Discharged

[hcorreia1]

I fell behind on payments 4 and just received a letter from the trustee looking to discharge my case. I am now again in the position to continue payments what is the best option to explain to the trustee, any advice?

[shipo]

Hmmm, from your description, it sounds like the Trustee is trying to "dismiss" your case, not "discharge" it; can you confirm?

[hcorreia1]

Yes you are correct, dismiss

[justbroke]

If you don't have an attorney, then you need to work with the Trustee to get the payments caught up. It really really depends on your Trustee to see how far you can spread those payments, but they usually want them caught up within 30-90 days. You would file a motion to modify the confirmed plan to fix the issue, especially where it was due to loss of income or medical.

I will say this and I only repeat it because it is always worth repeating. If you're in a Chapter 13 and you have or know you about to have a financial issue, immediately contact your attorney. There are a plethora of tools in a Chapter 13 that can help when there are issues. If you wait until you're in a real bind, it can be more difficult to fix.

Do you have an attorney (did an attorney file your case)? If so, have you contacted your attorney?

[hcorreia1]

Yes I do have an attorney and will be contacting him tomorrow. But I have gotten some good advice here so wanted to ask my question here. I am only 12 months from completion and hoping I can get these late payments in my plan without being dismissed. My biggest debt when I filled was the late payments on my mortgage and the trustee has paid all the late payments so my house should not go back to foreclosure. I am in a 100 percent plan, so I have to pay all my debt either through the plan or outside of it. So let’s say I get dismissed I am assuming my house can’t go back to foreclosure because it’s caught up am I correct?

[justbroke]

If you are caught up on your payments for your home (including any arrears), then you would be back in the position as if you were on time. If you had any lien stripping done on subordinate mortgages, you'd be in serious default and could face a foreclosure. (If you have no subordinate mortgages, such as a 2nd mortgage or a HELOC, then you can ignore what I just wrote.)

The key is that one should always immediately contact their attorney as soon as they know of or hit a financial issue. This give both you and your attorney more time to take corrective action. Ultimately, it will be up to the Trustee as to how quickly they'd want the missed payments. A serious issue can occur if you were paying your mortgage "inside the plan" (through the Trustee). That means you would be behind in mortgage payments and, since such a payment is related to secured debt, it could become a bigger problem.

[hcorreia1]

Thank you for the info. One last question if you don’t mind. I crammed my car as part of the plan. So let’s say I owed 13k and my attorney was able to negotiate the he car to 3k. The trustee has paid the 3k, and if the case gets dismissed would the car company resume wanting me to pay back the 10k?

[justbroke]

Yes. A cramdown only protects you if the Chapter 13 reaches a discharge! Without the discharge not only does the $10K come back, but it comes back with a vengeance. All the accrued interest, attorney fees, and any other junk fee will be added back to the account. The car would likely be repossessed quickly, and then you'd have a deficiency judgment for the difference.

(A cramdown is what your attorney did. It's not a negotiation but a tool of the provisions of Chapter 13 bankruptcy. A cramdown can be both in value and in the interest rate. So having a Chapter 13 dismissed when you had a cramdown could be a double whammy.)

[hcorreia1]

Thank you. My plan is to see if the attorney can negotiate paying the missed payments in the next 3 months. Will report back how it goes in case anyone else might need this info

[justbroke]

Thank you. My plan is to see if the attorney can negotiate paying the missed payments in the next 3 months. Will report back how it goes in case anyone else might need this info

Paying within 90 days is usually a deal with which the Trustee would agree. With all the issues with the pandemic, the (Chapter 13) Trustees are a little more forgiving.