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A Chapter 13 bankruptcy is a bankruptcy where you can pay back your debts (as much as your income allows) and keep your stuff. It is not uncommon that, during the three or five years that you are in a Chapter 13, that you may encounter some financial difficulty. If you are behind in payments to the trustee, you may want to discuss a Motion for Moratorium with your attorney before the trustee files a Motion to Dismiss. There are some things you need to consider when filing a Motion for Moratorium, though.
If you are paying secured debts, such as a car, through the Plan, then there will be additional interests costs.
You also have to make up the missed payments. So, if you missed three $1,500.00 payments, you now have to pay an additional $4,500.00 over the remainder of your Plan.
Hypothetically, the lender for the car could file a Motion for Relief from Stay because they have not received anything for three months, as well. I haven’t seen it in practice, but it could happen. If a Motion for Relief is filed, then you will likely end up liable for attorneys fees, filing fees and late fees, too.
If you have the worst case scenario, as indicated above, you may have $1,000 in additional costs (for interest, attorneys fees, filing fees, etc.). If you have 35 months remaining in your case, the additional $5,500 that must be paid would increase your remaining months by about $158.00 per month. Your attorney may have additional charges for filing a Motion for Moratorium and/or a Modified Plan, too, which would increase the monthly cost even more.
If you are falling behind or if you think you are going to fall behind on plan payments, call your attorney and make a plan of action. What is your Plan payment? How many months do you think you are falling behind? How much money can you send during those months that you are struggling? Is it time to consider surrendering the home or the vehicle? How large of a tax refund will you receive?
By providing all this information ahead of time to your attorney, you both can sit down and strategize about how you are going to successfully navigate through these difficult periods in your bankruptcy.