Frequently Asked Questions Regarding your Chapter 13 Bankruptcy Case What is going to happen now that I filed a Chapter 13 Bankruptcy? Since you have just filed a Chapter 13 Bankruptcy, you probably have a lot of questions! The following series of "Questions and Answers" is provided to you only for purposes of introduction and to give you some idea of what to expect. “Bankruptcy” refers to the set of laws and rules that help a debtor facing more debt than he or she can afford to pay. In bankruptcy, the person that owes money is referred to as the “debtor.” The Bankruptcy Code will determine what actually happens in your case. The Bankruptcy Code is Title 11 of the United States Code. The current Bankruptcy Law is commonly referred to as the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.” This new Act became effective for all cases filed on and after October 17, 2005. This Act includes the federal law that provides help for persons or businesses experiencing serious financial difficulties. It is divided into several chapters each of which offers debtors a different set of options for dealing with creditors. Chapters 7 and 13 are the chapters that are available for individual debtors and small unincorporated businesses. You need to discuss your individual concerns, legal rights, and specific questions about your particular situation and how the Bankruptcy Code will affect your case with your attorney. What is a Chapter 13 Bankruptcy and how does it work? Chapter 13 is one form of bankruptcy in which you obtain relief from your creditors and submit a plan to re-pay your debts over a period of generally not less than 36 months and not more than 60 months. Assuming you have not had a prior dismissed bankruptcy case within the last year, the Court prohibits your creditors from trying to collect any money or recover property from you during the time you are in your Chapter 13 plan. If you have had a prior bankruptcy case dismissed within the last year, the bankruptcy protection, known as the “automatic stay,” may only be effective for a period of 30 days or there may be no automatic stay at all if you’ve have more than one case dismissed in the last year. You are now required to make your first plan payment to the Trustee at the time that you file your Chapter 13 bankruptcy case. You must make regular monthly payments by Official Bank Check, Cashier's Check, or Postal Money Order to the Chapter 13 Trustee each month. The next payment is due by the fourth or twenty-first of the month (you choose) following the filing of your case. It’s deemed to be past-due if you don’t have sufficient funds in your bank account. As a general rule we have you sign an ACH form that allows these funds to be automatically withdrawn by the Trustee every month. The money collected by the Chapter 13 Trustee is disbursed to your creditors according to your Chapter 13 plan with some claims to secured creditors (such as your house and car) paid immediately and all others paid according to your plan after it is confirmed by the Court. If your house or car payment is behind, your plan will allow it to be caught up over time at 0% interest. Where is a Chapter 13 case filed? Your Chapter 13 petition is filed with the Clerk of the Bankruptcy Court in the (federal) District where you have lived, had your principal place of business, or had your principal assets located for the greater part of the last 180 days (91 of the last 180 days). The Bankruptcy Court is a part of the system of federal courts and is a special court that was created by Congress just to hear cases and make decisions about disputes between debtors and creditors involved in a bankruptcy case. Your Chapter 13 Bankruptcy case has been (or will be) filed in the United States Bankruptcy Court for the Eastern District of Michigan. All papers may only be filed with the Clerk of the Bankruptcy Court office, addressed as follows: Cases filed in the Eastern District of MICHIGAN, Bay City Division: Clerk, U.S. Bankruptcy Court, P.O. Box 911 (48707) 111 1st Street Bay City, MI 48708 Telephone: 1-517-894-8840 Cases filed in the Eastern District of MICHIGAN, Flint Division Clerk, U.S. Bankruptcy Court, 226 W. 2nd Street Flint, MI 48502 Telephone: 1-810-235-4126 We will be responsible for filing all of the required documents and papers in your case. The Bankruptcy Court currently operates an Electronic Case Filing system. Under this system, all Court documents are filed electronically with the Court through computer programs and systems operated by your attorney and by the Court system. All of the documents filed in your case by any party are maintained in digital images on secure computer records of your attorney. Who are the bankruptcy judges? Judge Daniel Opperman for both Flint and Bay City Bankruptcy courts. He is an intelligent and excellent Judge and very fair. What fees are charged in Chapter 13? The Clerk of the Bankruptcy Court charges a $274.00 for all cases filed on and after March 15, 2006. It does change periodically and never downwards. The standard Chapter 13 legal fee for a non-business case is $3,500.00 for all basic or "base fee" services. These fees are established by federal law and local court rules. Almost all additional or "non-base" fees are also paid under your plan. The Chapter 13 Trustees in Detroit receive an administrative fee of up to ten percent (10%) of the amount paid under the plan. The Chapter 13 trustee, Carl Bekofske in Flint only charges 3%. He is also a very good trustee and very fair. How does the Trustee receive his fees? Fees for the Trustee are taken only when a disbursement is made to your creditors, including your attorney. The Trustee takes a small percentage of all money disbursed. The Trustee continues to take fees until all of your creditors have been paid according to your confirmed plan. Your annual financial reports issued by the Trustee show you how much the Trustee has received to date. Why is your Chapter 13 case number important? At the time your Chapter 13 petition was filed, the Bankruptcy Clerk assigned you a seven digit case number. The first two digits represent the year in which your case was filed. Your case number is very important. You will need it whenever you call the Trustee's office, when you make each payment to the Trustee your case number should be clearly written or when you obtain information from the Clerk's office. Your attorney has also assigned a five digit file number to your case for his own records. You should use this number whenever you contact your attorney about your case. Your address & employer The Trustee and your attorney need to know your exact mailing address for as long as you are under Chapter 13. The Trustee has the address which you put on your petition, and the Trustee will send all notices and annual reports to that address until you or your attorney tell him to send them somewhere else. If you ever move or change your mailing address, you must INFORM your ATTORNEY, the COURT, and the TRUSTEE in WRITING of your new address. The Trustee also needs to know your current employer's name and address. "My friend went through bankruptcy and he says…" You have probably already received or will receive advice on what to do from well-meaning friends and relatives who have themselves experienced financial problems. Just like no two people are alike, no two "Chapter 13 Bankruptcies" are alike. Take the advice of your well-meaning friends and acquaintances with the proverbial "grain of salt." If you have a specific question about anything related to your bankruptcy, make it your rule to ASK YOUR ATTORNEY, and he will try to provide you with an answer that applies to your special situation. Although we are always willing to speak with you on the phone, email is usually by far the quickest way to get answers to your questions. Send to email@example.com and we will get you an answer, most times, within twenty four hours. Of course, we’re human, and if you don’t get a reply, call back and we will handle your concern or question over the phone. What should I expect my attorney to do in a Chapter 13 Bankruptcy? Exactly what you may expect of our office will be governed by the written fee agreement the two of us have signed and that which has been filed with your case. The attorneys are only able to return calls between the hours of 4:00 p.m. to 6:00 p.m. on Monday through Friday. If the Attorney is available when the call is actually received in the Law Office, then the call will be taken at that time. However, if you have to leave a message for the Attorney then you must provide a number that you can be reached at during the designated times of 4:00 p.m. to 6:00 p.m. The Attorney or his Legal Assistant will make every effort to return all such telephone calls within 48 hours, excluding weekends and holidays. Under the rules of the Bankruptcy Court, your attorney must continue to appear and represent you until the Court permits your attorney to withdraw from your case. Any attorney may only withdraw from a case for "good cause" after proper notice to you. This means that the attorney must file a motion with the Court, notice it for a hearing, and provide you with an opportunity to be heard. Your attorney's function is to aid and assist you in successfully completing your Chapter 13 plan. Your attorney is there to answer any questions or concerns regarding your plan and the legal consequences of your case. Remember, your attorney is your legal advisor, not the Trustee. The Trustee and his staff are not allowed to give you legal advice regarding your case. What may I expect from the Chapter 13 Trustee? The Chapter 13 Trustee offices are open five (5) days a week, Monday through Friday. The Trustees follow the Federal holiday schedule. The Trustees' phone numbers are as follows: FLINT Mr. Carl L. Bekofske Standing Chapter 13 Trustee At Flint 400 N Saginaw St. Flint MI 48502 1 (810) 238-4675 www.flint13.com BAY CITY Tom McDonald US Bankruptcy Trustee 3144 Davenport Ave Saginaw, MI 48602 Phone: (989) 792-6766 Fax: (989) 791-6565 E-mail: firstname.lastname@example.org The Trustee's main function is to administer the funds received from you. If you have a question about your plan's receipts and disbursements, you may wish to call the Trustee's office. Trained phone service representatives are available during office hours to answer your questions. The Trustee is not able to talk with you personally about your case. His staff is familiar with the policies and guidelines of Chapter 13 and is well qualified to discuss with you any problems you may have implementing your plan. Remember, however, that the Trustee and his staff cannot and will not give you legal advice. The Trustee can require that you provide information and documents, either before, after, or at the first meeting of creditors over which he presides. You should always cooperate with the Trustee because failure to cooperate with the Trustee could be grounds for dismissal or for denial of your case discharge. What does the Chapter 13 Trustee expect of me? The Trustee expects you to be cooperative and truthful. He also expects you to ask questions when you do not understand any aspects about the administration of your case. Please notify him promptly whenever you change your address, telephone number, employer or employment status. Do not incur new debts, sell any property or enter into any leases without the court first approving it. The Trustee requires that you submit the tax returns that were filed for the year preceding the filing of your bankruptcy case or the last required return within the four year period preceding the filing of your bankruptcy case. You should provide these copies to your attorney so that he can forward them to the Trustee. Your attorney may need to obtain a tax transcript from the IRS in the event that you are unable to provide the required returns. The charge for each transcript of each tax year for each tax payer is $30.00 and