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What happens if you decide to back out of a chapter 13 bankruptcy?

Valley Center, KS |

My husband and I are currently in a chapter 13 bankruptcy. Our payment is $2880. per month. If we choose to back out of the bankruptcy, would we get back all the money we have put into the pot? We are hurting for money right now and our attorney will not file a notice for us to suspend payments. Would we loose our house since we were behind with payments, or could we pay off the arrears and just start making monthly payments to the mortgage company? Please help. Thank you

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Attorney answers 3

Best Answer
Posted

I agree with the other two answers. In my jurisdiction, we cannot skip payments if we haven't been confirmed yet. If that is your case, then you should get a majority of the payments made back, but you will be way in the hole with your mortgage lender with no protection from the court and a big red bullseye on your backs. Going into a Chapter 13 is a big deal and you have to be prepared for it budget and emergency fund-wise or things like what you have now start happening. Reasons for your payment not being able to be lowered may be that you have too much stuff (paid off cars is a big one) or you are already at a minimum payment (mortgage + arrearage recovery + fees) and failure to keep that up will increase chances of losing the house. Sorry to hear you're in that bind, and you're not alone, but go have a face to face with the attorney and ask them to make you understand what the options are and why you can't skip or lower payments. I know they'd do it if they could. Once you do that, then you will understand the options and be in the position to pick your best course of action. Best of luck!

Posted

Most of your question depends on the specifics of your situation and whether your chapter 13 plan has been confirmed by the court. If the plan has been confirmed, your payments are already being distributed to your creditors so you would not get this money back. If the plan has not been confirmed, there is a chance you could get a portion of your payments back.

Keep in mind that when your case is dismissed, you will lose the protection of the automatic stay. Once that happens, the home lender would have the same ability to foreclose that it did when you filed. The ability to catch up on your arrearage is one of the features of a Chapter 13. Outside of a Chapter 13, it may be difficult to get the mortgage company to allow you to catch up on the arrearage.

You should definitely have a long, frank talk with your attorney about what will happen if you take a dismissal and how best to mitigate the damage.

Posted

If you dismiss the bankruptcy, you go back to square one with the creditors. You may very well lose the house. Have you asked the attorney to amend the plan to lower the payment? This may or may not be an option depending on the facts of the case. Although you don't say so, I assume your case is confirmed. If that is the case, you don't get the money paid into the plan back on dismissal, except for anything paid following the dismissal. If your case has not been confirmed yet you probably will get most of the money paid back, if not all of it. Your court should have a general order addressing this.

If you want to suspend payments and your lawyer is not responsive, you can find another lawyer to enter the case and represent you.