What to Do: When the Chapter 13 Trustee Moves to Increase your Payment
We get about 5 phone calls each week from agitated Chapter 13 clients who have just received a Trustee’s Motion to Increase Plan Payments. These can be very alarming, but most of the time, there is something we can do about it. Why would the trustee do this? Don’t they already know that you’re barely making ends meet? Honestly, the trustee doesn’t care. They have thousands of other cases to administer and they don’t look too deeply into the individual facts of your case before filing motions like this.
But here are a few reasons it may happen to you:
1. New claims have been filed in your case. This is the case about 60% of the time. Your creditors are supposed to file their claims within 90 days of your filing bankruptcy, but sometimes they com late and the trustee may try to pay it. It is up to you to object to the claim. Most normal debts can be objected to if not filed on time, and thereby preventing the need for an increased payment. But sometimes, you cannot. Taxes and missed mortgage payments, for instance, must be paid once added to your case. And remember that you only have 5 years to complete your plan, so if you add $2000 of taxes 10 months before your 5 years runs out, then that is $200/month extra you”ll have to shell out.
2. You missed payments. If you miss 2 payments of $500, then you are behind $1,000 on your case. You can either come up with $1000 now or increase your plan payment to catch up what you missed. If you’ve missed bankruptcy payments, you probably cannot avoid an increased payment.
3. You failed to disclose everything at the beginning of your case. You are required to be completely honest about your assets and liabilities when you file a bankruptcy. If, for instance, you “forgot” to list a $50,000 piece of land you inherited from you grandmother, then if the trustee finds out, they’ll move for an increase at the very least. Failure to list assets can be a federal crime, so you if you’ve done that, an increased payment is the least of your worries.
What to do if you receive a Motion to Increase Plan Payments:
1. Don’t panic. Your attorney has a copy of the motion and will review it and do what is necessary to keep your payment as low as possible.
2. Call your lawyer and ask what can be done. Maybe we can object to some claims. Maybe we can move for a reduced payout to unsecured creditors. Maybe you can surrender some collateral. If there is a way, we’ll find it.
3. Listen to your lawyer’s advice. If you are paying for a $25,000 dodge charger even though you have a perfectly fine Civic that can get you to work, when your attorney tells you that you should surrender the Charger, surrender the charger.