The bankruptcy court’s approval of your payment plan (at the Confirmation Hearing) happens about 2-to-4 months after filing your case. At that point your Chapter 13 case is fully on its way. You likely have about 3 to 5 years altogether to finish the case. Once the court confirms your plan, there are a few other crucial steps you need to fulfill to successfully finish your case.
Last time we got into three of these:
- Do your “debtor education”
- Avoid or defeat “nondischargeability complaints”
- Pay your Chapter 13 plan payments
Today we lay out two other crucial steps.
Pay Any Obligations NOT Within Your Plan Payment
In many Chapter 13 cases you pay nothing to your creditors except the single plan payment each month. The trustee divides that payment among your creditors as laid out in your court-approved plan. You pay nothing else to any creditor.
But in other cases, you pay one or more creditors directly. You may hear your lawyer refer to this as paying “outside the plan.”
To be clear, you are not paying these secretly. Your plan clearly refers to these debts and their payments. So the bankruptcy court approves these payments. They’re just not included within the single monthly plan payment, for various possible reasons. (See the explanation in paragraph 3.1 of the official Chapter 13 Plan form.)
Often these are ongoing payments on secured debts such as home mortgages or vehicle loans. Direct payments are more likely used when you’re current and are simply continuing to make the regular payments. In some jurisdictions it’s considered easier for everybody that you continue to pay such straightforward payments directly to the creditor. Paying them through the trustee is seen as causing too much delay and accounting confusion.
Naturally it’s essential that you know whether all of your creditors are being taken care of through the single plan payment, or whether there’s a creditor or two you need to pay directly. Your income and expense schedules should make that clear, as well as the plan itself. But if you have any doubt, be sure to ask your Louisville bankruptcy lawyer.
Do Anything Else Required
Two documents combined—your plan and the Order Confirming Plan signed by the judge—are the law of your case. These documents contain requirements beyond making payments. They include some standard ones that apply to just about all consumer debtors. There may also be some special requirements for you.
The standard requirements usually include:
- providing the trustee with copies of your annual income tax returns (paragraph 2.3 of the official Chapter 13 Plan form)
- turning over to the trustee “income tax refunds received during the plan term” (paragraph 2.3 of the official Chapter 13 Plan form)
- avoid using credit without prior Chapter 13 trustee or bankruptcy court permission
Special requirements can include:
- a specified deadline to sell an asset
- permission for you to use an income tax refund for a specific expense, such as a vehicle repair
- a requirement to report when an unemployed spouse gets employed
Notice that these special requirements often relate to anticipated changes to your income, expenses, or assets. These changes can directly affect your future obligations under your Chapter 13 case. They may well require you to adjust the payment terms of your plan in the future.
It does take consistent effort to complete a Chapter 13 case successfully. But that effort is worthwhile because it gains you tremendous benefits. Chapter 13 provides many tools that Chapter 7 cannot. Through those tools you can likely meet some otherwise impossible goals. Once you’ve decided that these goals are worthwhile, usually the effort will be worthwhile as well.