Because Chapter 13 Plans generally last from 3 to 5 years, it is quite common for persons to suffer job loss, medical problems, etc…that could lead to an inability to make the Chapter 13 Plan payment. What is a person to do? Fortunately, the Chapter 13 program is such that this problem can be dealt with in most cases if the inability to pay will not be long term.
The first thing to do is call the attorney so that he or she can prepare a game plan for allowing the case to go forward. If you wait until the Trustee notices the lack of payment and files a Motion to Dismiss the case, it is generally much harder to resolve the problem.
In the event of a job loss that will result in no income for a few months, a Motion filed by the debtor in bankruptcy for a suspension of the Plan payment for this short time period will generally take care of the problem. There are penalties in the Middle District of Tennessee for filing these Motions, as the Trustee usually will demand any future tax refunds be directed to the Plan for payment to creditors during the remainder of the Chapter 13 following the suspension. Also, the math must still work and depending on how long the suspension is, it could cause the Plan payment to be higher for the remainder of the Plan to make up for the missed payments. The Local Trustee in Nashville also requires individuals to attend the Trustee’s Financial Workshop, if the client has not already done so. The case is also put on Probation, meaning if any payments are missed in the future, without a Court Order allowing so, the case would be automatically dismissed without further hearing before the Court. (this is called a DIPM).
So, while it is possible to deal with being unable to make the Chapter 13 Payment, there are downsides that you need to be prepared for. The most important thing is to call the attorney immediately when you realize there will be a problem with the payment to avoid the Trustee taking action first. Also, it may be that you lose your job but get another job very quickly paying approximately the same wage. If this happens it is very easy to notify the Trustee of the new employer and make any minor adjustments necessary to keep the Chapter 13 Plan on track.
David E. Phillips
Attorney at Law