Four Factors That Complicate the Chapter 13 Bankruptcy Process

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The Chapter 13 bankruptcy process is much more complicated than the Chapter 7 bankruptcy process and there are a variety of things that can go wrong and cause a Chapter 13 case to be dismissed. 

1. Failure to File a Chapter 13 Plan

Every debtor must file a Chapter 13 plan which sets forth his proposal for paying his debts.  If a debtor fails to file a Chapter 13 plan, his case will be dismissed. 

There are instances where a Chapter 13 debtor files a plan, but the plan does not get confirmed (approved) by the court.  The court might not confirm a Chapter 13 plan because: 

  • The debtor’s bankruptcy schedules put into question his ability to make the proposed Chapter 13 plan payments;
  • It does no allocate 100% of the debtor’s monthly net disposable income for payment into the plan;
  • It does not set forth how certain debts will be paid;
  • There is a problem with the term of the plan; or
  • It was proposed in bad faith. 

2. Failure to Fund the Chapter 13 Plan

Most debtors are required to make their Chapter 13 plan payments via income deduction through their employer.  However, it may take several weeks before a debtor’s employer begins making the deductions required by his Chapter 13 plan.  Therefore, the debtor is responsible for making the required plan payments until his employer begins deducting his plan payments from his paycheck.  A debtor’s Chapter 13 case will not be confirmed if his plan payments are not current as of the date of the confirmation hearing. 

3. Failure to Make Post-Petition Mortgage Payments

Every Chapter 13 debtor who has a mortgage must make his post-petition mortgage payments beginning the first month after he files bankruptcy.  Chapter 13 debtors must provide proof of such payments to the Chapter 13 trustee.  If a debtor doesn’t make all post-petition mortgage payments which come due prior to the confirmation hearing, his case will not be confirmed. 

After a Chapter 13 debtor’s plan has been confirmed, if he falls behind on his post-petition mortgage payments, his lender will file a Motion for Relief from Stay.  If the debtor is unable to cure the arrearage or negotiate a workout with his lender, the motion will be granted, leaving his lender free to initiate foreclosure proceedings. 

4. Failure to Make Post-Petition Plan Payments

Once a Chapter 13 plan has been confirmed, a debtor must make all plan payments.  If a debtor falls behind on his plan payments, his case will eventually be dismissed unless he cures the arrearage or negotiates a workout with the trustee. 

Getting Legal Help

The majority of Chapter 13 cases filed by debtors representing themselves get dismissed as a result of these or other issues.  Therefore, it’s best to hire a bankruptcy attorney to represent you in your Chapter 13 case.