this fee must be paid in advance. The Trustee may also require that you submit an amended budget each year to reflect the current status of your monthly income and expenses as well as income tax returns that come due during the course of your Chapter 13 bankruptcy case. You may be responsible to turn over your tax refund to the Trustee, so please do not spend it until you have spoken with our office first! Should this information be required, your attorney’s office will contact you. Finally, the Trustee expects you to handle your payments in a prompt, regular and business-like manner. When will I have to appear in court in a Chapter 13 case? In the United States Bankruptcy Court for the Eastern District of Michigan, you will have to appear for at least one court hearing generally known as the First Meeting of Creditors. The fact that this first appearance is called the “First Meeting” does not mean that there will automatically be a second, third for fourth meeting. This is just an expression used to describe your first court appearance. This meeting is conducted by the Chapter 13 Trustee. The Bankruptcy Judge will not be attending this meeting. This meeting will be held within 30 to 60 days after your case is filed. You will be notified of the time, date and place of this hearing by your attorney and by the Trustee. This is a mandatory court appearance on your part. Your failure to appear at this meeting will result in the automatic dismissal of your Chapter 13 case. The meeting is also called the “meeting of creditors” because creditors may attend and question a debtor about the location and disposition of assets and any other matter relevant to the administration of the case. However, creditors are not required to attend these hearings and most often do not appear; however, in general, they do not waive their rights by failing to appear. Confirmation hearings (i.e., final approval of your plan) are handled by your attorney and the Chapter 13 Trustee. You may be required to appear at additional hearings if circumstances regarding your case change and mandate a hearing but you will receive advance notice of any such requirement by the Court as well as your attorney’s office. May I change to Chapter 7 if my Chapter 13 case is still open? Yes. A Chapter 13 case may be converted to a Chapter 7 case at any time. You should contact your attorney if you are considering converting your case. Additional legal and court fees must be paid before a case can be converted to Chapter 7. What effect does filing under Chapter 13 have on lawsuits and attachments previously filed against me? Under Federal Bankruptcy Law, the filing of a Chapter 13 case automatically stops or stays all lawsuits, attachments, foreclosures, garnishments, repossessions, and other actions by creditors against either you or your property if this is the first Chapter 13 bankruptcy case that you have filed or if any previous case was filed and dismissed more than one year ago. If this is not your first bankruptcy case, then your attorney will have already discussed the available duration of the automatic stay, if any. A few days after your case is filed, a notice is mailed by your attorney and by the Trustee to all of your creditors advising them of this automatic stay. The creditors may be notified sooner by either you or your attorney if necessary. Since you are now protected from your creditors under the Federal Bankruptcy Laws of the United States of America, please tell any of your creditors who may contact you that you have filed for Chapter 13 relief and that your attorney is Rex C. Anderson of Davison, MI. You should also advise them to contact Mr. Anderson at (810) 653 3300. This is all you need to say to any creditor. If you receive any verbal or written demands from creditors more than two weeks from the date your case was filed, please contact me. If the contact is by telephone, then you need to obtain the telephone number of the person calling you, the name of the creditor or the collection agent, the mailing address for such party, the name of the person who called you, and how much money they want you to send. The best way to get this information is to "act stupid" and "be nice." You can also gather evidence of these “stay violations” by recording any messages, telephone conversation between any creditor, collection agent, collection attorney and you. Accordingly, if you have a tape recorder, use it. If you have any answering machine with a time and date function, use it and save every message. If the contact is by mail, then you need to save the envelope for proof of the postmark date. You should notify your attorney of any such contacts. Please note that creditors who contact you after being notified of your bankruptcy case may be subject to various monetary and other sanctions for contempt of Court and for violations of the “automatic” Bankruptcy Stay. In many cases, the Bankruptcy Court will order such creditors to pay money damages to you (including legal fees) for such violations. We always take these cases on a contingency fee arrangement as set forth in the fee disclosure agreement. In short, unless we recover money damages from these creditors you do not owe us any additional legal fees for pursuing these type claims. We can assure you that the Bankruptcy Court takes these matters seriously and that they are vigorously pursued by our office. Will my creditors be able to take my wages or property while the Chapter 13 case is in effect? Unless you have had one or more bankruptcy cases dismissed within the last year, the automatic stay described in the previous sections remains in effect during the entire Chapter 13 case and your creditors will not be permitted to take or otherwise proceed against any of your property or assets, including your earnings. However, if secured creditors to whom you are in default are not being paid under the plan or if you are not making your direct home mortgage payments, these creditors may go to