I fell behind on my Chapter 13 payments. I have a settlement date on my house in 3 weeks..what should I do?

Question

I filed for chpt.13 in Nov 2006. I am paying a 1500.00 mortgage, and a 1400.00 payment on the Chpt. 13 repayment plan. I have had tremendous trouble keeping up with the trustee payments.My Bankruptcy lawyer contacted me and said the trustee is going to close my case on monday unless I pay a back fee of 4500.00. Needless to say I dont have the money. I have a house on the market and a closing date of Sept 14th. The lawyer suggested that I let the trustee close the case and go to settlement on the set date to save me some money. My question is I have a vehicle and back taxes in the Chpt.13 plan. How does that factor in after the sale of the house? The lawyer suggests getting a tax attorney for the back taxes I owe. So what about the car? Also, since the trustee is going to drop the plan on Monday, what does this mean in terms of my credit and how it is reflected on my credit report. Is it still reflected as an open bankruptsy? Also, what about the money i paid into the plan? Help!

Answer 1

I am not a lawyer but I have dealt with a lot of people who went through bankruptcies.

I am confused by your case...and I wonder if your lawyer knows what he's doing.

You do NOT want your bankruptcy dismissed for several reasons.

1) The very first people to get paid through the "plan" are the lawyer and trustee. If you are dismissed, you may have to file all over again, and you get to pay all those fees again! What a waste!

2) You have to pay the IRS no matter what! If you do it through your bankruptcy, you will not have to pay the penalty and interest. If your BK is dismissed, the IRS gets to tack on all of the past interest/penalties and come after you all over again.

3) None of your other creditors have been paid yet. Once dismissed, you can bet they will be going straight to court and file for a judgment....and move as quickly as they can before you can file for another bankruptcy in 6 months.

So allowing your bankruptcy to be dismissed is going to have a devastating effect on your finances.

You say you are selling your home? It closes in just a few weeks? Will there be money left after the sale to cover your past due amount to the trustee? If so, your attorney needs to convince the trustee to grant a deferment for one more month. Then pay off the balance and continue with your bankruptcy.

If the trustee won't work with you, file a motion with the court. The judge may see things differently. Many of the BK trustees are absolute jerks who are letting the power get to their head. If you have a clear path to repay this, it's not reasonable for the trustee to dismiss it!

As to the rest of your question....the sale of the house won't effect the BK because they will be dismissing it. You may need that tax attorney to fight off the IRS. If you keep up the payments on the car they won't go after it. The car was reaffirmed with your bankruptcy and the payments were being handled...but with the dismissal everything starts over again. You are behind on the payments, but you can work something out with the collectors.

The bankruptcy will appear on your credit reports as dismissed. It will still be a bad mark, and will stay there for the entire 7 year reporting period that began when you filed the BK.

The money that you have in your plan has already been distributed in this order: 1) Your lawyer 2) The trustee 3) the IRS 4) secured creditors (your car). I'm betting they haven't paid off beyond these people.

Again, it sounds like your attorney is dropping the ball. If you are not getting good answers, consider a new attorney.

Answer 2

You can find the best solution for you at: SALESQUOTES.INFO-

RE I fell behind on my Chapter 13 payments. I have a settlement date on my house in 3 weeks..what should I do?

I filed for chpt.13 in Nov 2006. I am paying a 1500.00 mortgage, and a 1400.00 payment on the Chpt. 13 repayment plan. I have had tremendous trouble keeping up with the trustee payments.My Bankruptcy lawyer contacted me and said the trustee is going to close my case on monday unless I pay a back fee of 4500.00. Needless to say I dont have the money. I have a house on the market and a closing date of Sept 14th. The lawyer suggested that I let the trustee close the case and go to settlement on the set date to save me some money. My question is I have a vehicle and back taxes in the Chpt.13 plan. How does that factor in after the sale of the house? The lawyer suggests getting a tax attorney for the back taxes I owe. So what about the car? Also, since the trustee is going to drop the plan on Monday, what does this mean in terms of my credit and how it is reflected on my credit report. Is it still reflected as an open bankruptsy? Also, what about the money i paid into the plan? Help!

Answer 3

You asked alot in your question, and I will try and shed some light on your problem. First, the court should be told about the pending sale of the house and if you are going to get some additional money from the sale, because you had equity beyong and above of the mortgage debt, it could be directed first for the back taxes and then any funds remaining could be applied to the car. The trustee should extend the chpt. 13 without much of an issue if he knows that this is happening. If he doesn't then take the remaining funds from the sale and deal with the tax issue as you probably can work a payment plan out with them. You didn't say whether or not you were dealing with the IRS or your State; however, either should take some money and work out a settlement plan, but if they have filed a lien on the property then they will take any money up to what you owe them straight from the closing, as the attorney will have to pay them as it will be reflected on the title issue. Needless to say your credit is fried for the time being, and only when you clear up the taxes and car, in addition to paying off the mortgage will you be able to start rebuilding your credit. It will take at least two and maybe three years of effort and to re establish. The money that was paid into the plan will be considered by all three of the creditors, as the trustee establishe when you entered the plan. The mortgage company will get the portion they were paid and so will the taxes and car. You must advise the car creditor of what you can do as they will immediately start to repossess it and will come after it quick. You aren't really saying any money by getting out of the plan as the trustee is paid according to how you pay. I assume your attorney was prepaid as is generally the case. You aren't alone in this situation as the mortgage problem will lead and already is, to the highest foreclosure rate our country has ever seen. Good Luck.

Answer 4

Of the money you've paid in, your attorney probably got his fees paid first, along with any other court related fees. The rest was applied to your various debts.

If the judge closes your case, all the creditors will be calling and knocking on your door demanding payment. The vehicle might just be repo'd.

The IRS will get their back taxes one way or another. I don't know why you need a tax attorney. You should save the lawyer fees and just put that money on your debts.

Normally Chapter 13 payment plans are set up taking your income and living expenses into consideration. If some expense came up that made it hard to keep up your payment plan, you should have contacted the trustee and your plan could have been adjusted.

I suspect you haven't learned the difference between WANT and NEED. Sell the house and use the profits to pay off some of your debt.

Answer 5

I've read a LOT online about chapter 13. If you are able to pay off the mortgage and have money left over to pay debts, let the case get dismissed. You can also negotiate with creditors yourself to lower payments. The Trustee gets a percentage of the sale price! No one mentioned this and I read it online posted by an attorney. Plus, your attorney will charge for the paperwork AND the Court may drag this out for months. You can end up with practically nothing after paying the Trustee and lawyer and realtor. If you have a buyer, sell. Many buyers if not all, may pull out of a deal when they find out it has to go through the Courts. Good luck.

Answer 6

the sole element you're able to do is to make the interior maximum loan present day. regrettably having a house is a income not an entitlement. hence in case you won't be able to have the money for to pay for the abode or do not stay as much as the words of the interior maximum loan which you agreed to, you're decrease than no circumstances entitled to maintain it. it quite is not any distinctive than lacking money on a automobile and having it repo'd.

Answer 7

Unless you can cough up 4500 by the date you are pretty much up a creek without a paddle.

If your lawyer is giving you the advice to pay, then it's in your best interests to do so.


Good luck and start moving stuff you don't want repo'ed to another place.