Modern Family Matters

Who Do You Pay in a Chapter 13 Bankruptcy?

September 20, 2023 with Darin wisehart Season 1 Episode 110
Modern Family Matters
Who Do You Pay in a Chapter 13 Bankruptcy?
Show Notes Transcript

Join us as we sit down with Bankruptcy Attorney, Darin Wisehart, to discuss who you pay in a chapter 13 bankruptcy, and the details of what to expect from the process. In this podcast interview, Darin covers the following:

•    In a Chapter 13 bankruptcy, every month the debtor is required to make payments to secure property they want to keep.
 •    When you pay the trustee and when you pay the lender in a bankruptcy.
 •    Two aspects that determine payment: what you must pay and what you can pay. 
 •    What you must pay to secure items you want to keep like cars, furniture, etc. 
 •    What you can pay is generally based on your expenses and your income. 
 •    How we work together with you and the trustee to arrive at a reasonable payment.
 •    How a Chapter 13 bankruptcy allows debtors to regain control of their financial lives and to get a meaningful fresh start. 

If you would like to speak with one of our attorneys, please call our office at (503) 227-0200, or visit our website at https://www.pacificcascadelegal.com.

Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.

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Intro:
Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you. Covering a wide range of legal, personal, and family law matters, with expert analysis from skilled attorneys and professional guests, we hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.

Steve Altishin  
Welcome, everyone. I'm Steve Altishin, Director of Client Partnerships at Pacific Cascade Legal, and today we have our Bankruptcy Attorney, Darin Wisehart, to talk about who do you pay in a Chapter 13 bankruptcy? Hey, Darin, how you doing today?

Darin Wisehart  
I am great. I'm great. How you doing?

Steve Altishin  
I'm doing well. Today it's sunny, it's warm. It's like you know, hasn't been for eight months.

Darin Wisehart  
It is nice. It is nice. When it gets to that point, everybody starts picking their eyes up and getting happy you start seeing some smiles. It's nice.

Steve Altishin  
That's exactly right. Before we start into who you can talk to in your chapter 13 bankruptcy to pay, let's just again, get a little one minute primer of what a chapter 13 Bankruptcy is.

Darin Wisehart  
The quick skinny, chapter 13 is a reorganization. So the idea is you try to keep what you want. You try to keep things normal on the ground, which is kind of how I always describe it to clients. And the idea is to reorganize those debts so that you figure out what you have to pay, what can you pay, and come up with that plan payment that you can propose to the trustee. And that's kind of the magic of the chapter 13 is getting everything pooled together, figuring out what needs to go in what cubby hole, and then how do we get it moving straight?

Steve Altishin  
Okay, that leads to the other question that I know I actually have been asked and not obvious, and that's who do you pay? Chapter 13 Bankruptcy, you pay, you pay an amount, but who do you actually pay?

Darin Wisehart  
So that's the beginning of the case. So the beginning of the case is figuring out what cubby hole each thing goes in. And a lot of times, depending on what district or in what area of the United States, you're going to take each debt and you're going to figure out, do I pay directly to that creditor, which sometimes you will do that with the house, you'll pay the mortgage payment moving forward, and you'll take the arrears which you are behind and put it into the trustee payment. And so there's a question of these debts at times on what you do. Now, if you put it into the trustee payment, then you're going to distribute it out over the time that you're going to be in the case, usually 60 months, and you're gonna pay oftentimes equal monthly payments over that 60 months, and that one payment will go to the trustee. And your plan will say what you're looking to do with these debts. So if you're looking to pay a creditor directly, you have a reason for doing that. And and you're gonna put that in the plan so that it's clear to the trustee what they're supposed to do what they're gonna get paid for, and how do they distribute that payment out to the creditors, because that's, that's the magic of chapter 13 is figuring out how to make sure that the trustee understands how to administer the payment that they receive.

Steve Altishin  
So there are some people you can pay, like the mortgage holder, directly, and then you pay the trustee. And that sort of issue makes me think, what happens if I come in to you five months into the plan and I say, hey, this month I'm a little tight, should I pay the mortgage holder? Or should I pay the trustee? One could could end my 13t, one could take my house. I mean, what are you going to tell me?

Darin Wisehart  
Well, I'm going to tell you a lot of things. So we're going to have to back up for a second because we want to figure out why you're in that situation. Right? So we want to figure out did did your income change? Did you lose your job? Did you know maybe you lost a source of revenue or any number of things could have played in and we want to be sure that we know why it's there. So now what do we have to do? We shine light bankruptcy is always about shining light on what's there. So when we shine light on what the budget is doing, and why is it not working the way it is? Then we have to figure out can we have some creativity? Do we have flexibility with what we're doing? Are we going to be able to move? Okay, so wait a second, wait, maybe we can dip your payment down a little bit for a while you get back on your feet, maybe you get a job again or something and then the income goes back up and we can increase the payment. So that's really the question of, you know, we have this payment that's got to go to the trustee. And that's the magic of the chapter 13 What what do you have to pay and what can you pay? And if it's what you have to pay then we can't really go under that because you can't get a confirmable plan. If you're not paying what do you have to pay and we've we've covered that before and free He is in previous rundowns that we've done. But the what do you what can you pay number? If that's what's driving your case, then you can absolutely move that depending on what your what your income is. So, yeah, your payment needs to go to the trustee. And yes, it's a balancing. So you have only have so much money, so many resources, but the idea is that you're paying what you need to so that it can be consistent and stress free over the course of the case. 

