If you find that you don't have enough money to pay your bills or that you have to constantly borrow money just to make ends meet, Chapter 13 bankruptcy can help you achieve a fresh financial start. Despite the name, Chapter 13 bankruptcy is actually a repayment plan that requires you to pay back a portion of your debts.
At the end of the Chapter 13 plan, the court discharges your remaining unsecured debts. However, you must continue to pay your non-dischargeable debts. When you file for Chapter 13 bankruptcy, you will propose a payment plan.
The amount of your monthly payment depends on your income, expenses, and the types of debts that you have. After your initial filing, the bankruptcy trustee assigned to your case must approve your proposed payment plan. Occasionally, the trustee may object to the details of a Chapter 13 plan. Learn a few of the reasons your trustee may deny your Chapter 13 plan and what you need to do to resolve the issue.
1. Your Paperwork Is Not Complete
When you file for Chapter 13 bankruptcy, you must include specific items to corroborate your financial situation. If you are missing any information, it can delay the confirmation of your Chapter 13 payment plan. Your bankruptcy attorney will supply you with paperwork that lists out all of the documents that you must include with your bankruptcy filing, such as:
- Tax returns from the last four years
- Paycheck stubs from the past six months
- Loan documents
- Current bank account statements
Ideally, you should check for any missing paperwork before your court date so that you don't waste an afternoon. If you can't find some of your necessary documents, a research request with the appropriate government agency or financial institution can help you obtain copies.
2. Your Proposed Plan Payment Is Too High for Your Income
A Chapter 13 plan lasts anywhere from 36 to 60 months. The length of your plan varies based on how much debt you have and what debts you must pay in full. Debtors who have a significant source of non-dischargeable debt may find that their proposed plan payment is too expensive for their income.
If the bankruptcy trustee feels that your plan payment is not realistic given your income, they retain the option to reject the plan. Remember, your trustee wants your plan to succeed. If you are proposing a plan that is shorter than 60 months, a simple way to appease the trustee is to extend the length of your payment plan and thus lower your monthly payment.
However, if you are already proposing a 60-month plan, you have limited alternatives. You can have your lawyer assist you with preparing an explanation of how you plan to make the payment more affordable, such as working a different shift than your spouse to reduce childcare expenses.
3. You Are Behind on Your Plan Payments
You should start making your Chapter 13 plan payments a couple months before going to court to confirm your plan. By making at least a couple payments, you are proving to the trustee that the plan fits your income and that you are serious about getting out of debt.
Unfortunately, it is not uncommon for debtors to miss one of these early payments. Perhaps they are short on cash due to attorney fees, or maybe they are adjusting to a reduced income.
If you are behind on your plan payments when you go to your confirmation hearing, expect the trustee to deny your plan. You can ask for a continuance of your case to give a chance to get caught up on your payments and reevaluate whether or not they are affordable.
Don't let your debt control your life. Contact W. Mack Rice for more information about filing for Chapter 13 bankruptcy.