What if I Lose My Job During Chapter 13 Bankruptcy in Nevada?

Chapter 13 bankruptcy is often called a “wage-earner’s bankruptcy” because it is generally used by people who earn too much to qualify for Chapter 7 bankruptcy, and who can afford to pay back some or even all their debt over a period of three to five years. But what happens if you lose your job partway through a Chapter 13 bankruptcy in Nevada? If you lose your job and get new job making less than before, can your Chapter 13 payments be adjusted? These are questions an experienced bankruptcy lawyer in Las Vegas can answer.

Is Losing Your Job During Chapter 13 Bankruptcy a Big Deal?

Loss of employment during Chapter 13 bankruptcy can be problematic for several reasons. Your monthly payments under a Chapter 13 plan are calculated based on how much you earn. If your income unexpectedly drops or stops, you suddenly face payments that are overly burdensome or outright impossible to afford. Depending on your situation, you might not have much of an “emergency fund” to fall back on while you search for a new job. If your plan payments aren’t made and appropriate action isn’t taken, your Chapter 13 case can end up being dismissed.

Tell Your Attorney About Job Loss or Reduced Income

The first step to navigating the situation is to notify your bankruptcy attorney as soon as possible. If you do not have an attorney, the Chapter 13 trustee might be able to help, but the amount of assistance trustee can provide is limited. The sooner your bankruptcy lawyer learns about job loss or reduced income, the better. Even if changes haven’t occurred yet, tell your attorney what you expect to happen and when so they can get ahead of the situation in advance. Once your attorney learns about the situation, they can start exploring options to help you get through it.

Can You Find a New Job?

Hopefully, you will be able to find new employment relatively quickly after losing a job. If you find a new job with a similar level of pay, you may only need minor modifications to your Chapter 13 plan allowing you to make lower payments for a few months. If the new job is going to pay less, your attorney may need to recalculate your payments to determine what you can afford going forward, then modify your Chapter 13 plan accordingly. Unexpected things happen in life, and Chapter 13 plans are frequently modified to account for changes in financial circumstances.

What if I Can’t Find a New Job?

If you are unable to find new employment, there may be other options available based on the reason for your prolonged job loss. For example, if you’re unable to work and cannot complete a Chapter 13 plan for circumstances beyond your control, such as becoming seriously disabled, you may be eligible for a “hardship discharge.” In this situation, the bankruptcy court decides whether the financial hardships you’re facing are significant and permanent enough that your Chapter 13 bankruptcy should be deemed completed and your debts discharged.

Another option might be to convert your Chapter 13 bankruptcy to Chapter 7. Conversion eliminates your repayment plan entirely but may result in liquidation of certain assets. This is because Chapter 7 trustees have the power to sell assets to pay debts. This may be a painful option if you have significant non-exempt property you were trying to protect in Chapter 13. A Chapter 7 bankruptcy can still eliminate your dischargeable debts once the liquidation process is over, but it’s best to discuss the risks and benefits of all available options with an experienced bankruptcy lawyer before deciding how to proceed.

Can a Las Vegas Bankruptcy Lawyer Help Me?

Job loss can be incredibly stressful, especially if it happens in the middle of your Chapter 13 case. At Larson & Zirzow, our Las Vegas bankruptcy lawyers can guide you through the entire Chapter 13 process and help explore all available options if you experience employment issues along the way. To learn more about the flexibility and relief Chapter 13 bankruptcy can offer, contact Larson & Zirzow to schedule a consultation.

Source: 

uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics