Utah Chapter 13 Bankruptcy FAQ
What happens to my tax refunds during Chapter 13?
Unless your plan pays creditors back 100%, expect to turn over your state and federal tax refunds to the trustee for at least the first three years of your case. In some cases you may keep a small portion, but don’t spend a refund until you have checked with our office about what you’re allowed to retain. Failing to turn over required refunds gets cases dismissed, and you can be locked out of re-filing for six months.
Do I have to file my old tax returns?
Yes, and right away. If you haven’t filed a state or federal return in the last ten years, those need to be completed as soon as possible. Unfiled returns get Chapter 13 cases dismissed.
Will my back taxes be paid off in my Chapter 13 plan?
Probably not all of them. Generally only recently filed or assessed returns, roughly the last three years, get paid through the plan. Older taxes, and taxes from returns filed late, likely won’t be paid in the plan. Interest keeps accruing on them, and they are still owed when the bankruptcy ends, so don’t be surprised by an IRS or Utah State Tax Commission bill at the conclusion of your case. On the other hand, some tax debts can be discharged entirely if the returns were due more than three years before filing. If a tax year is close to qualifying, it may be worth timing your filing around it, so ask.
What happens if I miss the trustee meeting or my first plan payment?
The trustee will ask the court to dismiss your case, and the court very likely will. The meeting itself is easier than people fear. Trustee meetings are held by Zoom now, and your ID and Social Security verification are handled through a secure upload before the meeting, so there is nothing to display on camera. You just have to be there, on time, with your first plan payment made.
How long does a Chapter 13 plan last?
Three years if your income is below the Utah median, and five years if it’s above. Sometimes we use five years even for below-median income, simply to keep the monthly payment lower. You must make every payment for the full term to receive a discharge.
Does my whole payment go to my creditors?
No. The Chapter 13 trustee takes a percentage of every payment as a fee set by law before the rest goes to your creditors.
Do I keep paying my mortgage during Chapter 13?
Yes, starting the first month after filing. Only the arrearage, meaning the amount you’re behind, goes into the repayment plan. The ongoing payment stays yours. Homeowners should also expect the mortgage company to hire an attorney to review how the plan treats the home. Your loan documents let the lender pass that attorney fee on to you, usually by adding it to the loan, though occasionally it’s billed out of pocket.
Which bills do I keep paying outside the plan?
Anything not included in it, such as your house payment or rent, current utilities, a car lease, and ongoing alimony and child support. If your student loans are in deferment during the case, voluntary payments can keep the interest from snowballing, but ask your attorney first, because payments outside the plan can affect your case.
Should I open a new bank account?
Usually yes, at a bank you don’t owe. Money in an account at a bank you owe can be frozen as security and the account closed. Stop payment on undeposited checks, cancel scheduled automatic payments, and move your direct deposit to a brand-new account at a different bank. That’s the clean way to keep creditors out of your money while their automatic withdrawals wind down.
Why did my online bill pay stop working?
Creditors often shut down portal access after a filing so they can’t be accused of taking money from someone under bankruptcy protection. Use your own bank’s bill pay to push payments instead.
Can I use credit cards or borrow money during Chapter 13?
Not without court approval. That includes existing credit cards, home equity lines, 401(k) loans, and bank overdrafts. Buying a house or car during the case is possible, but it’s done by motion, and it’s part of why plans sometimes get modified.
What is “relief from stay,” and how do I avoid it?
It’s a creditor asking the court for permission to take your property despite the bankruptcy. It usually happens one of four ways: not paying your mortgage, not paying the trustee, letting insurance lapse, or a pattern of repeat filings. Keep receipts for every mortgage and plan payment. With receipts, the motion can be fought.
Can my plan payment go up?
Yes, in a few situations. If you forgot a debt or underestimated one, the payment can rise. Also, the attorney fee built into your plan covers getting the plan confirmed and the standard milestones of the case. It doesn’t cover work that becomes necessary later, like catching up a skipped payment, modifying the plan, or getting approval to buy a house or car. That extra work can’t simply be billed to you. The court must approve any additional fee, and if it’s allowed, it gets added to the plan, which can raise payments or extend them.
How fast can a garnishment be stopped or a repossessed car recovered?
Allow at least two weeks from filing. Garnishment refund checks take time, and on repossessed vehicles state law requires insurance before recovery, so have the car insured before your attorney goes after it. Don’t count on garnished funds arriving in time to make your first trustee payment.
Does Chapter 13 remove liens from my real estate?
Not by itself. A recorded judgment lien survives unless a separate motion is filed to void it. That motion requires you to get a copy of the lien to your attorney, and it’s additional court-approved work beyond the standard fee. Your attorney doesn’t run a title search for you, so if you suspect a lien, check with the recorder in the county where the property sits.
What is the second financial-management course?
It’s a requirement for discharge, separate from the brief counseling session you took before filing. Miss the certificate deadline and the case closes without a discharge, which means creditors can collect again. Ignore the flood of overpriced course offers that will hit your mailbox, and take the second course through the same provider and login you used for the first.
I got a “deficiency notice” from the court. Is my case being dismissed?
Almost certainly not. It’s routine when a case opens with initial documents only. There’s a window to file the rest, and your attorney gets copies of everything the court mails you.
When am I actually done after my last payment?
Expect another 60 to 90 days. The trustee has to receive your final payment, pay it out, wait for those checks to clear, and file final reports for the judge’s approval. A landlord or lender checking your credit right after your last payment will still see an open bankruptcy, so plan around that.
Can a bank or doctor refuse to serve me after discharge?
Yes. Anyone whose debt you discharge can stop offering you services, so plan on switching providers.
Is it hard to rent during an open Chapter 13?
Often, yes. Landlords see the open case and worry the rent will end up in it. Plan to stay put until the case closes, or save up so you can offer a larger deposit than competing tenants.
Have a question that isn’t here?
Chapter 13 questions rarely have one-size-fits-all answers. Call or text us at (801) 388-0007 and ask yours. The consultation is free.