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Introduction
The following is basic
information about your Chapter 13 bankruptcy and the course of events you will
experience. If you cannot find the answer to your question in the information
below, you should direct your individual question to your bankruptcy
attorney.
Basic Terminology
Unsecured debts include personal loans and credit cards issued
by banks, such as Visa, MasterCard, American Express, or Discover, and other
credit cards used to purchase consumable items such as clothing, food,
vacations, etc. You may not file Chapter 13 if your unsecured debts exceed
$337,000.
Secured debts include those debts where the creditor has a
security interest in your property to guarantee payment. Examples of secured
debts include mortgages, car loan, loans from finance companies (usually
secured by household items), furniture, computers or electronics. If you
purchased store goods using a store credit card, such as a card from Circuit
City, Rooms to Go, Best Buy, etc., the store probably has a security interest
in certain items purchased, which makes the store a secured creditor. You may
not file Chapter 13 if your secured debts exceed $1,010,000.
Procedure Before Filing
Handling Creditors Before Filing: If a creditor calls you after your initial
appointment and payment of your retainer, tell the creditor that you have
retained an attorney to file bankruptcy and give them your bankruptcy
attorney's name and phone number.
After your initial
consultation with your bankruptcy attorney, do not use any credit cards you
intend to discharge. If you have substantial charges or cash advances within
approximately six (6) months preceding filing bankruptcy the creditor may file
an adversary complaint alleging that you incurred recent charges with
fraudulent intent and without the intent to repay these debts. You may incur
additional attorneys fees to deal with adversary
complaints as stated in the retainer agreement.
Debtors usually file a
Chapter 13 bankruptcy to stop a foreclosure action on real property. It is
important that you keep your bankruptcy attorney advised of any scheduled
foreclosure sale dates. If your Petition is not filed with the Court prior to
the foreclosure sale, it is then too late to save your home through a Chapter
13 bankruptcy.
General Guidelines In Completing Your
Bankruptcy Questionnaire.
Bankruptcy Questionnaire. The bankruptcy schedules that your attorney
will prepare for you are based upon the information you provide your
attorney. All information you furnish regarding your creditors must be
complete and accurate. It is your responsibility to assure the accuracy of that
information when you deliver the completed Questionnaire to your bankruptcy
attorney. Your creditors who do not receive notice of your bankruptcy because
of an incorrect address or account number might not be discharged (the
elimination of the debt) and you would still owe them money.
Collection Agencies. If a creditor has turned your
debt over to a collection agency or attorney (creditor’s representative), list
the creditor’s address and
the address of the collection agency or the creditor’s attorney.
List All Creditors. You are required to list all creditors, including your mortgage
company and auto loan or lease company. You may not pick and choose the
creditors you list on your bankruptcy schedules. You may, however, decide to
reaffirm debts to certain creditors.
Consider Getting a Credit Report. If you are not sure you know all your creditors
you may want to get a report from a credit reporting agency. If you have
recently been denied credit, you are entitled to a free credit report from the
reporting agency. Instructions for obtaining this report should be on the
letter you received denying credit. You can obtain your credit report from
Equifax online at http://www.equifax.com, by mail at
Equifax Credit Information Services, Inc., PO Box 740241, Atlanta, GA 30374, or
by telephone at 1-800-685-1111. You can obtain a copy of your credit report
from TransUnion online at http://www.transunion.com, or mail at TransUnion,
LLC, Consumer Disclosure Center, PO Box 1000, Chester, PA 19022, or by
telephone at 1-800-888-4213. TransUnion accepts
telephone requests only if you have been denied credit within the last 60 days
and TransUnion was the reporting agency. Your
attorney may be able to order a more complete credit report for an additional
fee.
Bankruptcy Picture. Bankruptcy takes a picture of your financial
situation on the date your case is filed. Because you are never sure of the
exact filing date you will always have to provide your best estimate of items
such as credit card balances, cash on hand, and checking or savings account
balances.
