CoVid19 and Chapter 13
The current CoVid 19 crisis can be especially devastating to anyone who is currently in a Chapter 13 case. Not only is there the risk of catching the virus and being out of work for some time, but the Stay at Home orders and social distancing have wrecked havoc with our economy, our buisness, our jobs and our paychecks.
Here is a little advice for the coming months:
First, recent legislation has made it possible to modify Chapter 13 plans to increase the payment period to up to 7 years (84 months) if you can show that you have had problems with your current plan due to the CoVid crisis. Any request to lengthen out your plan must be done before March of 2021 or you will lose that right. This means that anyone with a current 36 month or 60 month plan can lengthen out your plan to help you keep from being delinquent in your payments and having your case dismissed (often the worst thing that could happen). However, this should only be done if absolutely necessary and the modification should not extend the plan for more additional time than truely is necessary. YOU DON'T WANT TO BE IN A CHAPTER 13 PLAN FOR LONGER THAN NEEDED! In addition, during this extended time period, you are still subject to paying even more into the plan should the Trustee later discover that your income has gone up in the meantime.
Otherwise, normally, after a few months of missing payments, the Chapter 13 Trustee’s office would be filing a Motion to Dismiss your case. Then, after receiving this Motion, you might be able to salvage and continue with your case if you entered into an agreement with the Trustee’s office to immediately start making regular payments again together with an additional monthly amount capable of catching up on the missed payments over a few months. However, I’ve been assured that the Trustees will be a little more lenient at this time.
Obviously, if you are still working and capable of continuing on with your regular monthly payment, PLEASE DO SO. However, if you find yourself temporarily incapable of keeping up with your typical monthly budget needs and can’t make your Plan payments, the Trustees have indicated that they will be more lenient in filing Motions to Dismiss during this crisis. However, be aware that once the crisis is over and you are back at work, it is likely that you’ll be expected to once again begin making regular payments, together with an additional amount capable of catching up on the missed payments over a reasonable period of time. The Trustees will likely work with you on a reasonable period to catch up. NOTE THAT I SUSPECT THAT NO PAYMENTS WILL BE FORGIVEN.
Of course, in the event that your income does not return or you are not able to return to work, the normal process for “Modifying” your plan (even without extending the time period) will be available for some of you. Remember, that if your Plan is paying a large portion toward taxes, priority creditors or secured creditors (cars, mortgages) and is not paying a substantial amount to the remaining unsecured creditors, you may not be able to modify your Plan. If, after this crisis, you end up in a situation where a modification is necessary or desired, be sure to contact my office.