March 15, 2022
Chapter 13 bankruptcy is an option for individuals facing significant financial hardship. However, there are a number of rules involved. One of the primary rules is making your agreed-upon payments on time. You may be wondering; how do I make my payments in a Chapter 13 payment plan?
You must go through several steps to be able to qualify for Chapter 13, and you then must set up a plan for your repayment. You will make your payments to the trustee for your bankruptcy plan. The payment often will involve a payroll deduction or an automatic bank withdrawal, which ensures that the payments occur on time and in full. There is no grace period or required forgiveness for late payments in a Chapter 13 bankruptcy case, so making payments on time is extremely important.
Qualifications for Chapter 13 Bankruptcy
Think of filing for Chapter 13 like paying back a short-term loan that is based upon what the bankruptcy court believes you can afford. Unsecured creditors (who have no collateral) get paid 0% interest may get paid zero or a portion or all of what you owe – depending on what you can afford. This gives you time to catch your breath and make the payments in a way that more realistically fits your budget and matches your income level.
Setting Up the Chapter 13 Bankruptcy Plan
Before you can begin making payments under Chapter 13, you must qualify for this type of bankruptcy filing. Our bankruptcy attorney can help you determine whether you qualify, before helping you put together a repayment plan. This plan must detail how you will repay the debts that fit under Chapter 13. It will specify the amount of the debt you will repay, the total amount each creditor will receive each month, and the length of time the payments will occur.
The bankruptcy court must approve your plan. Before doing so, the court will give your creditors a chance to comment on the plan. Based on any objections of your creditors, the court may request that you make changes to the plan. Eventually, the court should approve the plan. However, even if final approval requires a few months, you must begin making payments during the first month after you file the plan.
How Many Months Is a Chapter 13 Repayment Plan?
One of the most common questions we at Grainger Legal Services hear from clients who are considering this option is, how many months does a Chapter 13 repayment plan last? Clients have concerns that the payment time will be so short that their monthly payments will be overwhelming. The good news is that a Chapter 13 repayment plan encompasses years, not months. Those who file for Chapter 13 can set up the repayment plan to last over three years or five years. People with above-median income must pay over five years.
The plan will specify the amount that you pay over those three to five years. The amount will not increase toward the end of the plan unless needed for missed payments or sometimes adding missed house payments into the plan. It will normally be a consistent payment amount, so you can plan and budget for it without any unwanted surprises as the plan moves forward.
How Are Payments Made in Chapter 13?
If you are wondering how the payments are made in Chapter 13, you are not alone. This is another common question we hear from our clients at Grainger Legal Services. Fortunately, the process of making payments under Chapter 13 is one of the easiest parts of filing this type of bankruptcy. Setting up the plan and reaching the point where you can begin making payments is far more complex than actually submitting your payments.
Some repayment plans under Chapter 13 require you to pay weekly, bi-weekly, semi-monthly, or monthly – depending upon how often you get paid. You have several options for making your payments, including:
- Payroll deduction if you are working.
- Electronic payments through approved online payment services
- By cashier’s check or money order through postal mail
The Role of the Chapter 13 Bankruptcy Trustee
As part of Chapter 13, the court will appoint a bankruptcy trustee for your case. In the U.S. Bankruptcy Court for the Middle District of Alabama, the court has appointed certain people to serve as trustees for all cases. It simply depends on where you live as to the person who will become the trustee for your case. Once you begin making these payments to the trustee, you no longer will have contact with the creditors. Your attorney serves as the go-between for you and your creditors and the Trustee.
The trustee collects your Chapter 13 payments and then submits the payment to your creditors. You must make your payments by the date agreed to in your Chapter 13 agreement. There is no option for making late payments. You must make payments in full, too. There is no option for making partial payments.
If you know that you will have a tough time making a payment in a certain month, you need to let our Chapter 13 bankruptcy lawyers know about this problem as early as possible, so we can contact the trustee and try to make other arrangements. Understand that there is no guarantee that the bankruptcy trustee can work with you or help you if you are going to miss a payment date or if you will be unable to pay the full amount for the month, no matter how early you tell us about the problem. However, if you wait until a day or two before the funds are due, we know that our chances of coming up with a workable solution are nearly impossible.
We Help You With Making Your Payments in a Chapter 13 Payment Plan
If you have concerns over making your payments in your Chapter 13 payment plan, it is important to reach out to Alabama bankruptcy lawyer Charles Grainger. He understands the importance of creating a plan that you can stick to and successfully complete.
Even better, speak to the team at Grainger Legal Services before you decide whether to file for bankruptcy. When you choose to hire us, we will walk you through all your options for overcoming your financial situation, helping you determine the best path forward. Should our team and you decide that Chapter 13 bankruptcy is the best option, we will make sure you understand everything you must do from a legal standpoint. We will help you put together a realistic payment plan. For a consultation, contact us today at 334-260-0500 at our Montgomery office, at 334-361-8550 at our Prattville office, or at 334-770-4500 at our Troy office. We offer emergency after-hours appointments for those who need this service.