What If I Can’t Make My Chapter 13 Payments?
If you have filed chapter 13 bankruptcy it is probably because you were either an above median debtor for your family size, you are trying to save a home, or you have already received a chapter 7 discharge in the last 8 years prior to filing your current case. Chapter 13 bankruptcy plan payments typically last for between 36-60 months and during that time life can be unpredictable. What happens if you lose your job?, have a decrease in income?, take time off?, or simply cannot make your currently scheduled payments.
In the Western District of Washington your chapter 13 trustee will probably move to dismiss your case after more than 2 plan payments are missed. In some jurisdictions debtors file a motion to receive a moratorium on plan payments if plan payments are missed due to a short term loss of income. The Western Washington Chapter 13 trustees generally won’t move to dismiss until a couple of payments are missed. Filing a motion for moratorium may be a waste of time and money as you can make up the payments you are behind within in a few months prior to dismissal.
What if my loss of income is permanent? If your loss of income is permanent and you don’t see yourself ever able to make your current plan payments you will have two options. If you fall below the median income for a 6 month period you could motion the court to convert your case to a chapter 7 bankruptcy. If you choose this option you will have to attend another 341 meeting of creditors and refile your schedules disclosing your current income and expenses as well as any new debts that were incurred since filing for chapter 13. If you are not trying to save a home, this would probably be your best option if you can qualify for a chapter 7 as you will most likely receive a discharge of your unsecured debt as long as you have no non exempt assets.
Your second option if after calculating your income you believe you are still an above median debtor you can motion the court to lower your payments due to your new circumstances. If everything can be documented, then there should be no push back from the chapter 13 trustee’s office.
Finally if you are somebody who has been trying to make up payments on your home and you simply cannot afford the payments required to make up the arrears on your home you may be in trouble. If you cannot show you can afford to keep your home, the trustee will move to dismiss your case which may take at least 21 days from when the motion is filed. Once your case is dismissed, your mortgage company can look to proceed with foreclosure actions. In Washington State, if your mortgage company is not exempt, you may want to consider having your bankruptcy attorney refer you to the foreclosure fairness Act mediation program (FFA) where you can request a face to face meeting with your lender in order to try to work out a modification. FFA mediation can only be requested by an attorney or housing counselor and may be requested after you have received your notice of default on your mortgage. You have up until 20 days after your receive your notice of trustee sale to request the mediation as well. It should be noted that if you have no income you will not qualify for a modification, however simply applying for FFA mediation will stop a foreclosure from happening until the closure of the mediation which can take several months. After you go through this process and if you become employed again your could refile a chapter 13 bankruptcy and try to make up your arrears over 5 years in the chapter 13 plan.
If you are somebody who has missed chapter 13 payments you should not panic immediately. There are many options out there that are designed to help you get through this difficult time and you should seek out a qualified bankruptcy or foreclosure defense attorney to learn about your options.
If you have additional questions please contact Symmes Law Group at 206-682-7975