What Happens if You Miss a Payment or Have a Change of Income During a Chapter 13 Bankruptcy?

Join us as we sit down with Bankruptcy Attorney, Darin Wisehart, to discuss what will happen if you miss a payment, or have an income change, during a Chapter 13 bankruptcy. In this interview, Darin discusses the following:

•    What Payments Are Required in a Chapter 13 Bankruptcy?
 •    What Is Paid to The Trustee in a Chapter 13 Bankruptcy and How Are They Calculated? 
 •    How Are Mortgage or Car Payments Made In a Bankruptcy, And What Happens If You Miss a Payment?
 •    What Happens If You Miss a Payment to the Trustee?
 •    Does The Amount You Have to Pay Change If Your Income Goes Down – Or Up?
 •    What Happens If You Can’t Pay Because of a Lost Job?
 •    If a Chapter 13 Bankruptcy Gets Dismissed, Can You Ever File Again?
 •    …and much more!

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.

Transcript

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  
Hi everyone, I'm Steve Altishin, Director of Client Partnerships at Pacific Cascade Legal. And I'm here today with Attorney Darin Wisehart to talk about what happens if you miss a payment, or your income changes in the middle of a chapter 13 bankruptcy. Hey, Darin, how you doing today?

Darin Wisehart  
I'm great. Thanks for having me on today. 

Steve Altishin  
Well, thanks for being on. So let's just start at the beginning on this one. What kinds of payments are required in a Chapter 13 bankruptcy?

Darin Wisehart  
So the payments that are required are going to be mostly on secured items that you want to keep. Okay, so that's one thing that drives what your payment is going to be. And that a lot of times is determined on whether you want to thing pulled into the bankruptcy as far as well, it'll all be pulled into the bankruptcy, but whether it's going to get included in your payment to the trustee, or whether you're going to attempt to continue to make payments directly to that creditor that holds the loan. And so that's that's a little bit of a question of What state do you live in? What trustee Do you have, that a lot of different places do a lot of different things when it comes to that. But you want to just have the idea that if you have a secured item, like a car or a house or something like that, and it's got a loan on it, or lien, for the most part, it's going to need to be paid one way or another. And that's kind of what your you're going to discuss with your attorney on whether those payments pull together to go one payment to the trustee, or whether you say everything, and then I'm going to pay the mortgage independently, or I'm going to try to pay this vehicle independently. You know, sometimes you can do that as well, depending on what the loan is and how long you still owe for that. But it you know, a lot of that will depend on your area and your jurisdiction your state that you live in. So you want to be sure that you've referred to information that is your state instead of, you know, looking at something that might be broad across the United States.

Steve Altishin  
So let's kind of delve into how payments are calculated that you're going to have to pay the trustee, because isn't that in a 13, where you pay the trustee, and then the trustee pays the creditors?

Darin Wisehart  
Correct. So the idea with a chapter 13 is exactly that. It's that you're going to, you're going to pay one payment into the trustee. And then there may be some other things that you're going to pay independently. But for the most part, that trustee payment is going to ball up all of the materials that are being dealt with in the bankruptcy. Now, of course, that's not going to deal with your electric, there is there is a conversation with the electric if you're behind, but if you're continuing to get electricity and your your phone service and all the things that you're going to continue to do, you're going to have to keep paying those independently, because that's not going to be put in, but you with your attorney, you're going to come up with a plan that includes all the payments that need to be, and so that that includes your car payments, you know, maybe you have a $30,000 loan still on a car, and you want to put that out over that 60 month, chapter 13. It allows you to average it out over that time with a little interest rate. And your attorney will have to come up with how you're going to pay them. Are you going to pay him equal monthly payments of 500 to 550? Or are you going to pay maybe 800? In the beginning, or maybe you know, maybe a lump sum at one point, whatever you're looking to do. That's how your payment is calculated. And that's, that's kind of the workings of the attorney on how here's here's our priorities. And a lot of times I'll ask clients, what are your priorities? Where do you look in? What do we want to make sure we pay off first? What are we trying to be sure we keep? You know, of course, the goal a lot of times is to keep all the things that that you have on the day to day basis, but but you want to make sure that you're discussing how they're going to get paid, how quickly or slowly they're going to get paid because you get a chance to move some of those things and be creative with how you pay the creditors. And of course, like always, they have a chance to object, the trustee has a chance to object and then the judge has to oversee it. So you have to make sure that you get everybody in your boat and and you do the things that aren't going to just get people to object to what you're trying to accomplish.

Steve Altishin  
That makes sense. So let's talk about the mortgage and the car payment. Say I have a house and I want to make sure that I save this house but I want to use a chapter 13. How is that paid, and what are some dangers that can happen with that if I don't pay?

Darin Wisehart  
So the first let's let's just talk about the really quick synopsis of that. That basically means a lot of times you're behind in your mortgage, okay, and then you file a Chapter 13 bankruptcy, because it's going to help you to spread the, the ketchup, which is that arrearage into your plan. And that's a cure. So you're curing the loan in the time period that you're in the bankruptcy and, and there's a specific statute that allows you to do that a law that says, you get to do that, okay. But you have to make sure you're making your mortgage payment moving forward, once you file your case, and you want to be sure that you discussed that at length with your attorney, because there's exactly what you need to do. And it's, you know, in the beginning, it's a little bumpy, a lot of times to figure out how you're making your payment, how much you need to make all the different things that need to be done. But you want to be sure you're prepared for that. Because that's that's usually how it goes. Now, you might be also in a state where they require the mortgage to go into the bankruptcy payment to the trustee. And that's sometimes that's, that's some of the states are starting to do that. And you want to be sure that you know whether or not you're supposed to pay directly to the creditor or to the trustee. Now the good thing about paying directly to the trustee is there really isn't any ability to go into fault on your mortgage, because it's being paid through that one payment to the trustee. And that's a nice thing, the bad thing is you're paying a little bit more because the trustee has to do their job. And so of course, you're going to pay them a little bit of extra money so that they can do what they do. And so there's there's kind of your peace. Now, if you're in a district that you don't have the house required to be paid into the chapter 13 payment, then you you get that choice. And a lot of times in my district, we choose to just continue to make the mortgage payment moving forward. And you have to be sure you're ready to make the payment every single month. And if you miss a payment, then that's that's kind of where your question comes in. Right? So now we talk about, what do we do if we miss a payment. And usually you can, you can cure that too. But you don't want to plan on that. And you only want to do it if you've discussed it with your attorney. And you've talked, hey, you know what, my next three months I'm out of work or, you know, something has changed. But I'll be right back to work after that. And I might need to figure that figure this out. You want the one thing you want to remember always is if you can talk that over with your attorney before it happens, rather than after it happens. Because if you've missed three or four payments, it's not the end, it's not the end of your case there. There are some things that an experienced attorney can do to keep you going and to keep you moving towards that goal. But it's more difficult the longer you go, like most things.

Steve Altishin  
is there a grace time sort of like in some lenders, where I know it's due today, but I got my big paycheck coming in, I got something you know, in a week, maybe I can hold off 10 days and pay him late. How does that work?

Darin Wisehart  
There's a lot of those types of things. And we can talk for a while about all of those things. And I will finish all of the statements with the same one blurb, try not to use them. Because they anything when you get into a bankruptcy, they idea especially with houses with people that come to me and say, Hey, Darren, I'm behind on my mortgage, I really need to get my house corrected. It's stressing me out. And I want to make sure we keep our house I got my three children, they're in the high school right there, you know, they don't want to go anywhere. So the goal is to stay in house. And if the goal is to stay in the house, then mortgage companies sometimes can be really good at marking up the water had making it confusing what you're supposed to pay, and how you're supposed to pay it and when and all of the different things. And most people you know, it's not your job to know what the laws are. But the exact things are in the course the mortgage company, they're not going to help you with that. So the the more clarity you can get with what progress you're making on the mortgage, the more comfortable going through a process like this convenient bankruptcy is great for shining a light on it and saying, Okay, you are behind before you file this day, exact day before that you owed $15,062 Okay, and that's all that money and you don't have to pay that except for in the bankruptcy and that's what payment likely you go to the trustee and that helps to catch up your house and then moving forward, you got to make your exact mortgage payment on the first of the month on the day that you're supposed to get it paid being getting it there a little early. If you start using that grace period, then you start muddying up the waters you start allowing the creditor then to to say that you you know you have a late payment or you should have to pay a penalty or then they you know after a little while if you miss a couple of payments then now the question is how long Do you owe and what attorneys fees do they get to charge and all the different things that come in that just cloud, you know, clouds, the clarity for keeping your house where it needs to be.

Steve Altishin  
And I know we talked about this in some other Facebook Lives, but one of the great benefits of bankruptcy and especially a chapter 13 is that you have just that. You have taken a mess that you can't handle and turn it into, you know, a mess that you can handle. And that being able to handle it is really important to your mental well being as much as anything else. And so anything you do to murky it up, it starts to put you back in that position that got you there.

Darin Wisehart  
No doubt, and there's a lot of things going on a good attorney gets really good at juggling a ton of things at the same time. But you know that the more things that are juggling, the more things that have to be explained. And the more aspects that have to be, you know, clear to the client clear to the attorney, everything needs to be straight. And five years is a long time. So of course, you explain it right now, you might not remember it in a year or two. And the better, you can stay on that path, that kind of solid, I'm moving straight, I'm making consistent progress. If you start, you know, getting away away from the path, like you miss your mortgage payment, it doesn't mean automatically you're done, you have to dismiss your case, sometimes it does, but But oftentimes, your attorney can be creative about getting you back on the path. But it does mean that there's going to be some bumps to get you back to, to the good spot. And that's with the mortgages. That's you know, there's some mortgage companies that really are good about cloud eating, and you just don't want them to cloud it you want to, you want to be clear about these are the payment and this is, you know, the stress is gone. Because they don't have a chance to take my house as long as I do the two things, make that arrearage payment and catch it up over 60 months in my chapter 13 and make my mortgage payment moving forward, those two things. That's it, they don't get a chance to take it, then.

Steve Altishin  
I like that. And that kind of gets into a question that I was gonna ask, but you sort of answered it. What happens if I miss a payment to someone else? I mean, because there are some other payments you continue to make, like, for instance, what if I don't make my insurance payment or something? Does the trustee come in at me at that?

Darin Wisehart  
Yeah, it's tricky because it they're all different classifications. So it depends on what type of debt you're dealing with. If it's an insurance payment, obviously, if it's an insurance payment on a car, that's included in your bankruptcy, now you've got another quote, conversation, because the creditor can come back and they do, they'll come back and they'll say they call me and they say, Mr. Weiser, your client does not have insurance on the vehicle that we own. So we're going to require that you pay that or we're going to try to take the vehicle because that's not how it's supposed to work. And so I have to call the client and say, Why don't you have insurance Come on, what are we doing, and get them get them going with that. So of course, it kind of depends. Now, if you miss a payment to your, you get a phone from T Mobile, and you you know you're paying on it, and you're happily moving forward. And in third year, you miss a payment, and you default, and now you owe them 600 bucks, you don't just magically get to roll that into the chapter 13. So it's, it's one of those where you want to just be once the the case is filed, you want to be moving forward with all your all your debts, the way that you would if it was all done. And that's that's just keeping those debts sound, keeping everything over the table, making sure that you're not taking on any debt that you can't handle. And just being really responsible for that. And that's, you know, that's true with the cars as well, sometimes your car is paid outside of the plan as well. And you want to just make sure you're paying that. Because if you don't you want to talk with your attorney. Because there are options, there are always options, you might surrender the vehicle maybe that maybe the vehicle broke down and you're done paying on it, you don't want to pay it, then you need to do something with your bankruptcy so that you indicate that you're looking to change that creditors treatment. And that's, that's gigantic, a lot of people will go quiet, they'll do the old ostrich or their head goes into the sand. And then six months later, I learned about it. And now it's tough to deal with because we're six months past when we should have been dealing with it and the judge. They don't want to they don't want to hear that. They don't want to see that you show up way later than you're supposed to. 

