Monday, December 9, 2013

Running on Empty: “What If I Can’t Make My Chapter 13 Payments?”

Chapter 13 bankruptcy is about payments. After all, it’s a “payment plan bankruptcy.”  But what if you just can’t make the payments?

A moratori…what?
A motion for moratorium of payments is a motion you can file to suspend your plan payments for a period of time.
Practice from bankruptcy district to bankruptcy district is very different.  Here in the Southern District of California, it can be challenge to get a moratorium, but not impossible. We are often able to obtain orders suspending payments for up to three months – although it is wise to use only one or two months if you need it, because you never know when you’ll need another order.  There is usually more flexibility if the plan is otherwise scheduled to complete in less than five years since a bankruptcy may not extend beyond its fifth anniversary.

Tell your lawyer if you’ll have problems making your plan payments
Going on maternity leave? Getting laid off for a few weeks? Having surgery? These are all income interrupters. If you’ll be experiencing an income interrupter, let us know well ahead of time so that we can timely prepare and file your motion with the (hopefully) legitimate reasons you have to suspend your payments.
Your creditors and the bankruptcy trustee have the right to object to the motion, but usually (let’s say almost always) the only person you need to “sell” your cause to is the trustee.

But my trustee’s a real jerk!
My official position is that there are no Chapter 13 trustees who are real jerks. None. Unofficially, let’s say you really do have a jerk for a trustee. Keep in mind that even if the trustee objects, you have the right to be heard by the judge. And the likelihood of your bankruptcy judge and your bankruptcy trustee being a jerk is pretty slim, statistically speaking.  If you really do have some legitimate reason to suspend your payments–through no fault of your own–the judge will grant your motion.

Don’t keep your attorney in the dark
With any problems in any type of bankruptcy, let us know immediately so that we can take necessary steps to keep your case on track. 

Chapter 13 cases are designed to help everyone – even you!  So, keep us informed of changes in your circumstances and lives so that we can continue to protect your interests.