Chapter 7 FAQs | Disclaimer - Read First!
Chapter 13 FAQs | Disclaimer - Read First!
CHAPTER 7 BANKRUPTCY FAQS DISCLAIMER:
This information deals with Chapter 7 consumer bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. Information dealing with Chapter 13 bankruptcy and consumer debt restructuring is discussed elsewhere on this website. The information contained in the following FAQs is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 7 consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice regarding specific information.
What is a chapter 7 bankruptcy and how does it work?
Generally speaking, Chapter 7 is the cleanest, easiest, quickest, and least expensive form of bankruptcy. In a chapter 7 case, Debtors surrender their nonexempt property, if any exists. The Chapter 7 trustee then converts the property to cash and pays the debtors' creditors. Very, very few Chapter 7 cases involve the loss of property by a debtor.
What is a chapter 7 discharge?
It is a court order releasing a debtor from all dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
How long does a Chapter 7 case last?
In most Chapter 7 cases, the Debtor receives a discharge within 120 days of the filing of the bankruptcy case. When the Court enters the discharge, Chapter 7 debtors can immediately begin reestablishing their credit. Debtors can expect to begin to receive offers of credit for car purchases and credit cards immediately upon receipt of their discharge. Proper management of your future credit is the key to financial success after a Chapter 7 case is filed.
Who can file a chapter 7 case?
Any person who resides in, does business in, or has property in the United States is permitted to file a chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days. To be permitted to maintain a chapter 7 bankruptcy case a person must qualify for chapter 7 relief under a process called means testing.
What is means testing?
Means testing is a method of determining a person's eligibility to maintain a chapter 7 case. Under means testing a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person's state and family size, must show that he or she is not able to pay a minimum of $100 per month for 60 months to his or her unsecured creditors from his or her disposable monthly income in order to be eligible to maintain a chapter 7 case. Disposable monthly income is a person's current monthly income from all sources less the person's permitted current monthly expenses. The chapter 7 case of a person whose disposable monthly income is such that he or she is deemed to be able to pay $100 per month or more to unsecured creditors for 60 months will be dismissed or converted to chapter 13 unless special circumstances exist. History has shown us that very few people fail to qualify under the means test.
What types of debts are not dischargeable in a chapter 7 case?
All debts of any type or amount, including out-of-state debts, are dischargeable in a chapter 7 case except for the types of debts that are by law nondischargeable in a chapter 7 case. The following is a list of the most common types of debts that are not dischargeable in a chapter 7 case: tax debts that are less than 3 years old; responsible party taxes; debts incurred as the result of fraud, embezzlement, willful and malicious injuries, educational debt, domestic support obligations, and debt incurred as the result of an accident while driving under the influence. Unlisted debts and certain fines and penalties are also not discharged.
Who should file a Chapter 7 case?
Any person who is eligible to file a Chapter 7 case, has substantial dischargeable debt they cannot pay, and is not at risk of losing property they wish to keep should seriously consider filing Chapter 7. At Evans & Evans, our attorneys will discuss with you all of your options and advise you on whether Chapter 7 is a safe, effective means of obtaining relief from your financial problems.
Is there anything that a person must do before a chapter 7 case can be filed?
Yes, prior to filing a Chapter 7 case, debtors must undergo credit counseling with an approved agency. The credit counseling is done on the internet or telephone and takes about 25-30 0 minutes. If you do not have high speed internet access, we can arrange for you to do your counseling in our office. Under current law, you must also file all tax returns that were required of you unless you are under a valid extension.
How much does it cost to file Chapter 7 and when must the fee be paid?
The court costs and attorney fee must be paid before a Chapter 7 case can be filed. The attorney fee for each case varies depending on the complexity of your financial situation. Your attorney will discuss the anticipated fee with you at your initial consultation.
May a husband and wife file jointly under chapter 7?
Yes. A husband and wife may file a joint case under chapter 7. If a joint chapter 7 case is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.
When will the phone calls and creditor harassment end?
