By Ryan C. Wood
What if I cannot pay my Chapter 13 plan payment? First of all it happens. It is called a change in circumstances and circumstances can change multiple times throughout a Chapter 13 Plan. Second, ever case is different and different circumstances call for different solutions. One of the benefits of filing a Chapter 13 case is that the plan it is not set in stone. While the bankruptcy court enters an order confirming or approving the Chapter 13 Plan, the Chapter 13 Plan can be amended after it is approved.
1. Let Your Bankruptcy Attorneys Know You Are or Will Have Difficulty Making the Chapter 13 Plan Payment
As Soon As Possible
As soon as you know you are going to have a problem making the payment you need to let your bankruptcy lawyers know. Hopefully you retained an attorney, if not retain one quickly. In the Northern District of California it is extremely rare (never witnessed it, which includes approximately 2 years as staff attorney for David Burchard, Chapter 13 Trustee for the San Francisco and Santa Rosa Divisions of the Bankruptcy Court for the Northern District of California) that a pro se, or someone representing themselves, actually successfully has their Chapter 13 Plan confirmed and finished without retaining counsel. In other jurisdictions it might happen. The point is you need to stay ahead of your case. If you missed payments with no explanation or communication with the trustee’s office and/or court, the trustee’s office will at some point file a motion to dismiss your case for nonpayment of plan payments. Some trustees do not file a motion to dismiss immediately though. Others will file the motion to dismiss when only one payment is missed. Your bankruptcy attorney needs to know your circumstances as soon as possible to make sure the best course of action is taken to keep you in your Chapter 13 case. If the case is dismissed you are right back where you started from with your creditors.
Modify Your Chapter 13 Plan If You Miss Payments
2. File A Motion To Modify The Confirmed Chapter 13 Plan
If you cannot pay your Chapter 13 Plan payment for a month or more you will most likely need to modify your Chapter 13 Plan to suspend the Chapter 13 Plan payments and/or reduce the payments going forward. A confirmed Chapter 13 Plan can be modified under Bankruptcy Code Section 1329 for a change in circumstances. Unfortunately your change in circumstances is a reduction in income or an increase in expenses that are making the Chapter 13 Plan payment impossible to make and still live life. The options available to you to change your monthly Chapter 13 Plan payment will depend upon your income, expenses, assets and debts. There a number of ways to keep the Chapter 13 Plan current when modifying a plan. The most common is explained below.
For example:
– Chapter 13 Plan payment is $500 a month for 60 months. A total of $30,000 total;
– You make the first 20 payments no problem;
– You do not make the Chapter 13 Plan payment for the 21 and 22 months;
– The Chapter 13 Trustee’s office filed a motion to dismiss your case for nonpayment;
– To make the plan current you need to suspend the plan payments for months 21, 22;
– Then add the missed payments totaling $1,000 into the remaining months of the plan;
– There are 37 months left in the plan; (37 x $500 + $1,000) = $19,500/37 months = $528
– The Chapter 13 payment will now increase to about $528 a month instead of $500.
3. Enter Into A Stipulation With The Chapter 13 Trustee’s Office
Some Chapter 13 Trustee’s will choose to not file a motion to dismiss or they will file the motion to dismiss but withdraw the motion upon entering into an agreement to payback the missed payments without modification of the Chapter 13 Plan. While making the normal Chapter 13 Plan payment again you will have to pay extra to make up the missed payments. Every Chapter 13 Trustee administers these cases differently. Depending upon your jurisdiction you may have a number of standing chapter 13 trustee’s to deal with. In the Northern District of California there are three chapter 13 trustee’s. Mr. David Burchard is assigned cases in the San Francisco and Santa Rosa Divisions, Martha Bronitsky is assigned Oakland Division cases and Devin Derham-Burk is assigned all chapter 13 cases in the San Jose Division of the Bankruptcy Court for the Northern District of California.
4. Let The Case Be Dismissed
Sometimes this is the only viable option at the moment. Voluntarily allowing dismissal will defeat the whole purpose of filing for bankruptcy protection in the first place. If your income or circumstances have changed so much that you can no longer make a chapter 13 plan payment at all then you may just have to let the case be dismissed. It will be as if you never filed for bankruptcy protection. Your creditors will be free to collect their debts just like before and the full amount will be owed again. You may filed another chapter 13 case if things change.
One of the benefits of reorganizing debts in Chapter 13 is the flexibility of the Chapter 13 Plan depending upon the circumstances. There are limits to what a bankruptcy lawyer can do to help a client. Those limits are usually because of the client’s income, expenses and debts. Hopefully this article has answered your questions as to, “What If I Cannot Pay or Afford My Chapter 13 Plan Payment Anymore?”
