If you have decided to go the route of Chapter 13 bankruptcy and the bankruptcy judge has confirmed your proposed repayment plan, you will be required to make the first payment within 30 days of the bankruptcy filing. Upon confirmation of your plan, your payment will be distributed among your existing creditors according to the plan’s terms. In the case that your Ch. 13 bankruptcy never actually proceeds, the bankruptcy trustee will return the money you have paid, minus administrative expenses.
The payments will usually be paid monthly to the bankruptcy trustee. The trustee is just an official appointed by the bankruptcy court to oversee your case. Generally, you will be required to agree to allow the payments to be taken directly out of your bank account or paycheck. The trustee then uses those monthly payments to pay your creditors in accordance with the payment order of your plan. There is also a statutory fee collected that is roughly 8% to 10% of the total plan amount.
In certain instances, a Chapter 13 bankruptcy plan containing payments that don’t occur every month will be confirmed by the bankruptcy judge. Typically, this happens if you show that your history of income is usually spread out in uneven payments throughout the year, e.g., seasonal employment, quarterly commissions, etc. When this occurs, you may be able to pay only when you typically earn income, not every month.
What Happens If Something Goes Wrong?
In the event that you will not be able to make a payment or two during your plan due to changes in income or circumstances, you can usually make it up with the approval of your bankruptcy trustee. However, if you discover that you definitely will not be able to complete your plan at all, you may be able to convert your Chapter 13 bankruptcy to a Chapter 7 bankruptcy, or receive a “hardship” Chapter 13 discharge from the court. Typically, Chapter 13 bankruptcies that don’t work out are dismissed.
If your case is dismissed, you’ll owe your creditors the difference between the balance on your debt prior to bankruptcy filing and the payments you were able to make during the plan, plus accrued interest. For more information, feel free to contact the Goldbach Law Group for a free, friendly, and confidential consultation. Good luck.