Chapter 13 Plan Payments Are Due
It’s the first of the month immediately following the day your chapter 13 case was filed and it’s time to start making chapter 13 plan payments. Your chapter 13 plan payments are due to the trustee AND your monthly mortgage payment is due to your mortgage servicer. It is very important to make both the mortgage payment and the chapter 13 plan payments on time every month for the life of your chapter 13 bankruptcy case.
If for some reason, and it happens from time-to-time, you are unable to make either or both payments this month, please call me to discuss before you make any decisions. There are certain things to consider if you find yourself in a situation where you have a temporary loss of, or reduction in, income or if you had an unexpected expense recently.
Missing payments can have serious long-term effects on your chapter 13 plan so please avoid this if at all possible. Again, call me to discuss if this comes up for you.
The difference between missing payments before your case is confirmed and after your case is confirmed.
When your case is first filed, the chapter 13 plan that we submit is a “proposed” plan and will be reviewed by your creditors and the trustee before it is accepted and confirmed. During that process, there may be some back and forth between us as your lawyers and the trustee and creditors before the plan is in its final form for confirmation. This back and forth is usually done at confirmation hearings in court. There may be a number of confirmation hearings before the case is confirmed which can take place over a period of three to six months or sometimes more.
Before the case is confirmed and a few days prior to each confirmation hearing, the trustee checks to see that you are up-to-date on your chapter 13 plan payments. If you have not made one or more payments as of the day of the confirmation hearing, the trustee will move to dismiss your case right then and there. There is no separate motion – the case will just be dismissed. This differs significantly from the procedure for a missed payment after confirmation.
What Happens If You Have To Miss A Chapter 13 Plan Payment or a Mortgage Payment Once Your Case is Confirmed?
A missed payment to either the mortgage company or the chapter 13 trustee can have significant negative impacts. If a trustee payment is missed, the trustee may file a motion to dismiss the case. If a mortgage payment is missed, the lender’s counsel may file a motion to lift the automatic stay (which prevents the lender from proceeding with foreclosure) and could lead to a sheriff sale of your home,
In both cases, a formal written response must be filed by us on your behalf and a court appearance is required (lawyers only). The matter is usually resolved at the court appearance where an arrangement is agreed to by the trustee or lender to catch up on payments. Such an arrangement can take many forms but always involves you coming up with some lump sum of money to bring the default currency. Adding missed payments to the remaining chapter 13 plan payments is sometimes possible at the discretion of the trustee or lender (or both) and sometimes requires updated documentation on your income and expenses.
Resolution of missed payments often, if not always, includes a 30-day default clause which gives the trustee or lender a great deal of power the next time you miss a payment.
Also, you will be required to pay attorney fees for the lender’s counsel as well as fees to us to file the written response and appear in court on your behalf so this tends to be an expensive event.
Links to Chapter 13 Trustee Websites
Below are links to the bankruptcy trustee website. Each website contains instructions and information for setting up and making monthly trustee payments as well as other important information.
Making Chapter 13 Plan Payments and Mortgage Payments is the Single Most Important Thing During the Chapter 13 Bankruptcy Case.
Both the trustee and the mortgage lender monitor your payments every month and are quick to take action if payments are missed. Sometimes the trustee or counsel for the lender will reach out to me before filing a formal motion, and sometimes they will not. Sometimes, they will overlook one missed payment, and sometimes, they will not.
The best strategy for you, of course, is to avoid missing payments but sometimes, we know, it just isn’t possible.