the Bankruptcy Court and seek permission to repossess or foreclose upon the property which is subject to their valid liens. Creditors secured by vehicle loans may also have your vehicle stored by Order of the Court if you fail to maintain physical damage insurance on the vehicle securing the loan. There are some exceptions to this general rule; the most common being child support, alimony, income tax refunds and certain property tax situations. For example, the IRS may apply your post-filing tax refund against any taxes included in your plan. The IRS must notify the Trustee of this action, but it is otherwise lawful. Other examples are court-ordered child support or alimony obligations which are classified as “domestic support orders.” The Bankruptcy Code has strict guidelines to ensure that if you owe ongoing support you make provision for payment of any arrearage and maintain the ongoing obligations during your Chapter 13 case. In addition, if you have a 401(K) or a retirement loan your Plan Administrator may continue to deduct the agreed payments from your pay check and this action is not barred by the Bankruptcy Stay. Specific questions regarding your situation and whether these exceptions apply to your case should be discussed with your attorney. May I repay some of my creditors and not others under Chapter 13? You cannot selectively "pick and choose" some particular creditors and decide to pay them "on the side." All of your debts must be dealt with through the Bankruptcy Court and your repayment plan. Any payments which you make to a creditor must be paid under the authority of the Court, by the terms of the law, and not by any personal desires. If you want to pay creditors, you must do so through your Chapter 13 plan. You should review your paperwork carefully to ensure that all of your creditors were listed and should you determine after your case is filed that you have inadvertently failed to list a creditor, you should provide a copy of a billing statement to your attorney so that the debt can be added to your schedules and plan. There will be a $26.00 fee assessed by the Bankruptcy Court plus any applicable non-base legal fees and expenses to my office for the filing of any necessary motion. Are student loan debts dischargeable? With very little exception, most student loans are not discharged in bankruptcy. In order to seek such a discharge, a debtor must prove substantial and undue financial and physical hardships that would make the repayment of any amount of these loans virtually impossible. You should refer more specific questions to your attorney. How are debts that have been co-signed or guaranteed by another person handled under Chapter 13? If a consumer debt which has been co-signed or guaranteed by another person is being paid off in full under the Chapter 13 plan, then the automatic stay that was entered when the case was filed will prevent the creditor from collecting the debt from the other person who has not filed. However, the creditor may ask the Court's permission to collect from the other person the portion of the debt that is not being paid off under the plan. The creditor may also pursue the co-signer for any balance owed once a discharge has been entered in your case. It is also possible that the non-filing co-signer of any such debt could have adverse information about your bankruptcy reported on his or her consumer credit report. You should therefore advise all such persons of your bankruptcy filing and they will all be listed on your bankruptcy papers and receive notice in any event. The Trustee will only pay in full those co-signed debts that are specifically provided for in your plan. Please call your attorney if you have any questions. What is required for court approval of a Chapter 13 plan? The Court will confirm a Chapter 13 plan if: (a) the plan complies with the requirements of Chapter 13 generally; (b) all required fees, charges, deposits and payments have been made; (c) the plan has been proposed in good faith; (d) each secured creditor is allowed to retain his lien on his collateral and is paid the full amount of the secured claim or the fair market value at the time of filing for his collateral under the plan; (e) each unsecured creditor will receive under the plan at least as much as the creditor would have received if you had filed a Chapter 7; and (f) it appears that the debtor will be able to make the required payments and to comply with the plan. What if the court does not approve my Chapter 13 plan? If the Court does not confirm the Chapter 13 plan you have proposed, it will usually state the reasons for such disapproval so that the plan may be appropriately modified, amended, converted to a Chapter 7 or dismissed. Many Chapter 13 plans are amended and modified at the “first meeting of creditors” if creditors have filed valid claims higher than you scheduled or if their collateral has been assigned a greater value by the Trustee. Once a case is dismissed, your creditors may again pursue the collection of your debts. We will not file a Chapter 13 case unless we are very confident the plan will be approved by the Court. When must the Chapter 13 payments begin and how often must they be made? You were required to submit the first payment due under your plan at the time of the filing of your case. Your next payment is due by the 4th or 21st of the month following the month that your bankruptcy case was filed and is deemed late if there is insufficient funds in your bank account to cover these withdraws. Your second plan payment, and all subsequent payments, should be sent only to the Trustee's payment address at least until ACH automatic withdraws commence. Be sure to keep the receipt for each payment. If your case is up for a motion or hearing in court, please give your attorney a copy of the payment receipt to prove the payment. Do not send your payments to the Clerk of the Bankruptcy Court or to your attorney. All payments must be in the form of bank