What Can I Do if I Fall Behind on My Trustee Payment?

Chapter 13 bankruptcy is available to consumer debtors as a way of individually restructuring and reorganizing their debts without liquidation. If people qualify, most choose to file a Chapter 7 to discharge their unsecured debt. But if that individual or joint case cannot qualify for a Chapter 7 (whether because of income, a previous Chapter 7 filing, or a large equity or asset issue that would disrupt a discharge under Chapter 7), or wants or needs a Chapter 13 for whatever reason, there are various requirements that must be met for the case to be successful.

The biggest of these, of course, is a monthly trustee payment that must be made. This is formulated through the submission of your Chapter 13 plan to the bankruptcy court and represents anything from 10% to 100% of your debt over a span of 3 to 5 years. This payment needs to be made by the date specified in your plan (usually the last day of the month) each month. But of course, things happen in the ordinary course of life that can sometimes make it difficult to make your trustee payment.

If you fall behind, there are a few options, all of which you'll want to discuss with your attorney. If the trustee brings a motion to dismiss your case because of a default, that makes acting on the default that much more important. First, you can simply try to come up with the default. If you have some or all of the funds that haven't been paid, send them off or contact your attorney to see what you can do. Second, you can file a motion to modify your plan and defer the default. What this does is essentially tack on the default to the rest of your plan. This necessarily means that your trustee payment will go up from what it was before, meaning that it is best to stay current if at all possible. Also, if the reason for the default is that you have a loss of income, you can always consult your attorney to see if a conversion to a Chapter 7 bankruptcy is appropriate or even possible depending on the circumstances of your case.

Other considerations and options may apply, such as how far into the case you are, whether you are paying any secured debts through the Chapter 13 Plan, paying any mortgage arrears, or anything else along those lines. That's why the best option for avoiding problems with your Chapter 13 bankruptcy is to avoid falling behind altogether. It is also advisable to hire an experienced bankruptcy attorney to begin with.