Handling a Trustee's Motion to Dismiss

Bankruptcy can be a stressful time in someone's life. They're dealing with financial terms and issues they're not overtly familiar with, creditors are calling almost nonstop, and they're worried about the impact that bankruptcy will have on their lives. These stressors are, for the most part, alleviated when a debtor actively seeks bankruptcy protection, including Chapter 13 repayment plans.

The stress can quickly return, though, if the debtor falls behind on some or several trustee payments. In Chapter 13's the trustee can file a motion pursuant to 11 USC 1307(c) to dismiss the case for failure to make plan payments. Usually, this is either met when there is a delinquency equal to three monthly payments or more, or if there is a sustained default of two monthly payments and the debtor has a history of plan payment delinquency. The question is, for both the debtor and their attorney, what to do next.

The best solution, of course, is to try and accumulate the default. If the debtor comes up with the balance, the trustee or their representative will likely just withdraw the motion. This, of course, presupposes that the debtor is making their regular payments; the difficult aspect of it is making sure that not only does the default get cured, but that the regular monthly trustee payments are being made as well.

If that doesn't work, a popular option is to file a motion to modify the plan and defer the default. Under this option, the default is taken and spread out amongst the rest of the plan payments. Therefore, the plan is brought current right away (or really, upon granting of the motion), but the actual trustee payment itself is increased to compensate for the deferral of the default. This motion requires judge approval, so there must also be a justification behind it as to why the debtor was delinquent.