Steve Altishin  
Yeah, yeah. Well, we talked a little bit about, you know, how the amount is calculated, and that's the amount you pay. But you know, what happens if, you know, I have a pay change or and my income goes down or if it goes up?

Darin Wisehart  
The beauty of chapter 13 Is that it addresses where you are in life. And it's not true with all cases because there are the two numbers in chapter 13. What do you have to pay and what can you pay? And sometimes you just have to pay a certain number. So if you get less income doesn't make much difference because As your payment still has to pay what has to be paid, but the what can you pay? If if that number was big in the beginning, then some, a lot of times most of the time, I think, sometimes you can't, you can't modify that. But a lot of times you can, you can lower it. And most trustees offices are very reasonable for this kind of thing, because five years is a long time. And sometimes, especially when you know, COVID was hidden, or some of these unknown events occur, that you're out of work for six months or something to that effect, you can address it and you can, you know, you can deal with that isn't the case, as long as you discuss it with your attorney as it's going to happen, that's huge. Because you just don't want it. You don't want it to be discovered later. That's, that's where you, you know, you get into problems that you can't fix. And unfortunately, you look at clients and just shake your head and say, there's not a lot I can do with this. Because we've you know, we're two years past, when you made a lot more income or something to that effect. And you're thinking it would have been nice if he would have come to me two years ago, so that we could tackle this on the front. And then the trustee would probably jump in our boat and be right with us and say, Okay, it looks like we've changed some things, let's figure out what we need to do. But if we, if we just ignore it and expect it to go away, a lot of times clients get to the end of the case, and the case dismisses rather than discharges. And that's where you don't achieve the goal that you came into the case to achieve. And that hurts. That always hurts you because it's like flying a plane, and then you've got to land it early. Before you get to that, you know that airport you're trying to get to?

Steve Altishin  
Yep, yeah. We're about done with our time. But one quick question. I always say that, the questions always quick. If the bankruptcy does get dismissed, is there any way you can file it again?

Darin Wisehart  
Almost always you can, the judge has an option to bar you from filing. Again, if you've been honest with your case, if you've tried to work your case forward and do what you're supposed to do, most every time, you can file a new case pretty quick after you've dismissed the case, depending on what the change in situation is. And that's that's always available to you. Even if you can't get a discharge, you can still file a new case. So there's a lot of creativity that can go in there. It depends on why we would do it and what's the benefit? What's the negative? You know, that's that's the weighing of, you know, the good and the bad. But absolutely, you can always look at that. And that's where you want to be sure you bring it up to your attorney, that that might be your goal, so that you can get that conversation of this is why we would do it. This is what the benefits would be. And this is what would happen as far as the negatives. Yep. Yep.

Steve Altishin  
Well, unfortunately, now we're out of time. Again, thank you, Darin, for bringing up you know, all of this information because it's not easy. It's not easy to get clear answers. You can get three answers to the same question if you just go Google it. And so that's, that's great. And, again, like I always say, you make complex bankruptcy rules understandable. So thank you for being here today.

Darin Wisehart  
No problem. Thanks for having me. You bet.

Steve Altishin  
And again, thank you, everyone else for joining us today. If anyone has further questions on today's topic, you can post it here and we can 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.