Chapter 13 Trustee Payments - Your Primary Obligation
When you file a Chapter 13 plan, you receive immediate protection from creditors in exchange for your promise to pay your creditors pursuant to a Chapter 13 plan of repayment.
Although the automatic stay protection goes into force immediately, your responsibilities as a Chapter 13 debtor have only just begun. In fact, the first one to three months of your Chapter 13 case are a kind of probation period - this is when you prove to the trustee and to your judge that your plan is feasible and that you have the ability to make payments. If you make it through this probation period, your plan will be approved or “confirmed” by your judge.
Just about every Chapter 13 case filed in the Northern District of Georgia will generate objections to confirmation. Your Chapter 13 trustee will almost always file several objections and in about half of the cases we see, creditors will file objections as well.
Most of the trustee objections will relate to document production - the trustee may want to see proof of food expenses, medical expenses or school tuition. Sometimes the trustee will want you and your attorney to clarify or correct an error on the schedules. By far, however, the primary objection filed by the Chapter 13 trustee relates to problems with the funding of your case.
Here are a few rules of thumb that you must keep in mind when you file a Chapter 13 in the Northern District of Georgia:
- your obligation to fund your case begins the minute you file your case. If your plan calls for bi-weekly payments, your first payment is due at the trustee’s office in 14 days. If your plan calls for weekly payments, then your first payment is due in 7 days.
- if anyone tells you that your obligation to pay money to the trustee starts after confirmation, you are receiving bad advice. This is not the case and it has never been the case.
- in the Northern District of Georgia, every case that involves an employed debtor must be funded by payroll deduction. Years ago, payroll deduction was optional - it is not optional anymore. Statistically payroll deduction cases work better for everyone. That being said, a payroll deduction can be a burden for your employer, especially if you work for a small business. The Bankruptcy Code does provide that your employer cannot legally terminate you because you have filed a bankruptcy and, in fact, very few of my clients have ever reported any problem with their employer. However, you need to recognize that your employer may not be aware that time is of the essence when sending in money. You should take an active role in encouraging your employer to withhold and send money in each pay period and you should advise your employer to call your attorney if there are any questions.
- until your payroll deduction kicks in, you and you alone are responsible for sending payments in to your trustee
- find out exactly how much you are required to have paid in to your trustee and make sure that your account is current by confirmation. Do not be surprised if you have to make up a few weeks worth of payments because the payroll deduction did not kick in right away or because your employer was late in sending in money.
- when you send money to your trustee, make sure to legibly print your name and case number on your check
- make copies of all payments that you send to the trustee
- if you have to get money in to your trustee within the next seven days, hand deliver your payment and get a receipt. If you rely on the mail, you may end up with a missing payment.
- pay your trustee by check rather than money orders. A missing or lost money order can be difficult and time consuming to trace. A missing check can be canceled (stop payment) and reissued
- if you have extra money that you want to pay to your case, call our office first. Sometimes it is not in your best interest to pay extra into your case
- most Chapter 13 plans filed in the Northern District of Georgia include a provision that requires you to tender your tax refund to the trustee. If you cash your refund and spend it, the trustee may file an objection to confirmation based on a delinquency
- if you miss a payment or two for whatever reason (job change, sickness) do not panic, but do not ignore the problem either. Let my office know about the delinquency sooner rather than later and we can figure out a way to deal with this problem before the trustee files a motion to dismiss
- the first 6 months of your plan require strict compliance with payment obligations. This means that if you miss a payment during this “strict compliance” period your case may be dismissed without further notice or hearing. After the first six months, the trustee will need to file a motion to dismiss based on delinquency (or any other reason) giving us time to cure the problem.
The bottom line: funding is your core obligation in your Chapter 13 case. If you have any questions at all about funding, please ask - this is why you have counsel.
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