While Chapter 13 offers debtors an opportunity to restructure their debts and pay some or all of what they owe over three to five years. Except for very limited instances, most Chapter 13 cases will extend the full five years, and five years is a long time. Five years can be especially challenging in Chapter 13 cases because debtors must live under a fairly tight budget during that time.
Obviously Chapter 13 does not offer any protection against life’s unexpected emergencies and hardworking Chapter 13 debtors sometimes fall behind due to unexpected circumstances like a job loss or slowdown, an unexpected house or car repair or the birth or death of a loved one. If you should fall behind, all is not lost – the system has a procedure built in that will allow you to save your Chapter 13 case.
Except for about 6 months at the beginning of your case (which is a kind of probation period), if you fall behind with your payments, your trustee will file a Motion to Dismiss Case. A motion to dismiss does not mean that your case is over. Instead, it means that your trustee has identified a problem that will prevent your case from paying out within five years.
Your trustee will file a motion to dismiss if:
- payments are not being received by the trustee’s office
- the trustee’s recalculations show that your case with its current payment will run longer than 5 years
Fixing the Problem – How to Respond to the Trustee Motion to Dismiss
When the trustee files a motion to dismiss, the paperwork will include a hearing date, typically 3 to 4 weeks from the date the motion was filed. When I receive one of these motions, I will file a response denying the allegations and asking the judge to dismiss the motion.
There could be many reasons for the problem with your case, including:
- you may have changed jobs and the new employer is not withholding and sending in funds
- your employer withheld funds for the Chapter 13 but for some reason did not send the money in yet
- a late claim from a creditor was filed that causes a term problem (i.e. your case will run more than 60 months)
- you are 1 or 2 payments behind for whatever reason
Once I am able to figure out why there is a problem, I will usually be able to figure out a solution. Sometimes the solution is as simple as resuming payments, while in other cases, we will need to increase the payment by some amount to make the case pay out within that 60 month deadline.
Consent Orders on Trustee Motions to Dismiss
When I have arrived at a solution, I will call the trustee assigned to your case and firm up a deal. This deal will take the form of a Consent Order that denies the trustee’ s motion and sets out the agreed upon solution. In almost every case, the Consent Order will also include “strict compliance” language. This means that for some agreed upon time (usually 6 or 12 months after the date the Consent Order is signed by the judge) any subsequent delinquency will not require the trustee to file another motion. Instead, in the event of a second delinquency within the strict compliance period, the trustee need only send a letter to your lawyer that gives you 10 days to cure the problem. The purpose of strict compliance language is to make it easier and less time consuming for the trustee to dismiss your case.
Your Chapter 13 trustee wants your case to work but he/she does not want to file motion after motion if you fall behind or if there are other problems. Therefore, if a motion to dismiss is filed in your case and a Consent Order is issued, make every effort to meet the terms of the Order and keep your case current.