Contingent And Disputed Liabilities. Make certain to provide your attorney
information about all liabilities, no matter how remote. List any claim that anyone
might have against you even if the claim has not matured yet. If you are a
co-debtor on a note, have personally guaranteed a corporate or other debt, or
are secondarily liable on a mortgage that has been assumed by a purchaser, the
debt should be listed along with a brief explanation of the liability. Disputed
debts and liabilities should also be listed. If you have ever had a home
mortgage that was insured by a governmental agency (such as the VA), be sure to
list that agency as a contingent creditor. This should be done even where
someone purchased the property and assumed the mortgage, since they might yet
default and the VA could decide to pursue a claim against you.
Secured and Unsecured Debts The bankruptcy petition asks you to list secured debts separately
from unsecured debts. Unsecured debts include personal loans and credit cards
issued by banks, such as Visa and MasterCard and credit cards used to purchase
expendable items. Secured debts include those debts where the creditor has a
security interest in your property such as a mortgage, car loan, loans from
finance companies (usually secured by household items), furniture, computers or
electronics. If you purchased goods using a store credit card, such as a card
from Circuit City, Best Buy, etc., the store probably has a security interest
in certain items purchased, which makes the store a secured creditor. If you
purchased consumables on a credit card (clothing, linens, small appliances,
food, medicines, etc.) the debt is unsecured. Secured debts will be paid
through your Chapter 13 Plan unless you surrender the secured asset. You
must provide your bankruptcy attorney complete information about your secured
debts including each
creditor's name and address, the approximate date the loan was incurred or the
date the credit card account was opened, the approximate amount owed, the
account number, any co-debtors (anyone other than yourself, or yourself and
spouse if filing jointly), the purpose of the loan, and whose responsibility
(self, husband, wife, or joint). It is also important to indicate whether or
not you want to reaffirm each secured debt. In a Chapter 13, you have the
option to surrender collateral (such as a house or car) securing a secured
loan.
Specific Issues in Completing Your Questionnaire
Exempt Personal Property. Under the Florida Constitution you are allowed to exempt and keep
in a Chapter 7 liquidation bankruptcy $1000 of
personal assets ($2,000 for a joint Petition).
Value of Personal Property. The bankruptcy court uses “forced sale” values
in the valuation of personal assets for the purposes of this exemption limit.
Therefore, when you complete your Questionnaire you should value your assets
based on what you could expect to receive for the assets at a fair market value.
Verification of Values. Only you know the condition and value of your
assets. Therefore, your bankruptcy attorney will rely on values you submit on
your Questionnaire, and your attorney will not change your values. The Trustee
has the authority to send an appraiser to your house to value your property. If
the Trustee orders an appraisal of your assets, the appraiser will contact you
to make an appointment to come to your house.
Liquidation Test. One of the requirements under Chapter 13
bankruptcy is that the creditors are paid through your Chapter 13 Plan at least
as much money they would have received if you filed a Chapter 7 petition. The
amount payable to creditors in Chapter 7 depends largely on the value of your
assets and your available exemptions. Therefore, it is important that you
accurately list and provide a current fair market value of all of your assets
in a Chapter 13 case, even though the purpose of a Chapter 13 is to avoid
having you sell any of those assets.
Income and Expenses. In Chapter 13 cases, the income and expense
statement should be as accurate as possible because the amount of your net
monthly income will determine your ability to make monthly payments to the
Chapter 13 Trustee. The law requires that you pay all of your “disposable
income” into the Chapter 13 Plan. Disposable income is the amount of income you
have at the end of the month after paying reasonable expenses. If you list
expenses for luxury items, the Trustee may require that you liquidate these
luxury items unless your Plan provides for the repayment in full of all
creditors (secured and unsecured). The Trustee requires that you submit your
income tax returns for the past three years in order to substantiate your
income and to show that all your disposable income is being applied to the
repayment of your creditors.
