As bankruptcy attorneys, we frequently hear clients say “I can’t pay my chapter 13 payment.” Life happens. People get sick, miss time at work, lose jobs, get divorced and lose income. All of these factors, plus many more contribute to I can’t pay my chapter 13 payment. When you fall behind on your payments, your Trustee will file a formal Motion to Dismiss your case with the Court. The motion will allege how far you are in arrears and set a date for a hearing. Your normally don’t have a lot of time between when the motion is filed and your hearing date.
You need to do something! It’s hard sometimes. We understand that. But all the same, you are in a repayment plan to bring your house payments current, pay off your car, pay back the IRS or take care of other bills. The monthly trustee payment obligation continues even when your income doesn’t.
This article is one in a series of six articles discussing the various options available to you. The series is designed to help answer the I can’t pay my chapter 13 question.
Many times, when you are behind on your trustee payments, the best thing to do is change your payment plan to reflect you letting some things go. Many people in a repayment plan are keeping their house and cars. Sometimes touch times require tough decisions. One of those decisions that people have to make is to decide to let go of their house or one of their cars.
A lot of times we use language specific to bankruptcy that doesn’t always make sense. In this case, that word is “surrender.” When we say surrender, we mean to physically give up an asset like a car or a house. In your repayment plan, you have the choice to keep or give up assets. Sometimes you have a car that is worthless, yet still has a lien on it. Obviously you would not want to keep paying on a car that is worth nothing. Luckily, in the bankruptcy realm, you can let that Hummer go (or surrender) and just pay pennies on the dollar for the loan, versus paying the loan in full. Whatever you decide to do, it requires formally modifying your repayment plan and changing it to reflect you surrendering or giving up that asset.
Give up the Hummer
Obviously, no one wants to give up their truck. But sometimes you have to make a small sacrifice for the greater good. Sometimes to keep your family’s house, it means giving up your truck. By giving back the truck, you will be able to eliminate the loan in your repayment plan. If you have a $20,000 or $30,000 loan, you can see how removing that amount of debt will make the remainder of your repayment plan much more affordable. And do you really need a Hummer anyway?
When you are screaming I can’t pay my chapter 13, you haave to take stock of what is important in your life. Which is more important? Your house where your family lives? Or your $30,000 Hummer? I think you know the answer to that. Now is the time for a little humility. Now is the time to drive that 4-cylinder 5-year old vehicle so you and your family have a place to live. When you get your finances righted, then you can think about treating yourself to a new truck (But I am betting you will have learned your lesson, and won’t do that.)
Ok, I want to give some stuff up. How do I do it?
First off, call or email your attorney and tell him that I can’t pay my chapter 13. At our office, we will go over your options and look at giving up some of the stuff you are paying in your Chapter 23 repayment plan. If you want to surrender your vehicle, we will let you know that you need to modify your plan to do it and what the steps are to get the modification filed with the Court. See our other blog posts about modifying your plan.
You may be surprised about how easy is to make the decision to give up some of the things you are paying for in your bankruptcy plan when you see how much it can lower your payments.
If you can’t wait until your attorney is in the office tomorrow, you can roughly estimate your savings if you give that Hummer up. Go to the National Data Center and set up an account. You will then be able to view everything about your account, including how much is left to be paid on your truck. Take that number (plus a little interest) and divide it be the number of months remaining. It will give you a pretty good idea of how much a month you can cut from your current payment.
Are you behind with your Chapter 13 Trustee payments. What can I do when I can’t pay my Chapter 13? Call your lawyer and start the discussion about giving up something (like that Hummer.)
The law firm of Busby & Associates has helped bring peace of mind to thousands of clients by working with them in their chapter 13 plans. We will do the same for you. So if you need help with your debts, please give us a call!