A Primer on How To Make Chapter 13 Plan Payments

If you are in a Chapter 13 case, you are required to make monthly payments according to your Plan.  Here is a primer on an easy way to understand how to make chapter 13 plan payments.  The Plan contains your instructions on how much money, if any, will be paid to creditors.  Some payments will be made by you to your trustee; some might be made by you directly to certain creditors if permitted by bankruptcy rules.  The Plan will indicate who you are required to pay and how much will be paid.  In Illinois, payments are due each month on the same date that you filed your case, starting the month after you filed your case.  [The payment start date may vary in some states.] If you filed on the last day of a month, your payments are due on the last day of each successive month.  A chapter 13 bankruptcy can last any length of time from three years up to five years.  To help you remember, you should write your monthly amount and start date in a handy reference area.

Monthly Plan Payment Made By You to the Trustee:

$ _________  beginning  _______  for   36   ____   60   months

[Divide the monthly amount by 4.333 for the weekly amount.  $_________]

[Divide the monthly amount by 2.167 for the biweekly amount. $________]

Please understand this payment may change, the duration may change, and the Plan may need to be amended, based on the actual amount of your debt as reported by creditors or if you have an adjustable rate mortgage or mortgage escrow adjustment due to taxes or insurance.

PAYMENT INFORMATION:  You will receive a Court Order in the mail calling for monthly plan payments.  [Again, the process may vary in some states, but this is generally how it works in Illinois.]  If you are employed on a paycheck system, your employer will also receive a similar Order.  Your payments begin with the very next pay period after your case is filed.  The court does not accept late payment excuses.  If a payment is not payroll deducted from your check, you are required to make the payment for that pay period.  This is important so let me repeat.  In order to keep current, you must make a payment from every check you receive after you file.  If you are paid every other week, you should send in 2 weeks of payments from every check.  If you are paid twice a month, you should send in one-half of the monthly amount from each check. Use the formula in the last section to calculate the weekly amount.  Multiply that number by 2 for a biweekly payment amount.  Do not hold onto the money.  The quicker you send payment, the sooner your trustee can pay your claims.

Late Payments:  No one should ever tell you that you are permitted to be late or miss a payment.  Let me repeat that.  No one should ever tell you that you are permitted to be late or miss a payment.  Although there are a couple of options to cure late payments, late payments may result in action by a creditor to repossess or foreclose your property.  If you fall behind in payments you should send in as much as you can as soon as possible.

Curing a Payment Default:  Once the trustee realizes you are delinquent, the trustee might send you a Notice requiring you to propose a method to bring your payments current, or in some states the trustee might immediately file a motion to dismiss your case.   If you fall behind you should contact your attorney to discuss the particular options available in your case.  You should only discuss these options with your attorney if you are represented.  Remember, the trustee is not your attorney and is not available to give you legal advice.  The trustee acts as the attorney in fact for all of your creditors against you.

Trustee Payment Address:  Some trustees use different addresses for mail and for payments.  Once you learn the correct address to use for each one you should write the address in a convenient reference area.

Method of Payment:  Payments should be made by money order or certified bank check.  In most cases the trustee does not accept cash, personal check or two-party check, though again, this might vary.  Make the item payable to “Trustee” and include your case number.

Write your case number directly on the item and keep your receipt.

Changing the Payment Amount:  Your payment is based on the monthly amount specified in your Plan.  Once your Plan is filed with the bankruptcy court the only way to change future payments is by Court Order.  The trustee alone cannot change the payment for you, nor can the attorney.  The most common way to change a payment is by filing an Amended Plan [or a Modified Plan] and having that Plan confirmed [approved] by court order.  You should contact your attorney to discuss whether circumstances permit such a modification.