A Chapter 13 plan commonly runs three to five years, and a lot can change in that time: a job is lost, an expense rises, a payment is missed. When a plan cannot continue as confirmed, the case may be modified, converted to Chapter 7 or dismissed. Assistants and paralegals do not decide which, but understanding the outcomes helps you flag problems before they become emergencies. This is a general overview. The attorney advises the client, and local practice varies.
Why Chapter 13 cases run into trouble
- Missed or late plan payments, which are the most common cause.
- Loss of income or a change in household circumstances.
- Failure to file required documents, such as tax returns or proof of insurance, when the trustee asks.
- Falling behind on payments outside the plan, such as new mortgage installments or support obligations.
- An unconfirmable plan, for example one that does not pay what the law requires.
- Unauthorized new debt or property sales during the case.
The first response: modify the plan
Where the problem is temporary or the budget has changed, the attorney may be able to propose a modified plan, with different payments or a different term, rather than ending the case. This often needs updated income and expense schedules, supporting documents and a notice to creditors, so the assistant's role is usually to gather the facts quickly and update the schedules accurately. For the structure of a plan, see Chapter 13 plan basics.
Conversion to Chapter 7
A debtor generally has a right to convert a Chapter 13 case to Chapter 7, subject to the Bankruptcy Code's conditions. After conversion, the case proceeds under Chapter 7 rules: there is no repayment plan, a Chapter 7 trustee takes over, and the debtor's eligibility and exempt property matter in the way they do in any Chapter 7 case. Conversion raises questions that the attorney should address, such as how property acquired since the original filing is treated and whether the debtor can pass the means test. Our means test overview and Chapter 7 vs. Chapter 13 primer give the background.
Dismissal
A case can be dismissed at the debtor's request in some circumstances, or because the trustee or a creditor asks the court to dismiss it for cause, such as default on plan payments or failure to file documents. Dismissal usually has serious consequences:
- The automatic stay ends, so creditors can resume collection and foreclosure activity.
- The debts generally remain owed, subject to credit already given for payments made.
- If the debtor files again, the protection of the automatic stay may be limited or require a court order, particularly after a recent dismissal. The attorney needs to plan for that.
Because of these effects, dismissal is a situation where timing matters, and where a prompt call to the attorney can change the outcome.
What an assistant can do to help
- Track every deadline, including trustee document requests and annual tax return requirements.
- Keep client contact up to date. A debtor who cannot be reached is a risk. Record phone numbers, email and a backup contact.
- Watch for warning signs. A client who mentions a lost shift, a new bill or a late payment should have that reported to the attorney promptly.
- Prepare updated schedules quickly and accurately when a modification is needed.
- Keep the file organized, with plan payment history, notices received and trustee correspondence in one place.
What an assistant does not do
Whether to modify, convert or dismiss is a legal decision for the attorney and the client. If a client asks what they should do, take careful notes and bring the question to the attorney, as discussed in what non-attorney assistants may and may not do. The wider case timeline is described in what happens after a petition is filed.
Next steps
Offices that want reliable help with preparation and updates can hire a virtual bankruptcy assistant. Assistants who want to be found by those offices can join NAVBA.
This article is general information about bankruptcy practice, not legal advice. Local rules, trustee preferences and state law vary, so confirm current requirements for your jurisdiction.
