- NOTE: We are continually updating this post as new information comes in. Please look for **UPDATE** below in the different sections as we learn more.
We wanted to take some time and try to answer some commonly asked questions we are receiving about the Covid-19 / Coronavirus situation and how it is and will have an impact on your bankruptcy. This information is for our clients, not clients with other attorneys or in other locations.
We know this only adds to the stress you are having to deal with and we want to provide you information to help reduce that stress. However, please understand we don’t have the answers to all of the questions. The Trustee’s office and the Court system are trying to determine things as we move along. As we have more information we will continue to add it to this page.
We understand many of you are currently going with either reduced or no income. Therefore, you have a lot of questions about how to go about making your Chapter 13 plan payments if you are struggling to put food on the table.
The Chapter 13 office is closed to visitors. You must mail in your payments.
What if your payment is coming out of your paycheck and you are struggling due to reduced income?
You should contact the Chapter 13 Trustee’s office, in writing and request they stop the automatic deduction coming from your paycheck or, in the alternative, refund money up to a certain amount. You should pay as much of the monthly payment as you can right now. It, at times, can take weeks to stop a deduction from your paycheck so the Chapter 13 office may choose to refund you money each check instead.
Greensboro Trustee:
Attn: Jody Troxler, Chapter 13 Trustee
P.O. Box 1720
Greensboro, NC 27402-1720
Winston-Salem Trustee:
Attn: Kathryn Bringle, Chapter 13 Trustee
P.O. Box 2115
Winston-Salem, NC 27102-2115
Charlotte Trustee:
Attn: Warren L. Tadlock, Chapter 13 Trustee
P.O. Box 792
Memphis, TN 38101-0792
Statesville Trustee:
Attn: Steven Tate, Chapter 13 Trustee
P.O. Box 613136
Memphis, TN 38101-3136
What if you can’t make your Chapter 13 plan payment?
There are currently three options if you cannot make your full Chapter 13 plan payment. Please be sure to read the options below very carefully because they will have a significant impact on the direction of your bankruptcy moving forward.
Option #1: Make as much of your payment as possible
Ideally, you would make the full Chapter 13 plan payment during this time. However, if you could do that you wouldn’t be reading this page right now. The next best option is to make as much of your Chapter 13 plan payment as possible. The Trustee’s office is understanding of the current economic situation and, typically, is not going to look to dismiss your case during the current situation. However, your payment could have to go up in the future to account for your reduced payments right now. Let’s look at an example. Get ready to do some math.
Your monthly payment is supposed to be $1,000 per month. You have 24 months left on your bankruptcy. Therefore, you have $24,000 left to pay in your bankruptcy. However you can only afford payments of $300 per month right now due to a reduction in income. You should pay the $300 per month. Let’s say you have to pay that $300 per month for three months until things get better. That means you are short $2,100. ($1,000 – $300 = $700, $700 x 3 = $2,100)
The remaining 21 months you would need to pay $23,100. (21 months x $1,000 = $21,000, $21,000 + $2,100 = $23,100) To do that your monthly payment needs to go up. If we have $23,100 that needs to be paid over 21 months then you would need to pay $1,100 per month ($23,100 / 21 = $1,100).
So you need to understand that the less you pay right now means the more your Chapter 13 plan payment will likely have to go up later.
Option #2: Don’t make a payment at all, if you cannot
Not making a payment at all sounds great, right? Maybe not. There are pros and cons.
If you have lost your job and cannot make a plan payment then you have no choice but to make no payment at all. The Trustee may let you get away with making no payment for a short period of time due to the current economic situation. We may file a Motion for Moratorium and see if we can get a Court order from the bankruptcy Judge allowing you to miss a payment or payments. That is tpyically worked out between the Debtor and the Trustee. However, there is no guarantee on that. If the Trustee requires you make a plan payment you cannot make then eventually they will file a motion to dismiss. Once that motion to dismiss is filed there will be a hearing set. That hearing is usually two to three weeks after the motion is filed by the Trustee. During that period between when the Trustee files their motion and when the hearing is held we can do one of three things.
First, we will likely see if we can file a Motion to Modify your Chapter 13 plan payment to see if the monthly payments can go down and keep you in the Chapter 13 bankruptcy.
- **UPDATE – March 29, 2020**: The CARES Act (or HR 748) which was signed by President Trump in late March allows for any Chapter 13 cases that were filed prior to the date of the signing of the bill can be extended to 7 years. In other words, most of you have a 60 month or 5 year Chapter 13 plan payment. If you can show there is a financial hardship caused by the COVID-19 / coronavirus then you can extend your bankruptcy to last for 7 years or 84 months. Why does this help? It means your payments may be able to go down and become more affordable. Also, we don’t know this yet for sure, but the Courts may allow you to miss some payments and extend the Plan out beyond the 5 years and let you pick up the payments at a later date. This is all still a very fluid situation so we will continue to update this as we learn more. If you are interested in this then you should reach out to us.
- **UPDATE – June 9, 2020**: We have created a page on our website, here, that discusses what steps you can take to help us file a motion to extend out your Chapter 13 plan to try to help reduce your Plan payments.
Second, if that will not work, we will see if you can convert to a Chapter 7 bankruptcy (more on that below).
Third, if a modification or conversion does not work, you may have no choice but be dismissed from your bankruptcy. If you are dismissed it means you will owe all of the debts that you owed before the bankruptcy (plus interest, late fees and penalties) and creditors can begin lawsuits, foreclosures and repossessions again. However, if you are dismissed, you can always look to refile a Chapter 13 bankruptcy at a later date when you are working again. Filing again will ensure you are able to protect yourself from creditors when the automatic stay is enacted. Just stay in contact with us and we will walk you through that process.
Option #3: Convert from a Chapter 13 to a Chapter 7
If your income continues to be reduced or removed altogether then you may want to consider converting to a Chapter 7 bankruptcy. You can read more about a Chapter 7 bankruptcy here. However, be aware that you probably will not want to do a Chapter 7 bankruptcy if you were behind on your mortgage or car payments at the time of filing the bankruptcy. There are some limited exceptions to that but you would need to check with us. If you are behind on your mortgage or car loans then you would want to make sure you had an agreement reached with those creditors to ensure they do not try to foreclose on your home or repossess your vehicle after you have converted to a Chapter 7 bankruptcy. You may be thinking, haven’t they stopped foreclosures? They have, temporarily. However, that can change fairly quickly so don’t depend on old reports of foreclosures being temporarily stalled.
If you are able to convert to a Chapter 7 bankruptcy then you will have to pay conversion costs as well as sign additional documents with our office. A conversion is like mini-bankruptcy. It doesn’t hurt your credit any additional amount but there are documents that have to be prepared and signed as well as additional fees that would need to be paid. Those fees will vary depending on how far along you are in your Chapter 13 bankruptcy. If you are interested in possibly converting to a Chapter 7 bankruptcy you should read our conversion blog post carefully. It goes into much more detail on what is needed from our office.
Contact us for a free consultation today
Charlotte: (704) 563-1224
Greensboro: (336) 856-1234
Winston-Salem: (336) 245-4294
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