Federal Taxes and Student Loans. Income taxes and student loans are considered
priority debts. Priority debts must be paid in full during your Chapter 13
bankruptcy. One advantage of filing Chapter 13 bankruptcy is that income taxes
owed the IRS can be paid without further penalty or interest which would
otherwise accrue outside bankruptcy. Your bankruptcy attorney may not practice
tax law. If you are unsure when certain income taxes were due and payable
you must contact the IRS or your tax advisor or a tax attorney.
Tax Refunds. Income tax refunds are assets, and you should
list a refund you expect to receive from a prior year’s tax withholding. During
your Chapter 13 Plan, you will be required to surrender any tax refunds to the
Chapter 13 Trustee.
Tax Returns. In a Chapter 13 case, you must timely file all
income tax returns due before and after the filing date. Failure to file any
tax return is grounds for dismissal.
Value of Automobiles. Any equity you have in a car is considered
personal property and may be counted toward your $1,000 overall personal
property exemption allowance (see b. below). If you own your car free and
clear, the entire car value is equity. If you have a car loan, only the excess
of the car’s trade-in value over the current loan balance is considered equity.
Most people with car loans owe more than their car is worth (“upside down”), in
which case, they have no equity in their car. To determine the value of cars,
most Trustees rely on NADA values and apply the average of the wholesale and
retail value. You may want to obtain your own appraisal of the car’s value if
you believe it is worth less than NADA book value. Your bankruptcy
attorney will rely upon the car value you provide in your Questionnaire when
the attorney prepares your petition. If you are unsure of your car’s value, you
can obtain a value at http://www.nada.com or http://www.kbb.com.
Additional Exemption for Automobile. Florida Statutes 222.25 gives you a $1000 extra
exemption for a car in addition to your $1,000 personal property exemption. If
married, you are allowed $1,000 on each car, up to two cars.
Car Lease. If you lease a car, you do not list the car as your personal
property. Be sure to list your car lease in the Questionnaire under Executory Contracts and list the leasing company as an
unsecured creditor.
Separated Spouses Filing Jointly. If you and your spouse are
separated and filing jointly, each spouse should complete separate
questionnaire sections for Schedule A and B (real and personal property) and
Schedule J (expenses).
After Filing the Petition
Procedure After Filing. When the petition is filed, the Court will
issue a Notice of Chapter 13 Bankruptcy Case, Meeting of Creditors, and
Deadlines. This Notice will be
sent to all creditors and/or their agent or attorney, to you, and to your
attorney. The Notice will give the date and time of a meeting with the Chapter
13 Trustee. You should receive this Notice from the bankruptcy court
approximately ten (10) days after your petition is filed. You should also
receive a letter from my office with directions to the Court and any special
instructions concerning the meeting.
The Automatic Stay/Suggestion of Bankruptcy. The automatic stay commences immediately upon
the filing of the bankruptcy petition. It acts like a shield between you and
your creditors during the bankruptcy. The stay prohibits the commencement or
continuation of creditors’ judicial proceedings against you as well as all
collection efforts. If you are a defendant in a foreclosure or other civil case
and intend to reaffirm the debt to save the property, the attorney will file a
Suggestion of Bankruptcy in the civil case. Provide your bankruptcy attorney a
copy of any lawsuits you have received and the name and address of the
Creditor’s attorney. You should call your bankruptcy attorney's office after
you receive your 341 Notice to confirm that a Suggestion has been filed as
appropriate. The attorney's filing of a Suggestion of Bankruptcy in your state
court case does not mean that your bankruptcy attorney represents you in that
case.
Motion for Relief from Stay. Motion for Relief From
Stay is a Motion filed by secured creditors who want to pursue foreclosure of a
delinquent secured loan. These Motions are not typically filed in Chapter 13
cases because secured creditors are paid through the Plan. In the event a
secured creditor does file a Motion for Relief From
Stay these Motions are typically denied as long as the creditor is adequately
provided for in the Plan and as long as your payments under the Plan are
current.
Handling Your Creditors After Filing. The Court mails the “341 Notice” to your
creditors about one week after the petition is filed.
