As bankruptcy attorneys, we frequently hear clients’ say “I can’t pay my chapter 13 payment.” Life happens. People get sick, take time off of work, lose jobs, get divorced and lose income. All of these factors, plus many more contribute to clients being unable to pay their chapter 13 trustee 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. But you know that.
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. We bring a series of articles designed to help answer I can’t pay my chapter 13 question.
File a Plan Modification
You have the right under Bankruptcy Code Section 1329 to modify your plan at any time. Genrally, you need a reason for the modification. If you are behind on your payments, your reasons are normally obvious like loss of job, health problems causing time off of work, or a divorce that causes a loss of dual income. However, a modification can be used for many things like reducing the amount you propose to pay to your creditors.
File a Plan Modification to surrender a car
A five year repayment is a long time. For many reasons, during the life of that plan, things happen to vehicles. It could be an accident, total accumulation of wear and tear, or maintenance problems related to miles and/or age of the vehicle. Sometimes is just isn’t worth it any longer to keep the vehicle. So one of the ways to lower your plan payments to make them more affordable is to modify your plan to now surrender or give up that vehicle. Once modified, you would remove the vehicle and the remaining payments owed from your plan. This would save you money on the back end by reducing the total amount owed.
File a Plan Modification to catch up payments
If you fall behind with your trustee payments, you have to realistically evaluate your case to determine if modifying it to catch up the payments is worthwhile. As we like to say, if the event that caused you to fall behind on your payments is still present, then you are still going to struggle with your payments going forward. So if you lost your job and could not continue making payments, if you are not back working, it is still going to be hard to make those monthly payments, right?
So a modification is good for someone who had a temporary setback with income and is back on her feet again. If you lost your job and fell behind on your payments, but are back working, then a modification could be very beneficial for you.
In a modification, we take the amount of payments you are behind and spread them out over the remaining term of your case. So if you are $3000 behind on your trustee payments and have 30 months to go, your payments would go up about $100 per month ($3000/30=$100). You start making the new payment right away.
We also have to provide notice of the change to your Trustee and all creditors and there is an attorney fee for this work. Some Judges set these Motions to Modify for a hearing. If everything looks good and you are current with your NEW plan payments, generally the court will approve it.
File a Plan Modification – Get your peace of mind back
So don’t despair if you get a Motion to Dismiss in the mail. You are behind on your payments. But options are available. You need to be flexible and realistic. But if you just experience a short term setback, call us about the possibility of modifying your plan. You may be surprised that your new payment going forward is not much higher than it was before you fell behind. Or if you modify to surrender something like your car, you may be very surprised how that one change suddenly makes your future plan payment very affordable. Call us and let us provide you with an estimate.
So I can’t pay my Chapter 13 Trustee payment. It happens, But you are not alone. The law firm of Busby & Associates goes extra lengths to try and help our clients. If you fall behind with your payments, call us, we will go over all of the options. Then we will help you choose the one that is best for you and your family. We are here for you.