In this article, we’ll discuss the important topic of: “How late can you be on a chapter 13 payment?”
What is a Chapter 13 payment in bankruptcy? It is also called a reorganization bankruptcy. To simplify the answer, the monthly payment is decided upon by the court, creditor, and the debtor to safeguard the assets and properties but pays back the debt. Since the monthly payment is a critical factor in this kind of bankruptcy, there cannot be a delay in payments.
In this article, let us discuss the deadline for payment and the adverse effects of late payments in chapter 13 bankruptcy.
How late can you be on a chapter 13 payment?
In Chapter 13 bankruptcy, the debtor goes into an agreement of repayment over the next 36-60 months, controlled by trustees appointed by the court. There are no direct payments to the creditors made by the debtor. The payments are made to the trustees, and that is then transferred to the lenders.
The trustees usually make payments to the creditors once a month. If in case you are late by 7-10 days, you not even get noticed. But the payment should be in the trustees’ account before he is sending it out.
In some cases, there can be late payments due to some emergency. But in such cases, your best resource is your trustee. And usually, there can be agreements on the coming to a revised date to make the payment.
However, if the trustees are not approachable, you can always request the court by filing a motion and explaining your circumstances at the motion hearing. And you can successfully convince the court; you can get an extension on your payment date and overcome the default payment.
Consequences of payment default
As mentioned earlier, there can have multiple adverse effects of not making monthly payments on time.
Chapter 13 bankruptcy may not be confirmed.
Once the court confirms or approves your repayment plan, you can start making the payments to the creditors. But there can be a delay in the confirmation; it may take up to 3 months. The delay often happens when the other stakeholders, i.e., the creditor and trustees, disagree on the repayment plan.
Despite all the delay, you will have to start making payments from a month later of filing the case. You will have to maintain making the payments proposed even without a confirmation. And if there is a consistent delay in payments, the case might not get confirmed of bankruptcy.
Creditors may resume the collection of debts.
The moment you have filed a case of bankruptcy, the court puts an order of automatic stay on all debt collection. This prevents the creditors or lenders from initiating or continuing to collect debts without the court’s permission.
The creditors get paid by the trustees, and if there seems to be a delay, both the creditors and trustees can file a motion in court to remove automatic stay. They can also start asking for debt repayment directly from the debtor.
Confirmed bankruptcy may get dismissed.
Even though your case gets confirmed under bankruptcy, there are chances that it can be dismissed. When you default the payments and fail to follow the repayment plan, the trustees can ask the court to dismiss the bankruptcy. The court can then decide whether to terminate the bankruptcy case without giving you discharge from the debts.
Can I skip a chapter 13 payment?
There is no such provision to skip chapter 13 payments. However, there can be multiple workarounds. Due to some unfortunate situation, if you cannot make the payments or make a reduced payment, you will have to inform the lawyer or the case’s trustees immediately. If this situation is temporary and has happened for only the current month, the trustees may co-operate and allow you to make payments from next month onwards.
If you are undergoing ongoing repayment problems, you can request the court to extend your payment period. If you have non-dischargeable debts like the student loan, it might be a good idea to extend beyond the standard 60 months of repayment.
Under extreme circumstances, where there is no way you could repay the debts, you can request the court to convert the case from Chapter 13 to Chapter 7 bankruptcy. Under chapter 7, the mortgaged properties can be sold to repay the creditors and get rid of the huge monthly payments (which in most cases is).
So, How Late Can You Be On A Chapter 13 Payment? Chapter 13 payments of bankruptcy are a continuous commitment for the next 60 months from filing bankruptcy. And it remains in the credit score even after getting discharged. You can be late by a week or two, but you will have to justify the delay with a concrete reason; only then can the court not dismiss your case.
This video clip tells you the latest trend of late payments due to Covid-19.