money order, postal money order or cashier's check. Be sure to include your name, address, and your bankruptcy case number on the money order or check. The Chapter 13 Trustee's office cannot accept cash payments or personal checks. The payment addresses are as follows: Chapter 13 Trustee-Flint P.O. Box 2175 Memphis, TN 38101-2175 Payroll deduction orders You may find it easier to have your employer deduct your plan payments from your paycheck. This is strictly voluntary. We recommend the automatic bank withdraw in every Chapter 13 case because once the order is effective you do not have to worry anymore about making the payments. However, if you make your payments direct and fall behind in your plan payments, then the Judge may order your employer to deduct your plan payments from your paycheck. It is important that both you and your employer understand that such an order is not a garnishment. If your employer has any questions, he or she should contact your employer's legal counsel. Be sure to notify both my office and the Trustee if you change or terminate your employment. What if I am temporarily unable to make my Chapter 13 payments? It is very important to contact your attorney if you ever expect to miss a payment due to a layoff, medical disability, accident, etc. If you are temporarily out of work, injured, or otherwise unable to make the payments required under the Chapter 13 plan, the Court may, upon proper application, allow you to suspend payments for a period of time. If you anticipate your situation to be a temporary situation, upon receipt of documentation evidencing your basis for the need, your attorney can file a motion for a moratorium (Court allowance to miss) for your plan payments for a period of up to three months during any given 12 month period. We can only file such a motion for a reasonable cause and with documentation such as a doctor’s note, receipts for unanticipated expenses such as medical bills or other expenses, etc. You must understand, however, that the filing of such a motion will most likely require an increase in your monthly plan payments after the allowed suspension period since this does not decrease the amount that you still owe under your Chapter 13 plan. If it appears that your inability to make the required payments will continue for an extended period, you may be permitted to amend your plan, or the case may be dismissed or converted to Chapter 7. Remember – neither your attorney’s office nor the Trustee's office has the authority to let you miss a plan payment or allow you to pay less than your plan requires. Only the Court can make such a decision. Your lawyer can ask the judge to change the requirements of your plan if you feel that you cannot meet the obligations of your plan. If you fail to make the required plan payments or receive allowance to miss any payments, the Court will enter a dismissal order which will end your case. When the Court dismisses a case, the automatic stay ends and creditors may start to collect on debts again. A dismissal order does not free a debtor from any debt. What if I experience a change in circumstances after my case is filed? The Trustee and the Bankruptcy Court understand that unanticipated things happen after the filing of your case. Your attorney can help you resolve whatever issues arise but he must be aware of your circumstances. Should you receive an inheritance, have substantial gambling or lottery winnings or have an increase of 15% or more in your wages, you will need to contact your attorney with this information. Your attorney will review these circumstances to determine if any action or notification is required. Should you receive a settlement of any kind such as personal injury, fire loss, property damage, worker’s compensation or Social Security Disability you should provide the documentation for the settlement to your attorney. Such settlements require approval by the Bankruptcy Court although under most circumstances such settlements are protected by your State and/or Federal exemptions. If you have a vehicle accident you should also contact your Bankruptcy Attorney. Not only do we handle Personal injury claims, we will also need to determine the extent of your loss, if the vehicle is financed and paid under your plan and review any proposed insurance settlement. Depending upon the extent of your loss you may need to obtain alternate transportation and we may additionally need to petition the Court to substitute your replacement vehicle if a financed vehicle paid under your plan was deemed a total loss. You should provide any documentation or insurance settlement checks to your attorney so that they can be processed accordingly. If you determine after the filing of your case that you can no longer maintain the required Chapter 13 plan payments, you may wish to consider surrendering some secured collateral which is being paid through your plan such as a vehicle. Frequently the surrender of collateral will materially reduce your monthly plan payments. Should you wish to consider this option you will need to contact your attorney so that the amount of any possible reduction can be calculated. If you wish to proceed with the surrender you will need to prepare an amended budget (current income and expense calculations) with one of your attorney’s legal assistants. This can normally be done on the phone and is necessary to support any proposed reduction. The final budget will be sent to you for signing and, upon return to your attorney’s office, your attorney will prepare the necessary motion to modify your plan to provide for the vehicle surrender. You will need to contact your attorney’s office to make arrangements for your creditor to recover its collateral. The reduced monthly plan payment will not take effect until the order approving the reduction has been entered by the Bankruptcy Court. Any of the motions that may need to be filed in your bankruptcy case due to a change in circumstances will take from 30 to 