What to Do if You Can’t Make Your Chapter 13 Bankruptcy Payment – Part I
Unless there’s a good reason for doing otherwise, it’s very important to make your chapter 13 bankruptcy payment each month. Section 1307 of the Bankruptcy Code allows for dismissal of a bankruptcy case for a “material default by the debtor with respect to a term of a confirmed plan.” The biggest “term” of your chapter 13 bankruptcy plan is your monthly payment, so missing a payment can be a big deal.
So what should I do if I’m about to miss a payment?
The short answer is,
1) Don’t Panic.
2) Call your bankruptcy attorney. If your attorney has “fallen off the map” and won’t return your calls, call a Denver bankruptcy attorney who will consider taking your case over and representing you through the end of your bankruptcy case.
Why don’t I panic? My case could be DISMISSED?!?
Chapter 13 practice is different across the country, so I can’t speak to the habits of every bankruptcy trustee, but in Denver and the surrounding areas, we have two bankruptcy trustees. Sally Zeman is trustee of bankruptcy estates in areas north and west of Denver, including Westminster, Northglenn and Lakewood. Douglas Kiel is trustee for cases filed by folks in Denver and points south and east, including Aurora, Littleton, Centennial and Highlands Ranch. These trustees are the only people keeping track of every payment you make, and nearly every motion to dismiss is filed by a trustee.
The good news is that for folks in Denver and elsewhere in Colorado, unless your bankruptcy plan is not yet confirmed, or you have previously fallen behind, the Denver area trustees typically give a debtor 2 months of missed payments before they request dismissal of the bankruptcy case. Keep in mind, the trustee is not REQUIRED to do this, but I’ve represented clients in several hundred chapter 13 bankruptcy proceedings, and I can tell you this is their practice.
So with the exceptions noted above, if you’ve hit a financial bump in the road and you’re going to miss one chapter 13 payment, and you can catch it up soon, you can relax. It’s not likely to matter to your bankruptcy case – at least not if your bankruptcy case was filed in with the court in Denver.
But it’s Not Just “One Payment” – Things Have Gotten BAD
If your finances have really deteriorated, whether from the loss of a job, major medical emergency or other hardship, you really need to have a discussion with a bankruptcy lawyer about your options. This is all the more important if the trustee files a motion to dismiss your bankruptcy case.
In brief though, if you are facing a motion to dismiss your chapter 13 bankruptcy case, you may have one or more of five options:
a) Make an arrangement with your bankruptcy trustee to catch up the missed payment within a short period of time (usually 30 – 60 days)
b) File a motion with the bankruptcy court to modify the terms of your chapter 13 plan
c) Convert your bankruptcy case to a proceeding under chapter 7
d) Motion the bankruptcy court for an early “Hardship Discharge” pursuant to section 1328(b)
e) Do nothing, let your case be dismissed, and file a new bankruptcy case (or not)
Each of these options has different pros and cons, and not each is available to every debtor in chapter 13. The details of each option are for another day.
Andrew Trexler is a bankruptcy attorney practicing in the Denver, Colorado Metro area