BASICS - Chapter 13
This
information pertains to present bankruptcy law and procedures
applicable prior to the new bankruptcy law known as the BANKRUPTCY
REFORM ACT (effective October 17, 2005). A summary
of the new bankruptcy law will be provided elsewhere on this
website. This web page will be amended to reflect the
new law when the Act nears its effective date.
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.
This website information does not replace or modify any separate
written agreement with or written information provided to clients
of Jonathan Alper, PLC.
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.
- 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 creditor’s 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? Laurie K. Weatherford
is the standing Chapter 13 Trustee to oversee all cases in Orlando
bankruptcy court. 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.
Location.
The bankruptcy court is located in the Fairwinds Building at
135 W. Central Avenue. Take I-4 west to Colonial Drive (SR 50).
When you get to the traffic light at the end of exit ramp, proceed
straight across Colonial which will put you on Hughey going
south. Proceed on Hughey about 2 miles: I-4 will be on your
left, and you will pass the Centroplex (Bob Carr Auditorium,
T.D. Waterhouse Center) and Marriott Hotel on your right. You
will notice a metered parking area under I-4 and the Federal
Building on your right. Park in the metered parking area. Walk
under I-4 to the east side. You will be about 2 blocks north
of Church Street Station. The South Trust building will be to
your east (a 10 story office building adjacent to I-4 at 135
West Central Boulevard). The Creditors Meetings are on the 6th
floor and the Clerk’s Office is on the 9th floor.
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. |
