Why Some Chapter 13 Cases End Before They Ever Get Started
Filing a Chapter 13 case is easy. Keeping it going is the tricky part.
Jeff Narmore, PC
Narmore Law Office
A Chapter 13 case can provide immediate relief and peace of mind. There is a certain element of “instant gratification” that gives it appeal on day one of the case. In many jurisdictions a case can be filed for “no money down.” Spending a few hours at an attorney’s office and signing some paperwork will make the foreclosure, repossession, garnishment or other collection efforts stop, as if by magic.
Appearances can be deceiving.
A successful Chapter 13 case usually requires a three- to five-year commitment involving monthly payments. The jumble of rules, requirements, meetings and hearings can seem like a bad set of instructions for building a complicated piece of furniture. Miss something important and the case will be dismissed, leaving you right back where you started, or maybe in even worse shape.
Let’s look at the common reasons why Chapter 13 cases fail, and how to avoid that result.
MONEY
You probably saw this one coming. As with many things, money is what makes the Chapter 13 world go round. The monthly payment you send to the Chapter 13 Trustee helps to fund his or her business operations, pays your creditors (often for items you want to keep), and probably pays your attorney, too. Miss a payment or two and you can count on hearing from someone.
“So don’t forget to make your payments!”
- Typically, your Chapter 13 payment will be due 30 days after you file your case.
- Your personal checks, credit cards and cash are no good here!
- The Trustee is not the Court.
COMMUNICATION
Chapter 13 rules and procedures are complicated and confusing. It’s easy to misunderstand or miss what’s expected. When you file your case, you hopefully receive a set of instructions and requirements from your attorney. Your mailbox will almost instantly be flooded with more instructions, directions and requirements from the Trustee and the Bankruptcy Court:
- Read Your Mail!
- Ask Questions.
- Get Your Questions Answered.
FEASIBILITY
Some cases are doomed to failure. A Chapter 13 case cannot be approved by the Court if it is not “feasible.” “Feasible” means that the debtor will be able to make all of the payments proposed by his or her Chapter 13 plan.
The lesson here is to make sure you know what your Chapter 13 payment will be before you agree to file the bankruptcy case. Part of the work you will do with your attorney before filing is to go over your monthly budget. Review your monthly income and expenses carefully and make sure your budget is realistic and that you will be able to make the required payments.
TAX ISSUES
Many tax debts need to be paid back in full during the bankruptcy case, and that can sometimes push a Chapter 13 payment past the feasibility point. There are other, time-sensitive rules about taking care of unfiled taxes.
FAILURE TO RESPOND
Communication is a two-way street. If your attorney asks you for information or documentation, it’s probably for an important reason. The information could be required in order to respond to an issue raised by the Trustee or the Court. The Bankruptcy Code allows the Judge to dismiss a Chapter 13 case for “unreasonable delay by the debtor that is prejudicial to creditors.”
Keep up with any notices about your case, especially if they set a hearing or set a deadline for a response. Check in with your attorney to ask what the hearing is about, and whether you are expected to attend. Your attorney might be waiting to hear from you!
A final word here. Make sure your attorney knows how to get in touch with you. How will you receive messages from your attorney? Whatever the arrangement, make sure you check for messages frequently.
