Filing Chapter 13
Chapter 13 is a chapter of the Bankruptcy Code that is structured for wages earners or small businesses. When a person files an initial case, where one has not been filed before, all debt collection activities (wage attachments, mortgage foreclosures, lawsuits, telephone calls, letters, bank setoffs or any kind of collections activity at all are stayed (halted) by the filing of the case. When the case is filed, or very shortly thereafter, the attorney proposes a "plan" of repayment.
Consider filing Chapter 13 if:
- Your house is being foreclosed upon.
- You have received a notice from your mortgage company that they intend foreclosure at any time in the future.
- You need some time to catch your breath, so that you can regain control of your life from your creditors.
- You are in severe financial difficulty and have tried, but cannot work other arrangements with your creditors.
- You have property (real or personal) that you need to protect and are in danger of losing to a creditor.
- You have committed a wrongful act respecting the debts (misrepresentation, fraud, etc.) and you feel that a creditor would object to your discharge in a chapter 7.
- You have income to pay less than 100% of the debts you owe and would like to make (in most cases) interest-free payments to unsecured creditors.
- You have an honest desire to not "run away from" your creditors, but are not in a financial position to pay all the debt, or all the debt and all the interest on that debt.
- You should also consider filing if you have already been in a chapter 13 and the case was dismissed for almost any reason. Refiling is usually possible. You do not have to stay with the same attorney if you did not like him or her.
How can I pay for an attorney if I am "bankrupt?
There are a number of different manners of payment. One should consider that he will not be paying a significant portion of his indebtedness so that in itself, may free up funds for counsel fees. Sometimes, some of the fee may be paid through the chapter 13 plan without interest. You will then have up to five years to pay! This will increase your plan payments only marginally. Many people still would want to pay prior to filing because the total fee would be less.
How can I stop creditors harassing you or your family?
Filing a Chapter 13 acts as a stay (which means an Order of the court preventing this) of ALL creditor activity, including all collection action. This includes, suits, phone calls, letters, "friendly reminders" of indebtedness or visits from bill collectors. This includes legal papers, of course. Please note that it is the Bankruptcy Court that notifies your creditor. Therefore, just because you have filed bankruptcy, it does not mean that all your creditors will know immediately. It may take a few weeks for them to learn of the filing through the court. If a particular creditor is getting on your nerves, let me know and I will contact them. The harassment should then cease. If it does not, you may have the right to bring legal action against them.
What if I owe the electric company, will they shut off my power?
The Bankruptcy Code prohibits your local power, water, telephone, or any utility company from discriminating against you because you have filed a bankruptcy. It cannot shut off your power, water or phone service or refuse you any utility service just because you filed. You should be aware that your local utility company may request a deposit from you for continued service.
I wrote a bad check to a creditor. Can that be discharged in a chapter 13?
Issuing a bad check is a crime in most, and probably any state. A bad check may be defined differently in individual states. Most states will give you a chance to cure a bad check before prosecution. Pennsylvania allows you 10 days to repay the money and costs. The bankruptcy will not protect you from criminal prosecution and will not discharge criminal liability for restitution, costs or fines. In addition, you can be arrested, notwithstanding the bankruptcy. It is strongly recommended that you satisfy all bad checks before you file.
My car payments stopped coming, whats going on?
Bankruptcy does not give you a free car. It often stops your lien creditors from billing you monthly. This may not be a bad thing. For those who depend on a bill every month, have your attorney contact the vehicle loan company and request a bill. Some lenders require a reaffirmation (see question above) in order to bill. Believe me, it is not worth it! Many banks will gladly pay a creditor every month from your account for a small fee, or sometimes for free. It is worth it! I recommend services like Checkfree or any on-line bill payer. It is only important that the bill gets paid, it does not matter how. Unfortunately, you may just need to remember to pay the bill yourself.
I have a high car note but want to keep my car
Although there is no reason one cannot continue payments to the creditors after the case is file, if the payments are too high, e.g. over $500 a month for a car, or over $1,500 a month for a home (and these are just personal estimates, they are not "law"), a chapter 13 trustee, or even the court may begin to think that you are not giving unsecured creditors your "best effort." That is, you are beginning to spend way too much supporting an extravagant former life-style at the expense of your creditors. Personally, we represented a debtor with a mortgage payment of $4,000 a month. A local bank, PNC, which was unsecured, objected, stating that the debtors were busy supporting an extravagant life-style, while the debtors' creditors were being denied a reasonable return in the chapter 13 plan. Put another way, people who need to file chapter 13s may not live as they lived before, if that style of living got them to where they are now. While it is true that the vast majority of persons do not have this issue, it is something that some debtors need to seriously consider before filing.
Got more questions?
- What exactly is expected of me in a Chapter 13 case?
- What are the chances of my bankruptcy "not being accepted?
- I work "under the table." I just to earn enough to feed my family. Will the court tell the IRS about me?
- I have not filed my tax returns for the last (or possibly other) years. My creditors should not care, should they?
- Now that I completed my taxes, should I send them in to the IRS Service Center where I usually file my returns?
- What if I want to sell my home (or real estate), and I have already filed a Chapter 13?
- After I file, how can I determine the status of my case?
- I lost my job or cannot make my plan payments for another reason. What can I do?
- I screwed up and my case was dismissed. Should I bite on my cyanide capsule?
- I screwed up and didn't make my payments to my mortgage company after I filed. The mortgage company moved for relief from the stay. What can I do?
- I just got some extra money. Can I pay off my chapter 13 plan early?
- What happens when I complete my Chapter 13 obligations?
- What is the effect of a bankruptcy discharge?
- What if I forgot to list a creditor?
- Is there a limit to the number of times I can refile my case?
- The trustee dismissed my case; can I just refile it?
- How can I hire you as my attorney to file a Chapter 13?
- I think I need to file right away. How do I start?
- What do I need to bring to my first meeting with you, as my bankruptcy attorney?
We are here to help and will answer all the questions you may have. Contact Us toll-free at 1-800-SAVEDME.