45 days to obtain the Court’s approval assuming that no parties object to the terms of the motion. May I make a higher payment than is required under the plan? If you are ever in a position to increase your plan payments to the Trustee, you should contact your attorney for advice on prepaying your plan payments. You may send extra monthly payments to the Trustee, however, at any time. If you want to simply pay-off your plan early you may do so but call your attorney first. What if I later decide that I no longer want to make payments and to continue with the Chapter 13 plan? Federal bankruptcy law allows the debtor to either dismiss a Chapter 13 case or to convert it to Chapter 7 at any time, unless your case has previously been converted from another chapter of the Bankruptcy Code. No one can force you to remain under a Chapter 13 plan if you do not wish to remain. If you desire to stop your case, contact your attorney. However, if you simply stop making the Chapter 13 payments, any creditor in your case may ask the Court to dismiss your case. The Trustee will ask the Court to dismiss your case or place you on payroll deductions if: (1) you fail to make your first payment(s) at the time your case is filed; and/or (2) if you fail to make your required regular monthly plan payments. You should understand that a dismissal will reactivate all unpaid or disputed debts, all interest, finance charges, legal fees, all late charges not allowed by the Bankruptcy Court, and all debts of creditors who did not file their claims. This can include debts for which my office has obtained special treatment either by terms of your confirmed Chapter 13 plan or by prevailing in a motion or adversary proceeding. Consider also that you will be forced to deal with those creditors on their terms, not yours or the Court's. How do I find out how much is owed to creditors under my plan? The Trustee's office will send you a report every six months of what has been paid to all your creditors. Be sure to review this report carefully and contact your attorney immediately if you have any questions or concerns. The report will list the creditor's claim amount and the amount paid to date to each of your creditors. The balance due on your plan is noted at the top of the report. Also, it is possible that one or more of your creditors is receiving interest and therefore the balance will change from month to month. The balance due is, therefore, only an approximate figure. How are the claims of creditors handled under Chapter 13? Unsecured debts are debts you simply agree to pay someone for a sum of money or for services rendered at a particular time and for which you have not pledged any real or personal property as collateral. Unsecured creditors must file their claim with the Chapter 13 Trustee within 90 days after the first date set for the First Meeting of Creditors in order for their claims to be allowed. If an unsecured creditor fails to file their claim within this time period, the Trustee will bring a motion objecting to the late claim. If the claim is disallowed or not filed, then the creditor will not be paid by the Trustee and the debt will be discharged or canceled upon the completion of the plan. Unsecured creditors normally receive an approximate 10% payback under Chapter 13 plans except in instances in which a debtor has non-exempt equity in real estate or personal property or in which the debtor’s disposable income requires a higher payback. Non-exempt equity is when you have property for which there are no State (or Federal in some cases) exemptions (protections) available or the available exemptions have been exhausted. Government agencies have 180 days from the date of filing to file their claims. Some government claims may be classified as unsecured priority claims and may require payment in full. A priority debt is an unsecured debt which is entitled to priority in payment ahead of other unsecured debts in a bankruptcy case. Examples of priority debts are some taxes, wage claims of employees, alimony and child support. Portions of some government claims may be entitled to be classified as general unsecured claims and receive the same percentage as all other unsecured claims under your plan. If you have not done so, you must prepare and file all State and Federal income tax returns as soon as possible. We will need to have your last year’s federal tax return at least 10 days before the first court meeting in your case and could possibly need your last 4 years of tax returns. If you are unable to provide the required return(s), your attorney can obtain a tax transcript from the IRS for a fee of $30.00 per person. Furthermore, If you fail to file any returns, then your bankruptcy case may be subject to an automatic dismissal and/or the taxing agencies may file a “Substitution for Return” which may impact the ability of any tax debt to be discharged upon completion of your case or in the event that you subsequently determine that you want to convert this case to a Chapter 7 bankruptcy case. In the alternative, they may also file an estimated claim which normally greatly exceeds any actual liability owed and which we are unable to dispute without the proper filing of your returns. Administrative debts are also priority debts and are created when someone, such as the Trustee or your attorney, provide goods or services to administer your bankruptcy case. Secured debts are debts that are backed by property. Secured creditors have a right to take back possession of certain property to satisfy their debt. These debts normally are vehicle loans (secured by a lien on the title to the collateral) or a mortgage debt (secured by a mortgage or deed of trust on the real property.) A secured creditor can file a claim at any time while your case is open. A creditor must file a claim in order to be paid. The Trustee pays the amount claimed by the creditor, not the amount you state in your petition. The value of any collateral, however, may be