All you ever wanted to know about Chapter 13 plan payments, but were afraid to ask

When I last wrote about Chapter 13 plans, I spoke about the fact that in the Bankruptcy Court of Western Pennsylvania (Western District), I mentioned that all secured debt payments (such as car loans and mortgages) must be paid inside the plans. This means that once you file a Chapter 13 plan, all of your car and mortgage payments must be included within your Chapter 13 plan payment made each month to the Trustee, who then pays your car lender and mortgage company. This is a strict rule here, so beware of reading about the practices in Courts around the country.

There is just one Chapter 13 Trustee in Western Pennsylvania, and that is Ronda Winnecour, whose office is in Pittsburgh at the U.S. Steel Building. Although your Chapter 13 payment checks are made payable to “Ronda Winnecour, Trustee”, you don’t send them to her office in Pittsburgh, but rather to a bank lockbox in Memphis, Tennessee. Moreover, you should only send payments in the form of money orders or certified bank checks, because personal checks are not allowed.

If you are a wage-earner, then there is a general rule with the Judges that you will submit to an automatic wage attachment with the payroll department of your company. Occasionally, a client with a sensitive employment situation will ask me to apply for an exemption from the wage attachment requirement. For example, they might believe that if their employer found out about their bankruptcy, then they might be fired. If it’s a legitimate reason, then the Judge will likely permit an exemption, but with the caveat that all monthly plan payments be made. And the Judge will likely order that if a plan payment is missed in the future, then the Trustee would have the right to dismiss the case.

Finally, your first plan payment is due within 30 days of filing your case. This is now explicit Federal law. And folks can’t claim ignorance of this rule because the Trustee mails out a letter within a day of the case filing that explains the importance of making plan payments. Because the Section 341 Meetings of Creditors are scheduled so close to the case filing dates (usually within 30 to 45 days of filing), you must quickly make your first payment. The Chapter 13 Trustee will not confirm your plan on an interim basis if you fail to make a payment prior to the Meeting of Creditors. If your plan isn’t confirmed, then your mortgage company won’t be paid for many more months and therefore may ask the Court for the dismissal of your case.

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