One of the main issues of a Chapter 13 bankruptcy payment plan is the Debtors ability to pay the trustee every month. In a Chapter 13 bankruptcy, you are required to repay certain debts to the bankruptcy trustee
So, if you are behind on your mortgage, once you file your Chapter 13 bankruptcy, you are immediately current. The bankruptcy could have been filed ten minutes before the foreclosure sale, and the state court cannot allow the sale to go through because of the Chapter 13 bankruptcy filing. Now that your property is safe from a forced sale, there are several rules you must abide by. For example, you must show on paper that you have the ability to repay not only the amount that you are behind through the Chapter 13 bankruptcy process, but you must also pay the regular monthly mortgage payments through the Chapter 13 bankruptcy plan. Many times you cannot show on paper that you have the ability that you can afford the bankruptcy repayment plan. To solve that problem, the Bankruptcy Court will allow you to get an affidavit of support. That is basically a notarized letter from a friend or a family member who is willing to help you which tells the Bankruptcy Court how you are able to afford the payment required to be made under the bankruptcy plan. The bankruptcy repayment plan is made more affordable because you are not required to always repay all of your creditors in full. For example, if you have unsecured debts (credit cards or medical bills) they usually get a very small percentage of what they are owed. So if you were paying them $500.00 every month, you don’t have to pay them anymore. They usually split a very small amount with other creditors so that you can more easily afford paying for your car or mortgage through the Chapter 13 bankruptcy plan.
The first payment under the plan is due 30 days after the Bankruptcy case is filed and every 30 days after that. The local rules of the Bankruptcy Court for the Southern District of Florida require you to have these payments made by your employer. If you don’t want your employer to know that you filed bankruptcy, you can file a motion to waive the income deduction order that normally gets entered by the bankruptcy judge. However, you cannot have the motion to waive the income deduction order for any reason. You must have good grounds to be successful in that motion. Good grounds include, but are not limited to, your belief that you may get fired because your employer knows you are in bankruptcy. This is only a good excuse if you work for a small company. If you work for the school board though, that excuse will not fly. If you handle money, that is an excuse that will justify the court to grant your motion. Another is that you don’t have enough income that would completely pay your bankruptcy plan payment. If you are married and are filing jointly, both spouse’s would have to file this motion if neither wants the employer to know about the bankruptcy filing. By the way, not wanting your employer to know that you filed for bankruptcy is not a satisfactory excuse to get the income deduction order waived. There must be a substantive reason why you can’t get it done. The reason why the bankruptcy court requires an income deduction order is because statistically it has been proven that debtors on bankruptcy are much more likely to succeed with the bankruptcy and make all their payments on time if they have a wage deduction order. That is why the bankruptcy court prefers all debtors have an income deduction order in effect.
Most of the time, the bankruptcy plan will change numerous times. For example, when the first plan gets filed, we do not know to the penny how much you might owe to a specific creditor. We will generally use the numbers given to us by the client, but there is no way to know what the court costs and attorney fees in the foreclosure are when you file for bankruptcy. Also, some mortgage creditors charge for the work they have to do during the bankruptcy, while others do not charge anything. These creditors will file a proof of claim showing all of their charges. We will have an opportunity to object to the proof of claim because we may think some of the charges are unreasonable or unnecessary. Once we have the final number, we will have to amend the bankruptcy plan to conform to the order on our objection to their proof of claim. Many times, the debtor wants us to change what’s in the plan. For example, if we file a motion to value a vehicle in the plan and we get an appraisal that is higher than we thought the value of the car was, we may have to pay more for the car. If you don’t want to pay that amount, you may request the car be taken out of the plan, and the plan will have to be amended to do that. The main thing that a Chapter 13 bankruptcy requires is that the debtor continue to be current on the plan payments. So if the plan is amended to increase a little bit, you must make sure to catch up on all the monthly payments while you were making while the payments were lower. So if your Chapter 13 bankruptcy plan payments were $200.00 per month, and on the sixth month you decide to add a vehicle, the payments will go up. If the new payment is $400.00, in the sixth month, you have only paid in $1,200.00, when you should have paid in $2,400.00. So you would have to find another $1,200.00 to catch up before the next court hearing so you are not behind at that hearing. This is the general rule, but there are ways around that, but your monthly payment would be higher than the $400.00 new payment because you have only a limited time to pay back the new $1,200.00 that you are behind. The income deduction order has language in it to allow your attorney to write a letter to your employer to increase or decrease what they are taking out of your paycheck to pay the bankruptcy trustee. You need to pay attention to your paychecks to make sure they are taking out the correct amount.
If you make all of your payments to the Chapter 13 trustee, you will have a discharge after your plan is finished. That means you will have no credit card debt or medical bills that were incurred prior to the bankruptcy. It also means that any tax liability that you had will be gone. Also, the mortgage that you were behind on is now current, and you will make the regular monthly payments directly to the mortgage company as if you were never behind. The mortgage foreclosure case will be required to be dismissed.
