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Federal Employees Expected to Continue Bankruptcy Payments Despite Shutdown

Posted on in Bankruptcy

Federal Employees Expected to Continue Bankruptcy Payments Despite ShutdownThe federal government shutdown is nearing a month, and federal employees have started to miss paychecks. Losing your job income can put a strain on anyone’s budget, but people with a Chapter 13 bankruptcy repayment plan feel under particular pressure. Filers agree to court orders to make regular payments to their creditors, and the payment amounts are based in part on their regular income. When a federal employee going through Chapter 13 bankruptcy stops receiving pay, he or she may not have the money available to make the scheduled payments. 

Missing Bankruptcy Payments

A Chapter 13 bankruptcy trustee receives your payments and distributes them to your creditors. The trustee can file a motion to dismiss your case if you repeatedly miss payments, which would require you to:

  • Fulfill your missed payments;
  • Motion to modify your payment plan; or
  • Allow the dismissal and attempt to refile for bankruptcy.

During the previous government shutdown in 2013, some bankruptcy trustees were willing to delay a motion for dismissal when a federal government employee missed a payment. However, this government shutdown has already lasted for longer than any other on record, and it is unclear when a resolution will be reached. We do not know how patient trustees will be if bankruptcy filers are forced to continue to miss payments.

The Chapter 13 Trustee is not the government. Chapter 13 Trustee offices are open and it is business as usual for them. For individuals who are currently in Chapter 13, you need to continue to make your payments.

Catching Up on Payments

When the shutdown eventually ends, the federal government will give back pay to many of its employees. The bankruptcy trustees expect Chapter 13 filers to use the back pay to catch up on their missed payments. If the filer continues to miss payments, the trustee will notify the filer of the deadline by which he or she must complete the payments. Some workers may not receive back pay, such as independent contractors. During the previous shutdown, some trustees allowed such workers to modify their plans. A bankruptcy lawyer would be crucial to successfully negotiate any plan modifications. 

Continued Shutdown

The federal courts that handle bankruptcy cases are nearing the end of their monetary reserves. It is unknown whether this would affect how quickly bankruptcy cases will be heard. You do not need to delay your bankruptcy preparations because of the government shutdown. Bankruptcy cases are still being filed. A Frisco, Texas, bankruptcy attorney at The Page Law Firm can talk to you about the process and whether the government shutdown will affect it. To schedule a free consultation, call 214-618-2101.


National Association of Consumer Bancruptcy Attorneys State Bar of Texas
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