As of the date of this writing we are barely two weeks into what could likely be the largest financial meltdown since the Great Depression. We have already been contacted by many of our Chapter 13 clients who have lost jobs or have reduced income who want to know what will happen if they can’t make their mortgage or Chapter 13 Trustee payment. The short answer is don’t panic yet. This is solely my opinions based on more than 30 years as a practicing bankruptcy lawyer.
The bankruptcy system is intended to give the honest debtor a fresh start. That is the goal of the bankruptcy court, judges, the trustees and lawyers who dedicate themselves and their practices to this area of the law.
I cannot imagine that any of the Chapter 13 Trustee in New Jersey will be filing motions to dismiss cases for non-payment while the public health emergency persists. Similarly, I believe that the bankruptcy judges would be hard pressed to grant lenders permission to proceed with foreclosures before giving Chapter 13 debtors every opportunity to use the bankruptcy to address payments missed post-petition.
Most bankruptcy plans have a life of 5 years. Those that have a shorter life can be extended out to 5 years to help address the missed trustee and mortgage payments. Even those that are already at 5 years can be adjusted to make up for missed payments when debtors return to work. In some cases, Chapter 13 debtors may be entitled to a hardship discharge before the actual plan completion date. I also believe that it will be necessary for Congress to take action to extend the life of pending Chapter 13 bankruptcies to help debtors rebound from this financial meltdown.
In addition, each day both the federal government and state governments are announcing plans to help people affected by the financial crisis. From unemployment compensation to sick leave to housing assistance, help appears to be on the way for struggling debtors.
The best advise that I can give to my clients and others in this situation is to communicate. Communicate with your lawyer, the Chapter 13 Trustee and the lender. Document your circumstances. Be in a position to show your hardship. Prioritize your budget. Make sure that there is food on the table for your family and the lights are kept on. If there is some money left over and it is not enough to make a full Trustee or mortgage payment, put the money aside until a full payment can be made.
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Bruce Levitt and Shelley Slafkes, the attorneys at Levitt & Slafkes, PC, have been helping individuals and small businesses address their financial difficulties for over 30 years. Although this current situation is unprecedented, we are here to help if we can.
Call us at 973-323- 2953 or contact us online to schedule a free consultation.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.