Falling behind on Chapter 13 payments puts your entire bankruptcy case at risk of dismissal, but you usually have options before that happens: talk to the trustee, ask the court to modify or briefly suspend your plan, convert to Chapter 7, or in rare circumstances pursue a hardship discharge. The window is short. Once the trustee files a motion to dismiss and the court signs the order, the automatic stay lifts, your creditors return, and you keep none of the debt relief the plan was meant to deliver.
Call the Trustee Before the Next Due Date
If you know a payment is going to be late, or you’ve already missed one, contact your bankruptcy attorney and the Chapter 13 trustee before the next payment comes due. Trustees deal with payment hiccups constantly, and most would rather work out an informal fix than file paperwork with the court. Reaching out early signals good faith and often buys you a month or two to catch up without formal proceedings.
Silence is the worst move. If the trustee doesn’t hear from you, the default speaks for itself, and the court has no reason to give you the benefit of the doubt.
The Motion to Dismiss and Your Response Window
When payments fall behind and no resolution is in place, the trustee typically files a motion asking the court to dismiss your case. Federal bankruptcy law lists “failure to commence making timely payments” and “material default” as specific grounds for dismissal.1Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal The motion spells out how much you owe in back payments and sets a deadline for your response.
You generally have about 21 days to respond. In that window you can cure the default with a lump-sum payment covering the arrears, propose a plan modification, or present a legal defense for the missed payments. Doing nothing, or skipping the hearing, almost always ends with the judge signing the dismissal order.
Modifying Your Plan
If your financial situation has genuinely changed, you can ask the court to modify the plan rather than let it collapse. Federal law allows you, the trustee, or a creditor to request a modification at any time before plan payments are complete.2Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation A modification can lower your monthly payment, extend the repayment period, or adjust how much goes to a particular class of creditors. You can even reduce plan payments by the reasonable cost of health insurance you’ve had to start purchasing, as long as you document the expense.
To support the request, you’ll file updated income and expense schedules along with pay stubs, tax returns, medical bills, or whatever else shows why the budget changed. The trustee reviews the new numbers to confirm the modified plan still meets legal requirements for creditor payments and can realistically be completed. One firm limit: the modified plan generally cannot extend beyond five years from when your first payment was originally due.2Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation
Requesting a Temporary Suspension
For shorter disruptions like a temporary layoff or a medical emergency you expect to recover from, you can file a motion asking the court to suspend payments for a few months. It isn’t a formal modification so much as a court-approved pause. You’ll need to explain the hardship, provide financial documentation, and show that you can resume payments and make up the shortfall once the crisis passes. Courts grant these sparingly and usually for no more than a couple of months, but they can prevent a dismissal when the underlying plan is still workable.
Converting to Chapter 7
If your income has dropped so far that no repayment plan is sustainable, converting to Chapter 7 may be a better path than letting the Chapter 13 case be dismissed. You have the right to convert at any time, and that right cannot be waived.3Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal Converting involves filing a notice of conversion and paying a small fee.
Chapter 7 works differently. A trustee liquidates your non-exempt assets to pay creditors, and most remaining unsecured debts are discharged. The trade-off is real: you may lose property your Chapter 13 plan was designed to protect, especially a home with significant equity. To qualify, you’ll need to pass the means test, which compares your current monthly income to the median household income for your state. If your income is above the median, Chapter 7 may not be available, and you’re back to either fixing the Chapter 13 plan or facing dismissal.
When you convert, the Chapter 7 estate generally consists of property you owned on the date you originally filed the Chapter 13 petition, as long as you still possess it on the conversion date.4Office of the Law Revision Counsel. 11 USC 348 – Effect of Conversion You’ll also need to file an updated statement of intention about secured property within 30 days of the conversion order.5Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 1019 – Converting or Reconverting a Chapter 11, 12, or 13 Case to Chapter 7
Hardship Discharge
In rare cases you can obtain a discharge without completing the plan. A hardship discharge requires three things: your failure to finish payments is due to circumstances genuinely beyond your control, creditors have already received at least as much as they would have gotten in a Chapter 7 liquidation, and modifying the plan isn’t realistic.6Office of the Law Revision Counsel. 11 USC 1328 – Discharge
Courts set a high bar. A temporary setback won’t qualify. The typical hardship discharge involves a debtor who developed a permanent disability, was diagnosed with a terminal illness, or suffered some other catastrophic event that makes future employment impossible. You’ll need medical records, termination documentation, or similar evidence showing the condition is both involuntary and permanent, plus a detailed accounting showing that payments already distributed through your plan equal or exceed what a Chapter 7 liquidation would have produced. Most debtors who succeed here are deep into their plan and have already paid a substantial portion of their debts before the crisis hit.
What Dismissal Actually Costs You
Dismissal is where things get painful. The automatic stay that has kept creditors at bay terminates the moment the court enters the dismissal order.7Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay There is no grace period. Mortgage lenders can restart foreclosure, auto lenders can repossess your vehicle, and creditors holding judgments can pursue wage garnishment and bank levies. Collection calls, demand letters, and new lawsuits can resume immediately. Penalties and interest that were limited during the bankruptcy can start accruing again on outstanding balances.
If anyone co-signed a consumer debt covered by your plan, they lose protection too. Chapter 13 provides a special stay that shields co-signers from collection, and that stay ends with dismissal or conversion.8Office of the Law Revision Counsel. 11 US Code 1301 – Stay of Action Against Codebtor A co-signer on a car loan or credit card could suddenly face collection calls and lawsuits for the full balance.
You also lose credit for the payments you already made. The trustee distributed those funds to creditors, so you don’t get them back, but you don’t get a discharge on any remaining balances either. You’re essentially back where you started, minus whatever was paid out, with a bankruptcy filing on your credit history that produced no debt relief.
Tax Debts After Dismissal
Federal tax debts deserve special attention because the IRS has collection tools most private creditors don’t. Once the case is dismissed, the automatic stay lifts and the IRS can immediately resume administrative collection, including levies on wages, bank accounts, and other assets.9Internal Revenue Service. 5.17.8 General Provisions of Bankruptcy Certain penalties that were suspended during the bankruptcy begin accruing again from the date of dismissal, and any federal tax lien that existed before or during your bankruptcy remains attached to your property.10Internal Revenue Service. Understanding a Federal Tax Lien
Priority tax debts are non-dischargeable even in a completed bankruptcy. After dismissal, you still owe the full remaining balance plus any interest that accumulated. If you were using the Chapter 13 plan to pay down a large tax bill over time, losing the plan means the IRS can pursue the full amount immediately using enforcement powers that don’t require a lawsuit.
Reinstatement and Refiling
A dismissal order isn’t always the final word. If you can cure the problem that caused it, you may be able to file a motion asking the court to set aside the dismissal and reinstate your case. This works best when the dismissal is recent and you can show the court you’ve come up with the money or resolved the underlying default. The sooner you act, the better your chances.
If reinstatement isn’t possible and you need to file a new bankruptcy case, federal law generally allows it. A dismissal doesn’t automatically bar you from filing again.11Office of the Law Revision Counsel. 11 US Code 349 – Effect of Dismissal There is an important exception: if the court dismissed your case for willfully failing to follow court orders or failing to appear, you cannot refile for 180 days. The same 180-day bar applies if you voluntarily dismissed after a creditor had already filed a motion for relief from the automatic stay.12Office of the Law Revision Counsel. 11 US Code 109 – Who May Be a Debtor Even when the 180-day bar doesn’t apply, a second filing within a year of a dismissal gives you a more limited automatic stay, so the fresh start won’t be as clean.