What is a Trustee and
What Does He Do? The Chapter 13
Trustee’s duties include advising and assisting the debtor in formulating an
acceptable Plan, collecting your Plan payments, and disbursing some or all of
the funds to the creditors. As compensation, the Trustee is entitled to six
percent of all money he receives from the debtor under The Plan.
Creditors Meeting with Trustee. A meeting with the Chapter 13 Trustee (“the 341
Meeting”) will be held three to four weeks after you file your bankruptcy. The
meeting is held in a meeting room, not the court room, and the federal
bankruptcy judge is prohibited by law from being there. Typically this meeting
will last about five minutes.
Who Attends. You are required to attend the 341 Meeting (if
filing jointly, both husband and wife must attend). Your attorney will
accompany you and represent you at the meeting. As a practical matter very few,
if any, creditors attend. The Chapter 13 Trustee, or her attorney, will conduct
the meeting.
What Happens at the 341 Meeting. It is normal for you to be nervous about this
meeting, but in almost all cases you will find this meeting is not difficult.
The Trustee will ask you questions, but she will not interrogate you,
cross-examine you, or threaten you. At the meeting, the Trustee will hand you
payment envelopes with the Trustee’s mailing address and will confirm the date
your first payment is due. The Trustee will also point out if there are any
changes that need to be made in your Plan through an Amended Plan. Typically,
most clients will have to submit one or more amended Plans after creditors file
their claims showing precise amounts owed to them.
What
if you cannot attend the meeting? Creditors meetings are scheduled by the Trustee based on the
Trustee’s schedule. Your bankruptcy attorney is not able to request a
particular meeting date or time. If you are unable to attend the 341 Meeting
you should notify your bankruptcy attorney at least one week in advance so your
attorney can contact the Trustee for a continuance. The Trustee will schedule a
“make-up” meeting approximately two weeks after the first date. If you do not
attend the second meeting, the Trustee will move to dismiss your case.
Bankruptcy Procedures after the 341 Meeting At the conclusion of the meeting with your
Trustee, creditors are given a limited amount of time to submit claims if they
believe you owe them money. Your secured creditors almost always file a claim.
The creditor’s claim indicates the amount of total debt, including what the
creditor believes is the amount of arrearage owed for past payments. The
arrearage amount can include past due interest, costs, and attorneys fees to
date. Some, but not all, unsecured creditors will also file claims. Your
bankruptcy attorney will send you copies of claims for your review. If you
believe that a claim is in error, you should let your attorney know because you
have the option of objecting to the amount of any claim filed.
After the last day
before which creditors much file claims, known as the “bar date,” your
bankruptcy attorney will review all claims filed in your case. Your bankruptcy
attorney will likely prepare an amended Plan which includes the amounts set
forth in the filed claims subject to any objections which you may have to a
particular claim. The next step is a confirmation hearing before the Bankruptcy
Judge where your Plan will be reviewed, and if acceptable, will be confirmed by
the Court. Your attorney will tell you if you
have to attend your confirmation hearing. You will have at least 30 days notice
of the court date. After your confirmation hearing, if your financial situation
should change, you should contact your bankruptcy attorney to discuss whether
or not you want to seek a modification of your Plan. Any increase or decrease
in your ability to pay may warrant a modification. Modifications can be
submitted for approval at any time for the life of your Plan.
New Debts. Chapter 13 Debtors may not incur any new debt
after filing the bankruptcy Petition, including taxes which must be paid when
due.
The Chapter 13 Plan
The Bankruptcy Plan
The Plan. Within 14 days after filing a Chapter 13 Petition, your
bankruptcy attorney will prepare and file a Chapter 13 Plan which will propose
a plan to pay your creditors on a monthly basis through a single monthly
payment to the Chapter 13 Trustee. The Plan and the amount of your monthly
payment to the Trustee is based on the income and
expenses you provide to your bankruptcy attorney. The Chapter 13 Plan
will include all of your regular monthly payments on secured items plus an
amount for attorneys fees, arrearage on each account,
trustee’s fees, and administration fees. You must show you have the ability to
make these payments on the income and expense Schedules submitted with the
Petition. You are required to review and sign your Plan before it is submitted
to the Court.