Steve Altishin  
On the other hand, I, you know, I've got a little extra money, or we're just saving harder, I have more because the thirteen is working. And I say, you know, I want a new car, I go to the dealership, I find a car, I buy it. And I pay off the rest of that loan on the old car. And then I come to you. First is that the right order? Can you do that?

Darin Wisehart  
Oh, are we already in the chapter 13 when we do that? 

Steve Altishin  
Oh yeah, we're in the 13 and I decided to buy a new car. But I have to pay off my old car. So I just go ahead and do it.

Darin Wisehart  
Yeah, well, we got to back up, then. Because we're where we are in this process is way past where we should be. So the first thing always you want to go talk to your attorney, because you want to make sure that you're doing what you need to do, you don't want to fly in the face of what the rules are supposed to say you need to do. Now one of the things you can't do, while you're in a case, without trustee and judge approval, is get a new loan. So you can't go just buy a car and say, Oh, I'm going to just buy a car and get a new loan, the company is not going to let you do that, because they can't sign an agreement with you while you're in a bankruptcy without trustee approval without you know, Judge court approval. Right? So so there's kind of a conversation that you need to have, why do you need the car? Where are you going to get the downpayment from? Is the payment going to, you know, move along with your case? How does it play in all of those pieces need to be talked about before you even go to the dealership, that's then okay, we have this much money, we have the constraints of what we can do. A lot of trustees will say you can't go buy a $50,000 car, while you're in the middle of a bankruptcy. These types of things are pretty reasonable. And and as attorneys, you know, we want to convey those to our clients so that they go and do what they need to do to get around the rocks when it talks about that. A lot of times I tell clients if you can, if it's possible, you keep those types of things quiet over the course of the case, because they cost money. They allow creditors to object, they allow, you know the case to take more time, effort and work. And if it's not necessary, then you you always want to rethink that type of thing. But when you're when you're looking to buy a car, it's possible you can do it in the middle of a case sometimes people get in accidents that total their vehicle that needs to get paid off, and they need to get a new car. And it's it's clunky, I always talk to clients, it's, you know, it's that type of just spluttering through and trying to figure out how to get this thing, moving to the next step. But on the ground, the idea is if I need the car, then I need the car, and we got to figure it out.

Steve Altishin  
That sort of just led to a question. When do you pay? Maybe I get paid twice a month, maybe I have a house payment that's due on the 15th and a car payment that's due on the first and then I got a trustee payment? How do I know when to pay it? Or is that all figured out? Or does it all have to go at once?

Darin Wisehart  
Yeah, we definitely want to make sure that when we sit down and chat with the clients, I always ask them to answer a question with a question right there, right? I'll say what when do you want to pay it? When is it right for you as far as the timing in the month, a lot of trustees that I that I've dealt with and that I know about, they don't care what day you pay it for the most part, you know, obviously you have a deadline to pay it, you're supposed to pay it every 30 days. So if you get filed on the first of the month, then the first of the month is supposed to be the day that you have the payment to the trustee. And that makes it smooth and easy. It doesn't always work like that. We know that's you know, that's the perfect world. But if you if you think you can pay it on the 15th. Most trustees don't care even if it's due on the seventh or eighth or 12 They don't care if you pay it on the 15th as long as you have a payment per month. That's the vital part because the trustees don't want to run around worrying about whether you made your three days late on your payment or your you know, they've got a lot of cases they've got a lot of things to do. And if you can you you want to take a lot of those things off the trustees plate because the less they look at your case, you know, the less work they do the more they can appreciate and they can focus on the things you know the cases that need that attention. So you know you've made that payment on on the 15th. If you think that's the day you need to make it then we figure out how to make that your payment date and we try to fit what it is every case is different. We try to fit you know your case to what we need.

Steve Altishin  
Can the trustee make the mortgage company change their due date?

Darin Wisehart  
The trustee, well, can they, can they not, we can have a long conversation about the legality of what they're doing, but they're not going to do that. And that's because your, your mortgage is your mortgage. And and I tell clients all the time, you know, the first of the month, just make your mortgage payment. After we file the case, you're required to make your mortgage payment, assuming you're not paying the whole mortgage off in the bankruptcy case, okay, so if you're just catching up your house, the very typical case, somebody comes to me, they're $10,000 behind on their mortgage, and they want to catch the house up and the bank just won't work with them. They don't care. They're saying, Pay us the whole 10 grand or go away. And so you're thinking, all right, well, I don't really have any choices. Now I'm going to file a bankruptcy. So they file, we put that $10,000, spread it out over three to five years, which depending on what your case has up to 60 months, and we we catch up the house that way, and you got to make sure you're making your mortgage payment moving forward. So that's directly to the company to the mortgage company. And then your arrearage will go into that trustee ball of here's a payment, and you help me catch up my mortgage. And that's, that's kind of that trade off.

