A chapter 13 bankruptcy requires a Plan to repay some of a debtor’s obligations; afford a debtor the chance to catch up on those debts where he or she is behind, such as a tax obligation or a house payment; and re-classify some debts to pay only the secured amount rather than what is owed.
Thus, the debtor enters into a Plan requiring the payment of a monthly amount, some of which will be distributed to secured debt (maybe a mortgage or car payment); some to priority debts (like tax or alimony payments); some to administrative expenses (the trustee’s fees); and some to the unsecured creditors (like medical bills and credit cards).
If you are in such a plan or are contemplating filing one, here are 6 “do’s” and “don’ts:”
1. Do make you payment on time to the trustee’s office. Late payments can result in a motion to dismiss the plan.
2. Don’t “skip” a month intending to get caught up. Although this will usually not result in dismissal of the case, getting behind can be difficult, if not impossible, to remedy.
3. Do budget to provide for the payment. It can be as important as a house or car payment.
4. Don’t pay less than the agreed amount. You can easily fall behind that way and not be able to catch up resulting in a motion to dismiss the plan.
5. Do keep track of what and when you send the payment and the number of payments made. You can often track this on line and it is encouraging to know where you are, how many more payments you need to complete the plan, and how well you’re doing.
6. Don’t pay more than the payment amount without consulting your attorney. Most of the time, you won’t pay off the plan earlier and will end up paying more than needed.
Chapter 13 plans bring many benefits: from saving a home to paying off your taxes over time. But you’ve got to stick with the program to make it work.
photo credit: Glyn Lowe Photoworks
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Last modified: May 7, 2013