subject to the terms of your confirmed Chapter 13 plan in instances such as a vehicle loan which is older than two and one-half years at the time of the filing of your bankruptcy case. Prior to confirmation of your plan, the Trustee will make payments from your first payments under your plan to creditors owed for vehicle loans. Leasing companies are notorious for adding all kinds of fees and costs, so beware. If you disagree with the creditor's claim amount, you should contact your attorney. The debtor may file a claim on behalf of a creditor if he or she wishes to do so and in certain instances your attorney’s office will file a claim on your behalf to protect your interests regarding a secured debt. A creditor may also file an amended claim increasing or decreasing the claim amount at any time. How are creditors paid? The monthly plan payments which you pay to the Trustee are used to pay expenses of administration, including payments to your attorney, and payments to your creditors. So that you will have some idea as to how the creditors are paid, you should understand that there are three (3) basic types of claims; priority (such as tax claims), secured (holding liens on property) and unsecured (consumer debt with no liens on property). Generally, your Trustee will pay secured creditors first, then administrative costs, then priority and finally unsecured. What happens to creditors who were not listed on my schedules? Creditors not listed by you when you filed can create some potential problems. There are two (2) kinds of unlisted creditors: those who were owed money at the time of your filing but were forgotten ("unlisted creditors”) and those creditors who have a bill that was incurred after you file ("post-petition creditor"). If you find an unlisted creditor, you should let your lawyer know the details immediately so that the debt can be properly addressed through your plan. Should you incur large post-petition debts (such as medical bills), you should contact your attorney to determine how best to deal with these debts. What if I don't agree with how much a creditor is receiving? The Trustee pays creditors the amount listed on their timely-filed and allowed proofs of claim. If you disagree with the amount a creditor claims you owe then contact your attorney. Your attorney and his staff will review the Trustee’s motion for allowance of claims; however, no one is more familiar with the debts than you. Can I incur new debt after I filed my Chapter 13 plan? You may find yourself in a situation where you need to incur additional debt after you have filed your Chapter 13 plan. The following are the guidelines on incurring additional credit provided by the Bankruptcy Code: (1) the debt must be for consumer debt and "for a property or services necessary for the debtor's performance under the plan"; (2) you must be able to prove you have the ability to pay the debt; and (3) the Trustee or the Court must approve or deny such additional credit. The Trustee can approve new credit up to $15,000.00 and the Court requires the filing of a motion and notice to your creditors for any new credit in excess of $15,000.00. If you wish to secure such credit, contact your attorney to process the necessary paperwork. Can I sell any property during my Chapter 13 plan? You are required to acquire Court approval should you wish to sell any real or personal property worth more than $500.00 during your bankruptcy case. You should contact your attorney’s office with all information regarding the collateral to be sold and the terms of the sale so that he can prepare the required motion for approval of the sale. If you wish to sell real property you should supply the Offer to Purchase contract with all terms of the sale for your attorney’s file should the document be required by the Court and/or your Chapter 13 Trustee. You need to be aware that the approval process for any sale is usually between 30 and 45 days so if you are listing real property for sale through a real estate agent or broker you will need to advise them of your bankruptcy case so that they can draft the purchase contracts accordingly. Will a Chapter 13 bankruptcy affect my credit rating? Your credit rating during and after completion of Chapter 13 will ultimately be based upon the personal opinion of any credit-grantor who looks over your credit record. Your credit record is a record of all your past credit performances. This record is made available to a creditor, and he or she makes up his or her own mind, by his or her own standards, as to whether or not he or she wants to grant credit to you. Your bankruptcy will remain on your credit report for up to a period of up to10 years, depending on the credit reporting agency's policy. If you successfully complete a Chapter 13 plan and receive a discharge, many credit reporting agencies will report that information for only seven years because such agencies may not report a bankruptcy case on a person’s credit report after ten years from the date of the filing of a bankruptcy case. When do I have to complete the financial management course? The enactment of the new bankruptcy laws (which aren’t so new now) became effective on October 17, 2005, required that you complete a financial management and educational course prior to making your last and final Chapter 13 plan payment to the Trustee. If you fail to take this course, then the discharge of your Chapter 13 bankruptcy case will be denied. Your attorney strongly recommends that you complete this course as soon as possible and obtain the required certificate so that his office can file it with the Bankruptcy Court. This will avoid the matter “slipping through the cracks” and holding up the discharge or even denying the discharge in your case. The ultimate goal of every Chapter 13 case is to complete all of the required plan payments and secure your Final Discharge Order. In the Flint court, the Trustee’s office generously provides the second credit counseling fee of