Late payments in a Chapter 13 bankruptcy

Florida residents who have filed for Chapter 13 bankruptcy may wonder what will happen if they are late with a payment. In a Chapter 13, reorganized debts are being repaid on a monthly basis to the trustee pursuant to a three- to five-year court-approved plan. The trustee then distributes the payments to creditors. Regarding late payments, the answer is that it depends on how late the payment is, when it arrives and who is being paid.

Delinquent mortgage payments or credit cards and other unsecured loans may be placed into an account and distributed monthly. A payment that is a week late in a case like this may not even be noticed by the trustee if it still arrives prior to the monthly distribution date. However, there might be a problem if the payment is car loans or mortgages because the due date may be missed.

In such a case, some trustees file a motion to have the case dismissed. It might be possible to stop this dismissal, but this requires opposing the motion and will cost additional lawyer fees. A trustee might also have the right to garnish wages.

Many people have misconceptions about bankruptcy. For example, they may think of it as an admission of irresponsibility, but people fall into bankruptcy for many reasons such as medical debt, and it is often an appropriate solution. Chapter 13 bankruptcy can be a good choice for people who want to keep some assets and who have a regular source of income, but it is important to follow the rules carefully. A person who is considering bankruptcy might want to discuss the process with a lawyer who can explain the eligibility and other requirements.