A Chapter 13 bankruptcy is often referred to as a reorganization bankruptcy. It allows people who see a regular income to create a plan to repay all or a designated part of their debt through the bankruptcy court and the assistance of a bankruptcy trustee. Under the Chapter 13 bankruptcy, the debtor can propose a repayment plan that will have installments or Chapter 13 bankruptcy “payments” that will be paid throughout the course of the designated time (3-5 years). But what happens when you miss a payment in your Chapter 13 bankruptcy plan?
If You Miss a Chapter 13 Bankruptcy Payment:
If you’re a few days or a week late, it’s not usually a big problem. The court appointed Chapter 13 bankruptcy trustee may not even notice the late payment as long as you make it before the month ends as this is when they typically distribute the creditor payments.
When a Late Chapter 13 Bankruptcy Payment CAN Be a Problem:
Having said that, some bankruptcy court districts include mortgage and/or car loan payments in the lump sum paid to the trustee each month. Others allow debtors to make those payments directly to their creditors rather than mailing the payment to the trustee and then having it redistributed. If you make your car loan payment or mortgage payment through your bankruptcy trustee, a late payment is a problem.
The trustee will not contact these creditors to advise them of the situation and late payment. If the due date is prior to the distribution date of the trustee, the payments will be late. In this particular instance, the consequence will depend upon the court appointed trustee in your case, but some trustees will aggressively file a motion to dismiss in this situation.
If you are in this situation and your trustee files a motion to dismiss, you can attempt to save your case by opposing the motion. This will likely cost more in attorney fees and require that you do whatever it takes to get the previous payment and upcoming payment in on time.
Keep in mind that when you are in the midst of a Chapter 13 bankruptcy plan, the trustee has the right to garnish your wages. If you are one week late, the trustee will not take this type of action. But they might put a wage garnishment in place if you are one month behind. It’s best to be aware of this from the very beginning of the process as the thought of an employer “discovering” you are in the midst of bankruptcy proceedings can cause some petitioners a lot of stress and anxiety.
Once you are in the repayment stage of your Chapter 13 bankruptcy, any retaliatory action to a failure to comply with the stipulations of the plan is in the hands of the bankruptcy trustee so it can vary from case to case. If you need assistance handling your Chapter 13 bankruptcy or if you need help determining what you need to do next in your bankruptcy filing, please get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law.