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.
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 attorney's 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 (creditors 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 to 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 years 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 cars 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 cars 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.
If a creditor contacts you after you have received the 341 notice, advise them that you have filed bankruptcy, give them your case number, and ask that they no longer contact you as is stated in the 341 Notice.
If you receive any bills after filing, you should mail a copy of the 341 Notice to the creditor with the bill.
If a creditor continues to call you or write to you after you have advised them of your bankruptcy case number and filing date, make a record of the creditors contact including, if possible, the name of the person contacting you, and dates and times of contacts. You may want to keep a log of unauthorized creditor contacts after your bankruptcy filing. If you have a written log or other evidence that a particular creditor has contacted you repeatedly after notification you should call your attorney for assistance.
What is a Trustee and What Does He Do? The Chapter 13 Trustees 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 Trustees 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 attorney's 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 must 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 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 attorney's 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 postings 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 that 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 Trustees 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