Chapter 13 bankruptcy is a reorganization bankruptcy where the court lets you repay some of your debts over time. Chapter 13 bankruptcy is great for people that do not qualify for Chapter 7 bankruptcy or just need some breathing room to figure out their finances.
Every Chapter 13 case involves a monthly payment by the debtor to the bankruptcy trustee. The trustee then distributes your plan payment to your various creditors in accordance with the instructions provided to the court in your Chapter 13 plan.
A debtor’s first Chapter 13 payment is due on the 25th day of the month following the month in which the bankruptcy was filed. For instance, if you file your Chapter 13 case August 12, your first payment will be due September 25.
Subsequent payments are due on the 25th day of each subsequent month. There is no grace period. The 25th means the 25th. A single missed Chapter 13 payment can put your entire bankruptcy in jeopardy. I always encourage my clients to pay their 13 payments early so there is no chance of a late payment.
The old fashioned way of paying involves sending a cashier’s check or money order each month in the mail. However, the trustees are now set up to accept electronic payments directly from your checking account via a service called TFS.
I like the TFS service because it establishes an audit trail. You don’t get that same level of assurance when you place your certified funds in the mail. Trust me, I have had my fair share of clients call my office in a panic because of a lost or mishandled Chapter 13 payment.
TFS does charge a small fee, but it is often less than the fee associated with obtaining a cashier’s check or money order from your bank. So TFS can help you save money too!
Please remember that the information listed above only applies to Chapter 13 cases assigned to trustees David Cusick and Jan Johnson in Sacramento. You should always check with your attorney and/or trustee to ensure that your Chapter 13 payments are being made on the appropriate schedule.
If you have questions about Chapter 13 bankruptcy in Sacramento, please call me at (916) 333-2222.