Common Chapter 13 Problems
Motion to Dismiss for failure to make payments to the trustee
Things happen. Divorce, disability, job loss. It is relatively easy for problems to happen and for you to fall behind on the plan payments to the trustee. When you do fall behind the trustee will file a motion to dismiss the case. If the case is dismissed for the failure to make plan payments it is possible to refile a second case. But when you file a second case within a year you have to show a good reason to extend the automatic stay. File a third case within a year and there is no automatic stay. None. File a third case within a year and it does not stop the sale of a home or repossession of an automobile. No protection from secured creditors taking their stuff. Zero.
Motion to Terminate the Stay for Failure to pay a mortgage or car loan
If you thought the failure to pay plan payments was bad then this is just as bad or worse. The attorney for the mortgage company will also be happy to show the judge you are not making timely payments on the mortgage. If you cant afford the mortgage payments you may be tempted to fall behind. A motion to terminate the stay is a request to allow the creditor to file a foreclosure or repossess an auto. It costs about 200 for the filing fee and 750 to 1000 in attorney fees. If you fall behind you will have to pay the mortgage company for this motion. If you had not fallen behind they would not have to file it.
That is a very large late charge. Fall behind a second or third time and the stay will be often be terminated automatically. .No hearing and with the home going straight to foreclosure court. Your plan payments and mortgage payments start the month you filed. It is common for people to not make the payments the month they filed. This means as soon as the plan is confirmed a debtor may already be 1 or 2 months behind in payments.
Motion to Dismiss by the Debtor
Just because your home went back in foreclosure to state court did not mean your Chapter 13 case was over. Your case in bankruptcy court does not close just because the mortgage company filed a motion to terminate the stay. The only reason you filed bankruptcy may have been to save your home. But the plan will continue to take out payments until you dismiss the case.
There is a penalty if you dismiss your own case after a motion to terminate the stay. If you dismiss your own case after a motion to terminate the stay or a willful violation you cannot file again for 6 months. Staying in the case makes no sense. Refiling seems the thing to do. But you have to do it quickly or you have lost the home.
Failure to File Budget or Turnover tax refunds
Every year the debtor must file a budget and turnover his tax refund in our district. This is not the rule in other districts like Indiana. The Debtor has a statutory duty to make his or her best efforts to repay the plan. Since tax refunds, inheritances and lottery winnings are not part of your normal budgeted income they must be turned over to repay creditors. If you increase your withholding to the normally number of exemptions plus 1 or 2 more exemptions you will lose little or none of your refund. If you properly budget for savings you wont have a tax refund anyway.
You should probably refer to your schedule I and J when you prepare your annual budget. If your income increases a lot your plan payments may increase. Normally when your income increases so does the food budget and other items. The plan payment does not increase unless there is a very large income increase.