Immediately upon the filing of your case your creditors must stop calling you. They must also stop all garnishments, foreclosures, and attempts to repossess your property. The filing of a chapter 7 case by a person automatically suspends virtually all collection and other legal proceedings pending against that person. A few days after a chapter 7 case is filed, the court will mail a notice to all creditors ordering them to refrain from any further action against the person. Criminal proceedings and actions to collect domestic support obligations from exempt property or property acquired by the person after the chapter 7 case was filed are not affected by the filing of a Chapter 7 case.
How does filing a chapter 7 case affect a person's credit rating?
In most cases, by the time a person is considering the filing of a Chapter 7 case, their credit is already in bad shape. Generally, they are already to the point that they have no available credit and lenders will not consider making them a loan. In this sense, the filing of a Chapter 7 case may actually help you to improve your credit. Some financial institutions openly solicit business from persons who have recently filed under chapter 7, apparently because it will be at least 8 years before they can file another chapter 7 case. If there are compelling reasons for filing a chapter 7 case that are not within the person's control (such as an illness or an injury), some credit rating agencies may take that into account in rating the person's credit after filing. A Chapter 7 filing can be reported on your credit report for up to 10 years.
Are employers notified of chapter 7 cases?
Employers are not usually notified when a chapter 7 case is filed.
May employers or governmental agencies discriminate against persons who file chapter 7 cases?
No. It is illegal for either private or governmental employers to discriminate against a person as to employment because that person has filed a chapter 7 case. It is also illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses (including a driver's license), permits, student loans, and similar grants because that person has filed a chapter 7 case.
Will I automatically lose my house or car if I file a chapter 7 case?
NO! At Evans & Evans, we review your financial picture and advise you on whether the filing of a Chapter 7 case will put you at risk of losing any property. Generally speaking, if you have a home or car with a valid lien or mortgage, you are current on those loans, the value of your property is close to the amount you owe, and you can exempt any equity in that property, you will most likely be able to keep your property. As mentioned above, few Chapter 7 cases involve the loss of property by a debtor. However, each case is different and requires careful analysis by your attorney prior to the filing of any bankruptcy case.
When do I have to appear in Court and what should I expect to happen at that time?
It is unlikely that you will need to appear in Court. You will, however, be required to attend a conference with your Trustee, called a "meeting of creditors," which is usually held about a month after the case is filed. Your attorney will attend the meeting with you. You are required to bring photo identification and proof of your social security number to the meeting. At this meeting you will be put under oath and asked about your debts, assets, income and expenses by the Chapter 7 trustee. In most chapter 7 consumer cases no creditors appear in court; but any creditor that does appear is usually allowed to question the debtors. No creditor is allowed to harass or embarrass a debtor.
What is a trustee in a chapter 7 case, and what does he or she do?
The trustee is a person appointed to examine the debtor, collect any nonexempt property, and pay the expenses of the estate and the claims of creditors. In addition, the trustee has certain administrative duties in a chapter 7 case and is responsible for seeing to it that the debtor performs the required duties in the case. A trustee is appointed in every case.
How are secured creditors dealt with in a chapter 7 case?
Secured creditors are creditors with valid mortgages or liens against property of the debtor. Property that is encumbered by a valid mortgage or lien is called secured property. If you wish to retain the collateral securing a debt, you may either reaffirm on the debt or propose to redeem the property for its current value. Liens survive bankruptcy unless they are avoided during the case.
What does it mean to reaffirm on a debt or to redeem property?
To keep secured property, you must either reaffirm on the secured debt or redeem the property. Creditors decide whether they will agree to allow you to reaffirm a debt. You decide whether you will redeem property for a lump sum cash payment. If the debtor and the creditor cannot agree on a redemption price, the Court may decide the value of the property and the amount to be paid by the debtor. Most creditors will allow you to reaffirm if you are current on your loan with them and you have insurance covering the property securing the debt. To reaffirm a debt, you sign a written agreement setting out the terms of your repayment. The reaffirmation agreement advises you of your rights including the right to change your mind about reaffirming the debt during a 60 day period.
How are unsecured creditors dealt with in a chapter 7 case?
An unsecured creditor is a creditor without a valid lien or mortgage against property owned by the debtor. Since most chapter 7 cases do not involve the sale of assets by the trustee, most unsecured debt is simply discharged without being paid. In most cases, the filing of a chapter 7 case will allow you to wipe out all credit card debt, medical bills, personal loans, judgments, and some tax debt. Please note that some debt, including but not limited to certain taxes, most student loans, and debt incurred by fraud or false pretenses, may not be discharged in bankruptcy.
May a utility company refuse to provide service to a person if the company's utility bill is discharged under chapter 7?
If, within 20 days after a chapter 7 case is filed, the person filing furnishes a utility company with a deposit or other security to insure the payment of future utility services, it is illegal for a utility company to refuse to provide utility service to the person after the case is filed, or to otherwise discriminate against the person, if its bill for past utility services is discharged in the debtor's chapter 7 case.
Can I repay a debt that was discharged and on which I did not reaffirm?
Yes. A debtor may repay as many dischargeable debts as desired after filing a chapter 7 case. By repaying one debt, a person does not become legally obligated to repay any other debts.
How does a chapter 7 discharge affect the liability of cosigners and other parties who may be liable to a creditor on a discharged debt?
A chapter 7 discharge releases only the person or persons who filed the chapter 7 case. The liability of any other party on a debt is not affected by a chapter 7 discharge.
CHAPTER 13 BANKRUPTCY FAQS DISCLAIMER:
This information deals with Chapter 13 consumer bankruptcy. Each state has its own bankruptcy laws, so you need to check with your state for details. Information dealing with Chapter 7 bankruptcy and consumer debt restructuring is discussed elsewhere on this website. The information contained in the following FAQs is provided for general information purposes only and is not intended to be a legal opinion nor legal advice nor is it intended to be a complete discussion of all the issues related to the area of Chapter 13 consumer bankruptcy. Every individual's factual situation is different and you should seek independent legal advice regarding specific situations.
What is Chapter 13 Bankruptcy?
Chapter 13 is a type of bankruptcy in which debtors, either individuals or married couples, choose to pay at least a portion of their debts out of their ongoing income, rather than having their non-exempt assets sold with the proceeds going to their creditors. As a Chapter 13 debtor, you are required to make regular payments to the individual who serves as the Chapter 13 Trustee . The Chapter 13 Trustee is appointed by the United States Trustee and authorized by the Bankruptcy Code to administer your Chapter 13 Plan . Your Plan is the legal document that you filed with the Court setting forth how much you will repay each of your creditors.
How much do I have to pay back through my Chapter 13 Plan?
That depends on a variety of factors, including your income, types of debt, and the amount of your “non-exempt assets”, among others. You and your attorney will develop your repayment plan based on the requirements of the Bankruptcy Code and your ability to make plan payments after accounting for your household and family expenses as permitted by the Bankruptcy Code.
When do my payments begin?
Within thirty (30) days of the filing of your case, but the Trustee will accept your first plan payment as timely if made at the time of your first meeting of creditors?
Where do I send my payments?
After the first payment, future monthly payments (always in the form of a bank check or money order – THE TRUSTEE DOES NOT ACCEPT PERSONAL CHECKS -) should be mailed to the Trustee’s post office box at the address shown below. Please allow 5 business days for the payment to be received by the Trustee’s bank lock box and credited to your case. Be sure to include your name and case number on your bank check or money order.
Mail payments to:
Chapter 13 Trustee
P.O. Box
Memphis, TN
Why file Chapter 13 bankruptcy instead of Chapter 7 bankruptcy?
This will be the subject of careful analysis and discussion by you and your attorney. Generally speaking, you might elect to file a Chapter 13, rather than Chapter 7 liquidation bankruptcy, for several reasons:
- You may have fallen behind on your payments on a secured debt, such as a house or car loan, and you want to keep the asset that is the collateral on the debt;
- You may have assets that you own “free and clear,” and you want to keep these assets rather than have them sold to pay creditors;
- You may have debts, such as certain kinds of taxes and child support/alimony obligations, which cannot be discharged in a Chapter 7 case but may be paid over time in a Chapter 13 case;
- Your income is such that you are not eligible to file a Chapter 7 bankruptcy;
- You want to repay at least a portion of your debts over time; or
- You may have already completed a Chapter 7 case and received a discharge, and as a result you may be ineligible to file another Chapter 7 case for a specific period of time.
