Is The First Plan Payment Required In A Chapter 13?

This video talks about the desire to have the first plan payment in hand when filing a Chapter 13 bankruptcy case.  It is required by my office in most cases.  There are some exceptions.

Your office, Dave, you also do the first plan payment as well. Do you not?

David Siegel: What I like to do in many cases is get first plan payment that’s going to go to the trustee upfront. The reason for this is its good faith, it shows the trustee when you go to meet him that you’ve already got one payment in the till, you show that you have the ability to pay and it also softens the creditor objections to a certain extent. Someone is not going to allege bad faith if you already can show that you have the ability to pay.

Jesse Barrientes: And it takes probably at least a couple weeks or more, right, to set up the payroll deductions?

David Siegel: That’s the biggest problem with Chapter 13 when people are on payroll control. The payroll doesn’t always kick in very fast. The payroll department doesn’t always forward the money to the trustee quickly. So it’s good to have the debtor or client make one payment on their own so there’s one already flowing through. That way by the time the payroll kicks in, they haven’t missed a payment because the first payment is due within 30 days of filing. And believe me, those 30 days can run pretty quick and it doesn’t have a lot of time for the payroll order to get signed by the judge, get to the payroll department, get turned over and sent to the trustee. And remember, if you can’t make your first payment, how are you going to make a three to five-year payment plan?

Jesse Barrientes: Your very first one, sure.

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