In the Chapter 13 Bankruptcy case (Schafer, Frances L.; In re,) a debtor who had already paid significantly into a Chapter 13 Bankruptcy plan suffers a dismissal because she fails to make enough money to repay her debts in the proposed plan.
The details of the Chapter 13 bankruptcy case:
The debtor, who worked on commission as an independent furniture representative missed two of her seven plan payments of $400 a month because of decreased income. The bankruptcy court found that her expenses exceeded her income and ruled that she would be unable to make future payments into the plan. Since the debtor had received a Chapter 7 Bankruptcy discharge in 2005 and had filed for Chapter 13 bankruptcy in 2008, she was unable to receive a conversion to Chapter 7 bankruptcy and the case was dismissed.
The bankruptcy judge said:
"Had there been any substance to her view that sales com¬missions would be forthcoming to allow her to pay these obligations, I would have allowed her some time to realize the income. After all, Debtor has paid the Trustee for five of the seven months she has been in this case. Unfortunately she could not do that and also pay her mortgage. Now she cannot pay either," the court concluded. "Because there is no legitimate purpose in continuing the Chapter 13 case, dismissal or conversion is warranted under Section 1307(c). However, since Debtor is not eligible for a discharge and has no unencumbered assets, I will dismiss, not convert, this case. In so ruling, I note that should Debtor's income increase as she hopes or liabilities diminish, particularly if she is successful in the TILA litigation, she is free to return to this forum to further attempt a reorganization."
Usually a debtor who is unable to continue a Chapter 13 bankruptcy because of financial reasons is granted a Chapter 7 bankruptcy conversion. Unfortunately, this debtor was unable to receive a Chapter 7 bankruptcy conversion because she had already received a discharge only a few years earlier. Debtors filing for Chapter 13 bankruptcy who are not eligible for a Chapter 7 bankruptcy due to time limits should carefully consider their ability to repay debts over the life of a Chapter 13 bankruptcy plan. Speak with a bankruptcy attorney to find out what actions are best for your particular situation.