The simple answer really is that there’s no grace period. The Bankruptcy code requires that payments begin no later than 30-days after the case is filed and that they continue to be made every 30-days thereafter, unless the court changes this payment requirement. Some courts actually require the first payment to made sooner than that. In my courts in Eastern Missouri, the case will be thrown out pretty quickly if you don’t follow the rules.
It’s important to understand that Chapter 13 is like a new contract with your creditors — but unlike many consumer loans, it has no grace period.
One reason is simply that that’s the way it is. Another implicit reason is that “grace periods” can often be a bad or dangerous thing for consumers. If you run a couple days late because the check is in the mail and doesn’t arrive on time, that’s one thing.
But many people who are squeezed financially — or living beyond their means now — count on grace periods just to get the money together to make payments. In effect, they’re always behind and always balancing one payment (e.g. the car payments) against another (like the mortgage). It becomes a way of life. And as often as not, you start paying the late fees — pure profit for your lender, effectively raising your interest rates — and believing you’re OK as long as you don’t run 30-days behind.
Chapter 13 ought to help break this horrible cycle. With everything starting fresh on Day One of the case, your goal should be to be paying the plan (and any debt you pay outside the case, like a mortgage) on or before the due dates. If possible, getting ahead on those things so you have some margin for error if a problem comes up. It’s a fresh start — use it!
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Last modified: September 28, 2012