A successful chapter 13 requires you to make timely, monthly payments to a chapter 13 trustee over the life of your plan. The plan could last anywhere from 36 to 60 months typically. Your plan may run less than that provided you pay off the debt in full. If you fall behind on your trustee payment, the trustee or a creditor can bring a motion to dismiss your case. When you fall behind with the trustee, there are no funds for the trustee to distribute that month. For that reason, creditors who are used to getting a monthly pro-rata payment, get nothing. This fact alerts them that there is a breach in your plan payments. By bringing a motion to dismiss, if they are successful, they will be able to recover secured items and pursue other collection efforts.
Typically, a chapter 13 trustee will bring a motion to dismiss when the debtor is two or three plan payments behind. This is not a hard and fast rule in that the trustee may bring the motion quicker or later in certain circumstances. Upon the hearing date, the debtor is often given an automatic continuance by many of the judges. Some judges will require an explanation as to why the debtor can become current in the future or if the debtor has anything to tender on that given day to go towards the arrearage. In my experience, debtors who are filing multiple cases have a greater likelihood of being able to make their cases work. Clients who have been through the system before understand that trustee payments are critical to a successful case. If someone is sincere about saving their home or saving their car, they’re going to put the chapter 13 trustee payment as a priority in their life. The rest of their budget items have to suffer in exchange for getting the trustee paid. This means that the person might not be able to eat out or entertain or engage in certain spending that the person normally would do in order to be able to pay the trustee as well.
The smartest way to avoid a trustee’s motion to dismiss is to have your trustee payment automatically deducted out of your pay. This is known as a payroll control order and it pretty much ensures that as long as you are working, you’re going to maintain current payment status with the trustee. In terms of other creditors, such as your outstanding mortgage payment and other utilities, you have to make those payments on your own. Studies have found that those that engage in payroll control have a greater likelihood and a greater success in a chapter 13 case.
If your case is dismissed, you will likely have the opportunity to re-file under chapter 13. It is only when cases are repetitively filed that have no likelihood of success, that the court, the trustee or a creditor can come in and seek a bar against re-filing. The typical bar against re-filing is 180 days. This timeframe gives creditors the opportunity to complete a foreclosure, repossessed a vehicle and sell it, or otherwise garnish wages or attach bank accounts. For more information on chapter 13, contact my office at 847-520-8100.
