Falling Behind On Trustee Payments
During the a Chapter 13 Bankruptcy, things can occur that causes a Debtor to be able to make the Trustee payment, such as a medical problem, time off work without pay, loss of job, or switching jobs. Just because a Debtor is unable to make one or two payments does not mean the case will automatically be dismissed. The Trustee’s Office will issue a 15 day Notice of Intent to Dismiss and set it for a hearing. This gives the Debtor time to determine what is best for them.
Depending on the situation depends on what a Debtor should do with the case. He has different options. First, he can let his case get dismissed and refile. This would be best if the stay has been lifted on a house, and he wants to refile to protect the house once again. However, there are cons with refilling a bankruptcy, and this option needs to be fully discussed with the attorney to make sure it is the best course before a Debtor decides to refile.
Second, a modification to cure Trustee arrears can be filed. This will add the missed payments back into the future payments. The downside to filing a modification is that usually the Trustee payment will increase. In some instances the payment can stay the same and the plan length can be extended. This is only an option if the Debtor is not already in a 60 month plan. Another way the payment might be able to go down is if the Debtor surrenders something being paid in the plan.
Third, the Debtor can sign an Interlocutory Order, which allows him to make 6 additional payments to get current with the Trustee’s Office. This is usually not the preferred option because in most cases the Debtor is not able to make his regular Trustee payment plus an additional payment to get him current in only 6 months as opposed to being spread out through the rest of the bankruptcy as in a modification.
Last, the Debtor can decide to surrender or try and work something out on what is left to be paid in the bankruptcy and convert to a Chapter 7 if he qualifies. However, this option needs to be discussed with a lawyer to make sure the Debtor is able to get a discharge in a Chapter 7.
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