What Happens After You File Chapter 13?

Once a chapter 13 bankruptcy case is filed, the automatic stay prevents creditors from legally foreclosing, garnishing, repossessing or collecting against the debtor or any individual joint debtors. As part of the chapter 13 filing, the debtor proposes a chapter 13 plan (“Plan”) to reorganize their finances.  The Plan will contain provisions to deal with repaying secured debts, taxes and other priority debt. It will also propose a plan to bring leases or secured accounts like car loans and mortgages current, removing judgment liens, and restructuring interest rates and amounts due on secured loans.  To ensure success of the Plan, the Debtor must comply with the Plan’s terms and remain current.

Plan Payment

The Debtor’s preeminent responsibility under the Plan is to make the monthly Plan payment to the chapter 13 trustee. The first Plan payment is due by the first regularly scheduled section 341 creditor meeting. In Utah, the trustee does not accept payments at the 341 meeting like in other jurisdictions. Instead, the Debtor must tender the payment in advance of the meeting. If the 341 meeting is continued (rescheduled) the payment is still due by the original 341 meeting date.

Getting Information on My Case

The Utah chapter 13 trustee has a website to access information relating to your case. The website’s address is https://www.13datacenter.com/. If you have questions about accessing this site, you MUST contact the trustee’s office directly. You can call them at (801) 596-2884 or email kratrusteemail@ch13kra.com. We, or your attorney, will not have information regarding your payments made, amounts past due and the like. You need to access that information directly from the trustee’s website.

Mortgage, Car Payments & Secured Debts

Debts that are secured (collateral that is attached to the debt) can be either paid directly to the creditor or included in the plan, with the exception of mortgages which are always outside of the Plan. If the secured debt is included in the Plan, the trustee will make those payments upon confirmation of your Plan.  If the Plan indicates that you will make payments directly to the creditor, you must begin making the regular payment the first calendar month after filing your case.  Failure to make the regular monthly payments directly after proposing to do so, is grounds for dismissing your case.

What About Tax Refunds?

Tax returns and a portion of all refunds for the first three years (if the Plan is for more than 3 years) must be provided to the trustee. In Utah, the court allows the Debtor to retain the first $1,000 of these tax refunds. If the Debtor receives an Earned Income Tax Credit or a Child Tax Credit, the Debtor may keep those funds unto an additional $1,000. Thus, the Debtor may in some circumstances be able to keep up to $2,000 of tax refunds for each of the 3 years. All other refunds must be paid into the Plan. Failure to timely provide state and federal tax returns and/or pay the trustee the refund (withholding the amounts above) is cause for dismissal of your case.

What If My Income Changes During My Plan?

Once a Plan is confirmed by the court, you will continue following the Plan’s terms until completion of the case. In Utah, if your income increased during the Plan, the chapter 13 trustee may file a motion with the court to increase the Plan payment.  In our experience and according to prior comments made the Utah chapter 13 trustee, that is unlikely. His perspective has been that the Debtor benefits from an increase of income. If there is a decrease of income that makes making your Plan payment while maintaining household expenses, it is often possible to modify the Plan. This is not always true due to minimum requirements of the Plan. If you experience a significant decrease of income, speak directly with us or your attorney to assess the situation.

What If I Need a New Car During My Plan?

During the Plan, the Debtor may not incur new debt without the court’s permission. Court’s routinely approve debt for things that are reasonably necessary for the support of the Debtor and the Debtor’s dependents. If a car is totaled or stops working and needs to be replaced, the court will generally approve of debt to replace the vehicle. The court will need information regarding the new debt, so it is advisable to seek out the replacement vehicle and identify the terms of the new loan. We or your attorney will then need to seek court approval by filing a motion to incur debt.

Russell B. Weekes is an experienced Salt Lake Chapter 13 bankruptcy attorney. This article is for general information and is not intended to provide specific legal advise. Schedule a free bankruptcy evaluation, or call (801) 657-5074

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