Having Trouble Sticking with Your Chapter 13 Payment Plan?
Chapter 13 is the second-most popular bankruptcy for consumers in Florida. However, it is also difficult to complete, requiring that debtors stick with a payment plan that lasts three to five years.
With the economy in a tailspin due to the coronavirus pandemic, many people have lost their jobs. Unfortunately, those experiencing reduced hours or a drop in income include those on a Chapter 13 payment plan, which makes it exceedingly difficult to keep up with scheduled payments.
As experienced Plantation bankruptcy attorneys, we have helped many people with their Chapter 13 plans. Below is what you need to know if you have suffered a drop in income or are worried that you are on the verge of becoming unemployed.
You Can Possibly Extend Your Plan
The federal CARES Act managed to include a nice surprise for those in Chapter 13 bankruptcy: the Act allows plans to be stretched to 7 years for reasons of hardship.
Why is this a benefit? Well, it might lower your monthly payments, which means that those who have suffered a slight drop in income can potentially keep up with their plan. We might also be able to reallocate missed payments, allowing you to keep on track, though this will depend on the judge and trustee.
Typically, when a debtor stops paying each month, the trustee in charge of your case can make a motion to have the case dismissed. This can have negative consequences. Many of our clients are using a Chapter 13 to catch up on mortgage arrears, which they can spread out over the life of the plan. Once the court dismisses your case, however, your lender could swiftly move to foreclose on your home.
If you have suffered a temporary job loss or reduction in hours, this extension could help. If you are a current client, please contact us to discuss modifying your payment plan.
Monetary Assistance Not Counted as Income
A Chapter 13 plan is based on the income that our clients earn, requiring that they contribute disposable income to creditors. However, another provision of the CARES Act states that debtors do not have to include any monetary assistance they receive because of the coronavirus in their plan.
An obvious example: the $1,200 stimulus checks that are going out to most Americans who make less than $75,000 a year. If you receive one of these checks, you do not have to include it as monthly income for purposes of calculating the amount you pay to your creditors. This money should provide added relief to people.
Conversion to a Chapter 7
If you still cannot make payments, then a conversion to a Chapter 7 is also a possibility. Most people will qualify; however, you still must pass a means test, which can be a problem if you make too much money.
Contact our Plantation bankruptcy lawyers at Nowack & Olson, PLLC today. If you are struggling to stick with your Chapter 13 plan, then you should carefully consider all options. Our lawyers offer a free consultation if you call 888-813-4737 or send in your contact details.
Resource:
justice.gov/ust/file/cares_act_recovery_rebate_notice.pdf/download
https://www.floridabankruptcynow.com/americans-are-carrying-record-amounts-of-consumer-debt/
