BANKRUPTCY BASICS – PART 4

Making Plan Payments

May 3, 2021

It is time to begin making plan payments in your bankruptcy case.  Here’s what to know:

  • Chapter 7 – Plan payments do not apply as you do not file a payment plan with the Court and the case usually is completed within approximately six months.  However, you may continue to make payments directly to creditors on certain debts you wish to keep, such as a mortgage or vehicle payment.
  • Chapter 13 – The first monthly plan payment is due to the Chapter 13 Trustee assigned to your case within 30 days after the case is filed and is due each month thereafter.
  • Even if you haven’t gone to court yet, the payment is still due.
  • Many people make payments through payroll deductions.  For example, if you are paid weekly, your employer will deduct of portion of your plan payment each week and send it to the Trustee.
  • If payroll deductions are not an option (you have social security or other income or payroll deduction is not feasible for some reason), then you can pay online, mail in payments, or you may be able to make payments through your attorney.
  • Most Chapter 13 cases last for three to five years.
  • Making the monthly plan payments is what makes the Chapter 13 case a success, so keep track of your payment records (such as paystubs, bank statements, or money order receipts).  It is your responsibility to make sure payments are made each month.
  • Chapter 11 – Whether you are an individual or a corporation and the type of Chapter 11 case you file and have approved will determine whether you make payments through a Trustee or directly to creditors.
  • You might not make payments to some creditors until after the plan is approved, which may be months after filing your case or more, and you may have payments to some creditors prior to your plan being approved.
  • You may have different payment schedules for different creditors.
  • If many cases, you will make payments directly to your creditors.
  • If you file a special type of Chapter 11, known as a subchapter V Chapter 11 case, it is possible that you may make some or all payments through a subchapter V Trustee.
  • Chapter 11 cases are complicated and are very specific to your individual circumstances and debts.  When you begin payments to creditors, how long payments last, and how creditors are paid will vary.
  • Chapter 12 – Typically you make plan payments through a Chapter 12 Trustee for three years after approval of a case.
  • As farmers and fishermen often have seasonal income, it is not unusual for plan payments to be made yearly, although some debts, such as a vehicle payment, may also be paid monthly.
  • Payments to some creditors on larger debts may be spread out over a longer period of time than three years.  In that situation, you would make payments to the Trustee for three years, and thereafter, you would make payments to the creditors directly.
  • Every Chapter 12 plan is unique, so the length of payments and payment terms to creditors will be based upon your specific circumstances.

Next up – Part 5 coming soon about the conclusion of your case and discharge!

Filing a bankruptcy case is complicated, and you need an experienced bankruptcy attorney to help guide you through this process.  Kimberly S. Ward has been representing people just like you for nearly 20 years in bankruptcy cases in Georgia. 

Call 912-764-9616 or contact me at info@kswardlaw.com to schedule your Free Consultation.

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