FAQS About the Chapter 13 Payment Process
Chapter 13 is a powerful bankruptcy option that stops foreclosure, repossession, and more. By using a payment plan, you can get out of debt and keep your most valuable assets. But how do Chapter 13 payments work? And what happens if something goes wrong?
Here are the most frequently asked questions we receive on this topic, along with how our trusted Chapter 13 bankruptcy lawyers can help.
How Does the Chapter 13 Payment Plan Get Set Up?
When you file for Chapter 13 bankruptcy, you set up a payment plan with your attorney and the court. Basically, the court’s Chapter 13 trustee determines what you can afford based on your income and other factors. You agree to make the payments, which are designed around your unique financial situation.
Because it’s set up based on your income, the hope is you’ll always be able to make the regular payments. Then, once you’ve completed your payment plan, the court considers you completely out of debt and discharges your case.
The Basics of Making Your Payments
Once the court approves your bankruptcy petition, your payments will usually begin within the first month. Your trustee will oversee the process and should give you a few different ways to pay.
These options might include:
- Wage orders, which take your payment directly from your wages.
- Mailing the Chapter 13 bankruptcy trustee.
- Automated withdrawal from your bank account, and
- The option to pay in-person with cash or debit.
You can’t charge these payments or put them on credit. Instead, it’s important they come directly from your bank account.
They might also have specific rules around personal checks, which usually need to arrive early so they can make sure you have enough money in your account to cover it.
If you have questions about the payment process, you can always ask your attorney or the trustee. It’s important to make sure you know all the rules and show the court you’re committed to the process.
What Happens If You Miss a Payment?
There’s no one answer to this question. However, it’s always a big deal if you miss a payment or think you might miss one in the near future. You definitely want to take it very seriously.
Sometimes missing a payment could cause an immediate dismissal of your case. You could also experience other penalties, depending on the situation.
If you think you might miss a payment, can’t afford it in full, or realize you’ve missed one, call your lawyer immediately. Your attorney may be able to help you address the courts and potentially fix the issue.
This is one of the many reasons we recommend you get a bankruptcy attorney with no hidden fees. You need someone who will answer your calls at no charge and help you if anything ever goes wrong.
Can You Pay Off Your Plan Early or Make Extra Payments?
Generally, you should pay off the plan the court approves in the amount of time they set. This helps everyone know what to expect and keeps you from having to go back to the court for changes.
But there’s another reason you should stay on schedule.
Chapter 13 allows you to pay off your debts at a lower rate than you actually owe. If you’re able to make higher payments or pay off your plan early, the court will likely determine you have enough money to pay the debt in full. This means you end up paying far more than your original plan.
If your financial situation improves drastically or you think you could pay off your plan early, talk with your attorney about your options.
Legal Help for a Chapter 13 Bankruptcy in Memphis
If you’re curious about Chapter 13 and have questions, you’ve come to the right place. For over 30 years, we’ve helped the people of Memphis file for Chapter 13 bankruptcy – and we can help you, too.
Our attorneys offer a free consultation, no strings attached. We’ll discuss your situation and give you an idea of what options might work best for you. If you decide to file, we’ll stay with you every step of the way.
Unlike some other firms, which charge extra for questions or problems with your case, we never charge more for basic legal care. We look out for you, because we care about our clients and consider your success part of our mission.
To get started with a free conversation, contact us online today or call us at 901-327-2100.