Payments Under Your Plan. After the filing date, the Court will issue an Order Establishing
Deadline for Making Payments.
You must begin making Plan payments on the date set by the Order. Your name and
case number must be written on all payments to the trustee to ensure accurate
posting to your account and receipt of payment. Many people prefer to have
their payments made through wage deductions at their place of employment. Your
employer simply deducts your payment from your paycheck and sends it directly
to the trustee. This procedure makes it easier for you to stay current under
your Plan and eliminates cost of postage. Payment should be made by cashier’s
check or money order. The Trustee will not accept personal checks. Even if the
Court orders your employer to deduct Plan payments and send them to the Trustee
for you, are ultimately responsible for making sure all payments are made. If
your employer fails to make a Plan payment deduction, you must tell your
bankruptcy attorney and immediately send the payment to the Trustee by cashier’s
check or money order. If you fail to make any Plan payment to the Trustee on
time, the Trustee will file an affidavit of default and serve it upon you.
Thereafter, you will have 21 days to make the overdue payment plus the next
payment due under your Plan. Therefore, being late will cause you to make a
total of two payments within the 21-day grace period in order to save your
Chapter 13 bankruptcy.
Effect of Non-Payment. When a Chapter 13 case is dismissed for
non-payment, the Court will enter an order prohibiting you from filing another
Chapter 13 case for up to six (6) months. If one of your payments is late, the
Trustee will issue an Affidavit of Non-Payment. In that event you will have 21 days from the date of the
Affidavit to make all payments currently due plus any payments that come due
within the 21-day period. The Trustee will often consider a Stipulation of a
payment program to make up for the past due amounts over time, provided you pay
the current payment and the next payment due under your Plan. If you do not pay
the missed payments or enter into a payment program with the Trustee within the
21-day period after the Trustee’s Affidavit of Non-Payment, your Chapter 13 case will be dismissed for
non-payments. These rules are strictly applied and enforced, and neither the
Trustee nor the Court will consider excuses for your non-compliance.
Confirmation of Your Plan. The bankruptcy judge will evaluate and either
confirm or deny, your bankruptcy plan at a confirmation hearing several months
after you file your Chapter 13 case.
Amended Plans. An amended Plan may result in you having to pay
a larger monthly payment to the Chapter 13 Trustee each month. In the event an
amended Plan results in an increased monthly payment you are responsible to pay
the difference for all months preceding the filing of the amended Plan. This
difference must be paid in full prior to the confirmation hearing. Therefore,
it is important for you to accurately report your payment and arrearage
obligation amounts on your Questionnaire so that you will not be liable for
significant payments after the filing of an amended plan.
Paying Your Creditors. In most cases you will pay all creditors through the Chapter 13
Plan. Typically, you will make no payments directly to the creditors after the
filing of your case, and your first payment will be to the Chapter 13 Trustee
when you are told by the Trustee’s office that the payment is due (usually 30
days after the filing of the original plan). You are able to pre-pay the
Chapter 13 plan if you have enough money to do so.
Life After Bankruptcy
Bankruptcy and Your Credit Rating. Bankruptcy will appear on your credit report
for several years. This does not mean you cannot get credit after filing
bankruptcy. Most lenders will extend credit within two or three years after
filing a bankruptcy case. Generally, the effect of bankruptcy on your credit is
not a bankruptcy issue; it is a banking or credit issue. Most questions
concerning reestablishment of credit are best answered by people at banks,
credit agencies, or consumer credit services.
Bankruptcy and Employment. It is illegal for an employer to discriminate
against you in any way because you have filed bankruptcy.
ORIGINALLY WRITTEN BY JONATHAN B. ALPER, ESQ. - ATTORNEY IN LAKE MARY FLORIDA
ACTIVE MEMBER OF