If I file a Chapter 13 Case can creditors continue to contact me?
In most instances, as soon as you filed your bankruptcy, a stay was imposed on all of your creditors. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although you may request the court to extend or impose a stay. The stay prevents creditors from taking certain actions against you to collect the money you owe them. Because of the stay (assuming the stay is invoked), creditors may not call you; wage garnishments (except for child support and alimony) must stop; foreclosure proceedings must stop; and attempts to repossess property must stop. If your creditors do not stop these actions, contact your attorney immediately.
What is a discharge?
Your ultimate goal in any bankruptcy should be to complete your payment obligations and receive a discharge . A discharge is an order issued by the Bankruptcy Court stating that you have completed your obligations as a Chapter 13 debtor, and that certain debt you incurred before you filed your bankruptcy is forgiven. Once you receive a discharge, the individuals or companies to whom you owed money may not attempt to collect those debts from you again (except in certain circumstances, such as student loans, domestic support obligations, and certain kinds of taxes, which will be discussed later). In some instances, even if you complete your obligations as a Chapter 13 debtor you will not be eligible to receive a discharge. Your attorney will be able to tell you if you will or will not be eligible to receive a discharge upon completion of your bankruptcy.
Who is the Chapter 13 Trustee?
The Chapter 13 Trustee is the person who administers your Chapter 13 Plan. The Chapter 13 Trustee has several responsibilities. The Trustee will review your bankruptcy schedules for completeness and accuracy, as well as your proposed Plan to make sure it complies with the bankruptcy laws; examine you at the Meeting of Creditors ; make sure your case is in order so he can recommend to the Bankruptcy Court that your Chapter 13 Plan be approved; collect your Plan payments; and make distributions to your creditors according to the terms of your Plan as approved by the Bankruptcy Court. During the three to five year term of your bankruptcy, the Trustee will provide you with periodic reports of your Plan payments to the Trustee, the distributions the Trustee has made to your creditors, and the amount of funds, if any, in the possession of the Trustee.
The Trustee is also responsible for making sure that you comply with your Plan after the Court approves it. If you fall behind on your payments, the Trustee will likely ask the Court to dismiss your case. The Trustee’s responsibilities do not include reminding you of your payment obligations to the Trustee, making sure you are up to date on your house payments, or negotiating with creditors on your behalf. These are your responsibilities. If a creditor contacts you, if one of your assets is repossessed or foreclosed upon, or if your mortgage company reports that you have fallen behind on payments, contact your attorney, not the Trustee.
What is a Chapter 13 Plan?
When you file a Chapter 13 petition, you are required to file a Chapter 13 Plan. Simply put, this Plan states how much you are to pay to the Chapter 13 Trustee and to certain secured creditors, and to whom the Chapter 13 Trustee is to make disbursements. Creditors that have claims based upon certain kinds of debts must be specifically named in your Plan. These debts include mortgages, taxes, child support and/or alimony debts, and debts that are secured by personal property, such as a car or furniture. If you are behind on your mortgage payments, your Plan may provide for you to make up the delinquent payments while you make the on-going monthly mortgage payments yourself directly to the mortgage company. Even if you are not behind on your mortgage payments at the time you file your bankruptcy petition, you must still identify your mortgage creditor or creditors in your Chapter 13 Plan.
What kind of debts do I have?
Debts on which there is no collateral are sometimes called unsecured debts . These would include (but are not limited to) debts such as utilities, credit cards and medical bills. Each unsecured creditor is individually listed in the bankruptcy documents filed with the Court. In your Plan, however, these creditors are not individually listed by name but instead are grouped together as unsecured creditors. They are paid a percentage of the amount of their claim. If you are unsure if a debt is secured or unsecured, ask yourself this question: If I don’t pay this debt, is there something the creditor can take away or repossess? If the answer is “yes,” the debt is probably a secured debt, and the creditor and the amount of the debt will have to be specifically provided for in your Chapter 13 Plan.
