A Virginia resident who has filed for Chapter 13 bankruptcy must set up a payment plan with creditors. That payment plan lasts for three to five years and is administered by a trustee that the court has appointed. The debtor sends the money to the trustee and the trustee pays the creditors. For debts like unsecured loans, the trustee probably makes a monthly distribution. In cases like these, if the debtor is a week late paying the trustee, it may not matter and might even go unnoticed.
However, if a person is paying a mortgage or car loan through a trustee, this could make a difference. A payment that is even a week late could cause a missed deadline.
In some cases, a late payment may cause a trustee to file a motion for the Chapter 13 to be dismissed. A debtor can stop this by opposing the motion, but this may require hiring an attorney and can be costly. Another option a trustee has if a payment does not come in is garnishing a person’s wages.
Despite these possible scenarios, a Chapter 13 bankruptcy may be a good choice for some people. Many people have misconceptions about bankruptcy. For example, they may think they can only file if they have a very low income or that they will lose all their assets. A Chapter 13 bankruptcy can help provide relief from overwhelming debt to people who have a regular source of income. Attorneys can describe the benefits of the process to those who feel that there is a stigma around bankruptcy and who struggle longer than they should.