charge on the morning of your meeting of creditors. What happens when all payments have been completed? Once enough money has been paid to the Trustee to complete all of your required payments, the Trustee will begin the process of closing your case. The closing process normally takes 6 to 8 weeks and is completed in the following order: (1) Court Audit. The Trustee’s office verifies that all claims filed in your case were paid correctly and all court orders were property administered. If any problem is discovered, you and your attorney are notified. (2) Stop Payment. The Trustee's office directs you or your employer to stop making plan payments. This will not be done until after the court audit is completed successfully. (3) Final Report. The Trustee's office prepares a final report for the judge. (4) Court Date. The Trustee schedules your case for final review by the judge, if necessary. You do not have to appear for this final hearing if any is held. (5) Case Discharge. The judge signs an order discharging you from your scheduled debts. A “discharge” is an order, issued by the Bankruptcy Court, which permanently prohibits creditors from taking action to collect dischargeable debts against a debtor and with very limited exceptions, against income and property that a debtor acquires after the bankruptcy filing. When a debt has been discharged the creditor can no longer enforce it. The discharge is the primary benefit most debtors received from filing a bankruptcy. Some exceptions to the discharge include, but are not necessarily limited to, student loan debts, alimony or child support obligations, certain mortgage debts, criminal restitution and debts for driving while intoxicated resulting in injury or death. (6) Notice of Discharge. The Trustee sends a notice to you, to your attorney and to your creditors. This tells you when your case was discharged by the judge. (7) Refund. After the judge discharges your case, you receive a refund from the Trustee if there is money remaining in your case. (8) Case Closing. This is the actual date that the Bankruptcy Court officially closes your case file with the court. Quite often this is the same date as the date the Discharge Order is entered in Chapter 13 bankruptcies. How do I inform the credit agencies of my Chapter 13 completion? You and your attorney will both receive copies of the discharge order. Approximately four to six weeks after the judge has discharged your case, your discharge papers will also be available at the court house. This legal document states that you have been discharged from your scheduled debts. The Trustee will not have copies of your discharge papers. If you subsequently lose or misplace your discharge order, you may obtain a certified copy from the court. However, the Bankruptcy Court does not take requests for copies over the phone. If you go in person, you must have your bankruptcy case number, picture identification and money ($.50 per page) for photocopies. Your case is not complete until we have prepared letters to credit reporting agencies on your behalf and met with you for signing. WE will send these letters certified mail to the big three credit reporting agencies along with copies of your discharge order and necessary portions of your petition and schedules. You may also do this on your own by making several copies of your discharge papers, and sending copies to the three major credit bureaus: Experian P.O. Box 2002 Allen, TX 75013 (800) 392-1122 TransUnion P.O. Box 2000 Chester, PA 19022 (312) 408-1050 for information Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374 (800) 685-1111 Fax (404) 612-3150 You are entitled to receive a free credit report each year from one or all three of the major credit reporting agencies. One manner of obtaining these credit reports is by accessing www.annualcreditreport.com and following the instructions to print the report. You should obtain a credit report approximately three to six months after the discharge process of your case has been completed to review the information to ensure that it accurately reflects the discharge of your case. Should you find any improper credit reporting, make sure to contact my office so that we can review your credit report for any discharge violations by your creditors. My office pursues these matters aggressively as well. Where do I obtain title to my property after completion of my Chapter 13? When a creditor has had his claim paid by Chapter 13, whether partially or in full, he should, and usually does, send the "paid-in full" papers to you. If any of your creditors hold liens on your motor vehicles, or a mortgage on your real property, then they are required to release the liens and encumbrances and send clear titles to you within 30 days of the issuance of your Discharge Order, if completely paid off during your plan. Contact the creditor holding title, not the Trustee's office, to obtain your titles. If you have any problems, please contact your attorney as such action could provide grounds for legal action against such creditors for actual damages, costs and the payment of your legal fees. It should also be noted creditors who refuse to deliver titles may violate State laws as well as the Federal bankruptcy laws. If you have any other questions which have not been completely answered above, then I encourage you to call me. I have put this Frequently Asked Questions (FAQ) document together as I found myself repeating these answers many times a day. As I am sure you can understand, I have to have time to work on your cases in addition to answering all of your questions. This (FAQ) document seemed to be the best solution. Additionally, it saves you legal fees in unnecessary phone consultations. Cordially, Rex Anderson The Law Offices of REX C. ANDERSON PC P.C., is a Federal Debt Relief Agency as designated under Title 11 of the United States Code. We provide legal services to consumers seeking to file for bankruptcy relief under the Bankruptcy Code.