In most circumstances, all unsecured creditors must be treated equally. There is no provision in the Bankruptcy Code allowing you to favor one creditor of the same type over another, nor is there any provision in the Bankruptcy Code allowing you to omit a creditor from your bankruptcy schedules, no matter how much or how little you owe that creditor. In order to ensure complete compliance with the Bankruptcy Code, you must tell your attorney about all of your debts. The decision as to which debts are to be paid through your Chapter 13 Plan is not yours to make; in most cases, it is determined by the laws governing Chapter 13 bankruptcy.
What if I owe someone in my family money?
If you owe money to a family member, you must treat this debt exactly as you treat your other debts. It is unfair for you to pay a family member back in full while other creditors only get a portion of the money you owe them. If you owe someone in your family money, you must inform your lawyer. If it is later discovered that you owe money to a family member or if you repaid money to a family member within a certain period of time prior to the filing of your bankruptcy, and failed to disclose this information in the documents filed with the Court, you risk having your bankruptcy case dismissed or converted to a Chapter 7 bankruptcy.
How do I make plan payments?
It is your responsibility to make sure Plan payments are made, and that you are current in your payment obligations to the Trustee. The Trustee does not send monthly statements, coupon books, or reminders. Failure to make payments to the Trustee is grounds for the dismissal of your Chapter 13 case. If your case is dismissed, then you will not get a discharge, your debts will not be forgiven, and your creditors will be permitted to resume collecting the money you owe them.
What if I change jobs?
You should tell your attorney immediately if you change jobs.
Does the Trustee charge a fee?
Included in your payment to the Trustee is a fee for administering your case. This fee is a percentage of the money the Trustee pays to your creditors. By law, this fee can be no more than 10%. For example: if you pay $100 to the Trustee, the Trustee may keep up to $10 as an administration fee, leaving $90 available for your creditors. This is not a separate payment you have to make; it is already included in the money you pay to the Trustee.
What is the Meeting of Creditors?
Approximately six weeks after your Chapter 13 Plan and schedules are filed with the court, you will be required to attend the Meeting of Creditors . If the case is a joint filing by a wife and a husband, both debtors must attend. Your attorney will appear with you. The Meeting of Creditors gives your creditors and the Trustee an opportunity to talk to you about your finances and your Plan for repaying creditors. The Trustee will also ask about assets you own, and if you own a business, about the operation of your business.
You will receive from the Bankruptcy Court a notice in the mail detailing the time and location of your Meeting of Creditors. This examination is recorded and conducted under oath and penalty of perjury. You are required to answer each question accurately, truthfully and to the best of your ability. Your failure to appear at this meeting may result in the dismissal of your case. If circumstances will prevent you from attending this meeting, contact your attorney immediately.
What should I bring to this meeting?
You are required to bring the following items of identification to the Meeting of Creditors:
- A valid, unexpired photo ID (drivers license, state ID, employee ID, etc.). If you are using employment identification, that employer must still employ you; and
- Proof of your social security number (if it is not on your drivers license or state ID).
What documents do I need to provide to my attorney prior to filing bankruptcy?
Your attorney will need to review the following documents, among others:
- Pay Advices for the past six (6) months up to the date of filing your Chapter 13 case. (If your spouse is not filing bankruptcy, recent pay stubs of the non-filing spouse are also required.) If you are self-employed you will need to complete a profit and loss statement and provide evidence of your business income. Your attorney will also need proof of rental income, pension income, governmental benefits such as social security or unemployment compensation, worker’s compensation, or other forms of income;
- Your federal tax returns for the past four (4) calendar years. (If your spouse is not filing bankruptcy and you filed separate returns, the recent federal tax return of the non-filing spouse is also required.);
- Copies of deed(s) to any real estate you own together with a copy of recorded declaration of homestead;
- Copies of most recent IRA, 401(k), pension, and other retirement account statement(s) and Summary Plan Descriptions;
- Copies of all bills (or a list of creditors complete with name, address, zip code and balances due);
- Copies of most recent mortgage and auto loan statement(s);
- If you own a motor vehicle, a copy of the title to the vehicle. If you are leasing a vehicle, a copy of the vehicle lease agreement;
- Evidence that all real estate and vehicles are currently insured; and
- An affidavit of Support if you are receiving regular financial assistance from a friend or family member, other than your spouse.
In addition, the Trustee may require additional items be provided such as savings and checking account statements, verification of certain expenses, or business information. Failure to timely provide these items may prevent the Trustee from conducting a proper analysis of your proposed bankruptcy Plan and financial situation, and may result in the Trustee asking the Bankruptcy Court to dismiss your Chapter 13 case.
What about my mortgage payments?
In most cases, if you have a mortgage you will be responsible for making the regular on-going monthly mortgage payments directly to the mortgage company during your bankruptcy case. Only the payments you missed before you filed bankruptcy will be included in your Chapter 13 Plan and paid over the term of the Plan. Your mortgage payment due date will almost certainly be the same as it was before you filed bankruptcy. Plan on making each mortgage payment that comes due after you filed bankruptcy. If the mortgage lender has stopped accepting your payments, you or your attorney may have to call your mortgage lender to arrange for the lender to start accepting payments. You cannot sit back and wait for your lender to contact you about starting your payments. Keep track of all of your cancelled checks, money order receipts, etc. so that, if necessary, you can prove that you have properly tendered your mortgage payments. You may also stop receiving statements from the mortgage company. It is your responsibility to make these payments, whether or not you receive a statement.
What about my car payments?
In many cases, if you have a car loan you will be responsible for making regular monthly payments directly to the secured creditor (as with the mortgage payments). In other cases you may pay your car payments to the Trustee through your Chapter 13 plan. This is a decision that you and your attorney will discuss prior to the filing of your plan.
If you lease a vehicle and your Plan provides for your retaining the lease, you will be responsible for making regular monthly lease payments directly to the creditor.
Can I borrow money while in Chapter 13?
The Bankruptcy Code, your bankruptcy Plan and the court order approving your Chapter 13 Plan combine to prohibit you from borrowing money (or transferring an interest in real estate) without the permission of the Bankruptcy Court. To obtain permission from the court, your attorney must file the necessary documents with the court and request a hearing before the judge.
Actions that require the permission or approval of the Court include:
- Selling your house;
- Refinancing your mortgage, even if you get no money from the transaction;
- Borrowing money using your house as collateral;
- Financing home improvements;
- Financing the purchase or lease of a car;
- Borrowing money from your employer or from a credit union;
- Borrowing money against a 401(k) plan;
- Borrowing money from family or friends;
- Co-signing a loan for anyone;
- Taking out a student loan;
- Leasing, renting, or purchasing on time or on payments any furniture, jewelry, audio/video equipment, or appliances.
What if I have a student loan?
Student loans are generally unsecured debts, and they are not treated any differently from other unsecured creditors during the term of your Plan. However, Congress has passed laws that affect the balance of the student loan debt that is not paid during your Plan. Unlike other unsecured debt that is unpaid in a Plan with less than 100% repayment, the remainder of the student loan debt is usually not forgiven when the discharge is granted upon completion of your Plan. This means that you will be responsible for any part of your student loan that is not paid through the Chapter 13 Plan. For example, if your Plan calls for a payment of 75% of the amount owed to your unsecured creditors, your student loan will also be paid 75% through the Chapter 13 Plan. When your Chapter 13 Plan is over, you will still be responsible for the 25% of your student loan that was not paid through your Chapter 13 Plan, plus accrued interest.
What if I owe alimony or child support?
Domestic support obligations such as alimony, maintenance and child support are generally unsecured debts. The laws regarding these obligations require that the arrearages you owe be included in your bankruptcy Plan, and that you continue to make your ongoing monthly support payments. Before the Trustee will recommend approval of your Plan you must be current on all domestic support obligations that have come due after you filed your bankruptcy case. The Trustee requires you to file an Affidavit whereby you declare under penalty of perjury that you have paid all domestic support obligations required under the bankruptcy law.
In addition, as a precondition to receiving a bankruptcy discharge you must certify to the court at the time you complete your case that you have paid in full all domestic support obligations that were due since the time you filed your case.
May I keep making contributions to my retirement plan? May I keep making payments on my retirement loan?
In general, your retirement contributions such as IRA or 401(k) contributions will likely be allowed to continue. Similarly, repayments on retirement plan loans will also likely be allowed to continue. There are exceptions to this rule; your attorney can advise you if your circumstances are such that you will not be allowed to continue retirement contributions or loan repayments. Not repaying a retirement plan loan may have tax implications for you. Before you decide to file a Chapter 13 case you should talk to your attorney about the tax implications of not repaying a loan from your retirement account.
What about my income taxes?
You will have to file with the taxing authorities all delinquent tax returns before the Court will approve your Chapter 13 Plan. If you have not filed a tax return for several years, or if you have a tax return for a particular year that has not been filed, you should inform your lawyer. The IRS is authorized to estimate how much you owe if you have not filed a tax return for a particular year. In almost all cases, the IRS estimate is considerably higher than the amount you would owe if you had filed the return, so you may save money over the long run by filing your delinquent tax returns. In addition, you may stop certain penalties from accruing when you file delinquent tax returns.
Even if all your returns have been filed, you should be prepared to turn over your tax return for the most recent tax year to your lawyer so that the return can be delivered to the Trustee. During the term of your Chapter 13 case, you are responsible for continuing to file your tax returns and to pay taxes in a timely manner. If you fail to file returns and/or pay your taxes, the IRS and other governmental agencies may file claims in your Chapter 13 case, which would disrupt the payments to your other creditors, make your Plan run longer than you planned, and may prompt the Trustee or one of your creditors to file a motion to dismiss your case.
Before the Trustee will recommend approval of your Plan you must have filed all applicable Federal, state and local tax returns for all taxable periods in the four years prior to your filing your bankruptcy case. The Trustee requires you to file an Affidavit with the court, whereby you declare under penalty of perjury that you have filed all applicable tax returns required under the bankruptcy law.
How do I fulfill the requirement to attend a personal financial management course?
All Chapter 13 debtors must complete a personal financial management course . This course is in addition to the required credit counseling briefing you were required to complete prior to filing your bankruptcy. Your attorney will provide you with the information you will need to attend and complete this course requirement. If you do not complete the personal financial management course you will not receive a discharge from the Bankruptcy Court even though you may have made all required Plan payments to the Trustee.
How can I keep track of my Chapter 13 case?
The Trustee will send you a semi-annual statement of the progress on your Chapter 13 case. You may also track the progress of your case online. Ask your attorney for details and registration information. You should review activity in your case carefully. The statement will detail the creditors who have filed claims in your case (and the amount and status of each claim), the amount of money you have paid to the Trustee, the amount of money the Trustee has paid to each creditor, and the balance remaining to be paid on each claim. Except with regard to certain secured and priority claims and unless you file an objection to a claim, the Trustee pays claims in the amount filed by the creditor, even if that amount differs from the amount you believe you owe that creditor or the amount that you specified in your Chapter 13 Plan for that creditor to be paid. If you notice a claim that you believe does not belong in your case or a claim in an amount significantly in excess of what you believe you owe that creditor, contact your attorney immediately. If a claim is filed in an amount in excess of the amount you believe you owe that creditor, completing your Plan in a five-year period may prove to be impossible, and your case may be dismissed without your receiving a discharge because you could not complete the Plan in a timely manner.
May I pay off my case early?
It depends on a number of factors. There are a wide variety of variables that the Trustee must consider before accepting money intended to pay off a Chapter 13 case early. You should consult with your attorney if you are considering paying off your Chapter 13 case. The Trustee will not automatically accept funds intended to pay off your case early.
What happens when my case is over?
When you make your last payment to the Trustee, the Trustee will start the process of closing your case. Upon receipt of your last payment, the Trustee will make sure all claims have been paid and will ask the Bankruptcy Court to release your employer from the order that required the withholding of funds from your pay. Once the Trustee is satisfied that your Plan has been completed and that relevant provisions of the Bankruptcy Code have been complied with, your case will be closed and the final report will be issued. Once the Trustee informs the court that your case has been completed, it is the Bankruptcy Court, not the Trustee, who will determine if a discharge may be issued. It may take up to 120 days from the time your final payment is received by the Trustee until the court determines if a discharge may be issued. If you have paid money to the Trustee in excess of the amount needed to complete your Plan, the excess money will be refunded to you after your case is closed.