Steve Altishin  
You said something that jogged my brain, which every once in a while happens. Are there chapter 13 type plans where the payment rules or scheduling is different? I mean, if I can hardly pay anything, is it different than if I pay-- I can pay everything, I can actually, you know, pay everything, everything I own. Can I do something like that?

Darin Wisehart  
Absolutely. A chapter 13 has so much creativity. And it's almost I tell clients, a lot of times, it's overwhelming, because there's so many different options to get through and around where you're at. And that's one of the beauties of chapter 13. But it's also a negative of chapter 13. Because I mean, I could blow up a client's head by telling them all eight of the possibilities that they have. So you know, I try to whittle it down to what I think is the best couple of solutions and allow the trustee or the client to kind of choose from that list, they can take the popsicle stick that they like, right? So, you know, in that case, absolutely, if they're looking at a different situation where they're making nothing, or they're making very little right now and they feel like they're going to get a better job down the road. Or maybe they have equity in their house that they can pull from next year or the year after with a refi maybe they're gonna get an inheritance next year, or, you know, they're waiting on a payout from, you know, some type of litigation or something like that. They just need the creditors to be off their back for this short period of time, while they're waiting for that money to come in. All of those things are things that chapter 13 can do, it can hold the levee so that the creditors are in place, they don't have a chance to get in until that individual is ready. And that's that reorganization of, I want my automatic stay, I want to figure this thing out. But I need a little time to get that done. And if they needed some time, a lot of attorneys can give them that time. And I can usually tell somebody how much time roughly I'm going to be able to give you to get this done. And that's that's that creativity that comes into chapter 13. On being able to just kind of mold the clay and figure out what are the rules? What do we have to do? And then how do we move each piece? 

Steve Altishin  
Last question, I swear. This is simple. What if I don't pay?

Darin Wisehart  
Famous last words, this is simple, right? If you don't pay. Now, there's a lot of the first thing that I always tell people, you always want to speak with your attorney. As soon as you know you can't pay or you know, you're not going to pay, the worst thing you can do is is be the ostrich and stick your head in the sand. And the attorney doesn't know what's happening until they get a motion to dismiss from the trustee. There's always you know, some type of, well, it's always best to know, okay, well, if we got this, we're going to deal with this a little bit down the road. But let's we have to do it. Because we don't have a choice. These are our only options. And so sometimes you have that situation. If you do then you do but you want to make sure that you know what you're looking at what the river is going to bring you down the road, and then how to deal with it. And yet your motion to dismiss is going to happen if you miss your trustee payments for a certain period of time, you're going to end up having to deal with that it's not the end of the world. There are ways to deal with that there are ways to get it back to good. Obviously, it adds complexity, that extra work, you know, usually has to charge for that work. So it adds some pieces you don't want to include. But if it's necessary, then you got to talk it through and you got to have that conversation of hey, I don't have the money you can't squeeze whatever out of a turnip. And then that's I don't really know how juicy turnips are but I imagine they're not so juicy. But that's that's the conversation that you want to have earlier rather than later when it comes to I can't make my payment or I need to miss a couple payments here because of this This be a mortgage or trustee payment or, you know, even your rent or anything like that, you know, these types of things are all conversations that you want to know, before you go do that. If you see the writing on the wall, you want to make sure your attorney knows so that you can chat it over and negatives and positives. That's, that's always bankruptcy. Every bankruptcy has this negative and this positive, and there's no, you know, perfect, perfect system.

Steve Altishin  
Which is why they need an attorney.

Darin Wisehart  
That is definitely helpful to have an attorney that knows because the attorney-- I always I always, you know, compare it to flying a plane and get the plane in the air in the beginning of the case, we fly nice and smooth for a long time, maybe a little turbulence here and there in the middle, and then landing the plane can be bumpy. And you just you know, the goal is to get the plane to where it's going. And that's that's the attorneys job. And a lot of times you're just in there buckled up ready to, you know, ready to deal with whatever whatever you need to deal with whatever your case brings.

Steve Altishin  
Yep, all I want to do on my plane flight is have my Mai-tai. There you go. So we're done. We have come to the end. And thank you again, Darin, for sitting down to talk to us about, you know, who you pay in a Chapter 13 bankruptcy because the simple questions are obviously not always the easiest ones. So thank you so much today for doing this.

Darin Wisehart  
Yeah, no problem. Thanks for having me.

Steve Altishin  
Thank you. And thank you, everyone for joining us today. If anyone has a further question on today's topic, you can post it here get you connected with Darin, until next time, stay safe, stay happy and be well.

Outro:
This has been Modern Family Matters, a legal podcast focusing on providing real answers and direction for individuals and families. Our podcast is sponsored by Pacific Cascade Legal, serving families in Oregon and Washington. If you are in need of legal counsel or have additional questions about a family law matter important to you, please visit our websites at pacificcascadelegal.com or pacificcascadefamilylaw.com. You can also call our headquarters at (503) 227-0200 to schedule a case evaluation with one of our seasoned attorneys. Modern Family Matters, advocating for your better tomorrow and offering legal solutions important to the modern family.