation; and modification isn’t a workable fix.³ Courts apply the test strictly. If you can hold a part-time job, or if a revised plan could plausibly work, the judge will deny it.

What Dismissal Actually Costs You

If the judge grants the motion and your case is dismissed, several things happen at once.

The Automatic Stay Ends

The stay that was blocking creditor action ends the moment the case is dismissed.⁴ Wage garnishments, repossession, foreclosure, and collection lawsuits can all resume immediately. A foreclosure sale that was halted by your filing can pick up where it left off.

Co-Signers Are Exposed

Chapter 13 includes a special shield for people who co-signed your consumer debts. That co-debtor stay ends when your case is dismissed or converted.⁵ A relative who co-signed your car loan or a friend who guaranteed a personal loan can be pursued directly by the creditor once your case closes.

Liens Return to Their Original Terms

One of Chapter 13’s most useful features is the ability to reduce certain secured debts to the current value of the collateral, or to strip off junior liens entirely. Dismissal reverses those changes. Any lien that was voided during the case is reinstated, and property revests in whoever held it before you filed.⁶ A car loan that had been reduced from $15,000 to $9,000 goes back to $15,000. A second mortgage that was being stripped off because the home was underwater comes back to life. The law’s stated purpose is to put everyone back where they were before the case began.

Payments You Already Made Stay Gone

Money the trustee already distributed to your creditors during the plan doesn’t come back to you. Those amounts are credited against what you owed, but the remaining balances become immediately collectible. For payments the trustee collected but hadn’t yet distributed before plan confirmation, the trustee returns those funds to you after deducting allowed administrative expenses.⁷

Creditors Get Extra Time to Sue You

The stay froze creditor lawsuits while your case was open, and some of those creditors may have been nearing the end of their statute of limitations when you filed. The bankruptcy code prevents them from losing that right because of the pause. If a creditor’s deadline hadn’t expired when you filed, they get at least 30 days after the stay ends to file suit, even if the original deadline would already have passed.⁸ You can’t run out the clock on a lawsuit by filing and then getting dismissed.

Refiling Comes With Penalties

You can file again after a dismissal, but the protections are weaker. Congress built escalating penalties into the code to prevent serial filings used as a stalling tactic.

If You Had One Case Dismissed in the Past Year

The automatic stay in your new case expires after 30 days. To keep it in place, you have to file a motion within those 30 days and convince the judge the new case was filed in good faith.⁴ If the earlier case was dismissed because you didn’t follow the plan, the law presumes bad faith, and you have to overcome that presumption with clear and convincing evidence that your circumstances have changed.

If You Had Two or More Cases Dismissed in the Past Year

No automatic stay takes effect at all when you file the new case.⁴ You have to ask the court to impose one, and the burden of showing good faith is entirely on you. Filing gives you no immediate protection from creditors.

The 180-Day Bar

Sometimes you can’t refile at all for 180 days. This bar applies if your previous case was dismissed because you willfully disobeyed court orders or failed to appear, or if you voluntarily dismissed your case after a creditor had already filed a motion to lift the automatic stay.⁹ During that window the court won’t accept a new petition from you. If a creditor is actively trying to lift the stay in your current case and you’re considering voluntary dismissal, this is a trap worth knowing about before you file the paperwork.

1
Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal
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Office of the Law Revision Counsel. 11 USC 521 – Debtor’s Duties
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Office of the Law Revision Counsel. 11 USC 1328 – Discharge
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Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
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Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor
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Office of the Law Revision Counsel. 11 USC 349 – Effect of Dismissal
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Office of the Law Revision Counsel. 11 USC 1326 – Payments
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Office of the Law Revision Counsel. 11 USC 108 – Extension of Time
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Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor