Chapter 13 Can Help in So Many Ways

Individual debt adjustment” is similar in many ways to a Chapter 11 Plan of Reorganization, but there are many differences. Chapter 11 Reorganization is normally used by businesses, while only an individual may file for Chapter 13 relief. Chapter 13 is a much more streamlined process of “reorganizing,” or “adjustingdebts,” and as a result it is much less costly than a Chapter 11 Reorganization.

In Chapter 13, individuals voluntarily dedicate a portion of their income to a payment plan which lasts from three to five years. A Chapter 13 plan does not risk a sale of the debtor’s assets, although a debtor may voluntarily choose to sell assets, with prior Court approval, to help fund the plan.

If you are named as a defendant in a mortgage foreclosure lawsuit, you might be interested in knowing that you have options which may enable you to avoid losing your home.

A Chapter 13 plan can be used to cure a default on the debtor’s mortgage over three to five years. Lenders can be unreasonable and difficult to work with if you have fallen behind on payments. They often refuse to accept partial payments, and instead of allowing borrowers to gradually bring their payments current, they often demand immediate payment of the entire past due amount.

The good news is that the law has a remedy for this, Chapter 13, providing a means to take up to five full years to bring the payments current. Lenders must immediately stop foreclosure efforts, halting any steps toward selling your home.

Seelinger Law offers a FREE CONSULTATION. Please give us a call today, so that we can tell you more and answer all of your questions. At Seelinger Law, your free consultation includes an IN PERSON meeting with a licensed attorney, not just a telephone interview.

There are other reasons to consider Chapter 13 bankruptcy: to get up to five years to pay back taxes; to pay car loans at a reduced interest rate; to eliminate certain liens (such as judgments and junior mortgages); to pay (or discharge) unsecured creditors, such as credit cards, medical bills, personal loans, or deficiency balances on repossessed cars, to name a few. Chapter 13 payment plans are conditioned on several factors, including the debtor’s ability to pay (or lack thereof), and the value of the individual’s assets.

Unlike Chapter 7, where a bankruptcy trustee may be able to sell a valuable asset to pay creditors, a chapter 13 debtor may retain the asset by agreeing to pay an appropriate amount to unsecured creditors through the three to five year plan. Unsecured debts which are not fully paid in the Chapter 13 plan are discharged, just as they would have been in a Chapter 7 case (subject to exceptions, such as student loans).

If you are facing mortgage foreclosure, tax liens or tax collection, student loan garnishments, imminent vehicle repossession, or if you have steady income beyond what is needed to meet your reasonable living expenses, or have equity in your home or other assets which exceeds the amounts you are allowed to protect as “exempt,” Chapter 13 can help you.

How do my creditors get paid?

How does the trustee decide who to pay each month, since my mortgage, my taxes, my liens, and even my attorney are supposed to be paid from my Chapter 13 plan payments?

The trustee follows a distribution sequence which the court decided upon, and your Chapter 13 plan incorporates that court-approved schedule. Picture a water fountain with multiple levels, where the water coming out from the top fills the uppermost pool, then overflows into the pool below it, and then into the pool below that one, until the water reaches the bottom most pool. Your creditors and your attorney get paid in a similar hierarchy, with the funds you paid into the plan flowing to certain creditors until they are current (or fully paid), then to the next category of creditors until they are paid, and so on.

First, if you did not pay the filing fee for your Chapter 13 case when it was filed, the trustee will pay that fee before paying anyone else. After that, the trustee will pay the current monthly payments due on your mortgage, your car, and your attorney fees. The money remaining after those payments have been made is used to pay mortgage arrearages owed from before you filed, along with other liens. After the prepetition mortgage arrears and other liens have been paid, the funds remaining each month after the trustee pays the current mortgage and car payments is used to pay unsecured priority claims, such as back taxes. Finally, after the prepetition mortgage arrears, liens, and priority claims have been fully paid, the money remaining from your plan payments (and after the trustee has continued to pay your current mortgage and car payments) is used to pay unsecured creditors, such as credit cards or medical bills, to the extent there are funds available to do so.

The trustee continues disbursing money in that sequence until you have paid the full amount required by your Chapter 13 plan, thus ending your obligation to make plan payments, resulting in the “fountain” running out of “water.”

Are you afraid of a Chapter 13? Did you know…

Many people live better in their Chapter 13

Chapter 13 is not a punishment and it is certainly not a death sentence. My clients often tell me that they are living much better in their Chapter 13 than they were before they entered bankruptcy. Take Amanda for example: Amanda was paying $800 a month in credit card debt for almost two years before she had finally had enough of living paycheck to paycheck. She had been cutting corners trying to make ends meet, skimping on groceries, wearing worn out clothing, neglecting routine car repairs, and missing out completely on recreation. We put together a budget for her Chapter 13 plan, beginning with allowances for all of her basic needs, utility bills, food, clothing, transportation, medical expenses, and so on. Then, we looked at how much was left to be available for payment of creditors. Instead of the creditors’ demands taking priority over her budget, her reasonable living expenses came first. The creditors received payments based on what she could actually afford, and at the end of her plan term the remaining credit card balances were discharged. Her FRESH START began when she filed the Chapter 13 plan, and it became permanent when the plan was completed.

Chapter 13 is a voluntary procedure. Seelinger Law offers a free consultation to go over all of your options. If Chapter 13 offers the biggest benefit to you then we will come to that conclusion together. WE choose Chapter 13 because it is the best way for you to take care of your financial problems.

Did you know that both the Court and the Trustee want your Chapter 13 plan to work for you?

Many of my clients have gone through a divorce and are used to court processes as adversarial, involving hostile and unpleasant court hearings. The bankruptcy system is fundamentally different. The court and the trustee want your Chapter 13 plan to work, so that at the end of the plan term, you will enjoy the benefits of a successfully completed plan, a FRESH START.

The legislature created the Bankruptcy Code with the understanding that unforeseen things happen, i.e. BAD THINGS HAPPEN TO GOOD PEOPLE: people get sick, people get divorced, people lose jobs, and that is why the Bankruptcy Code was created: to HELP and PROTECT good, honest people from creditors when they need it. The Court understands this goal and so does the Chapter 13 Trustee.

Here are just some examples of how Chapter 13 can truly help you

  • If you were behind on your mortgage, you will bring the payments current over time, no longer facing foreclosure. See the section titled “What do I do if I am Facing Foreclosure?” below.
  • If you owed back taxes, those will have be paid off over time, preventing tax sales or IRS collection. See the section titled “Catching up on Back Taxes” below.
  • If you were drowning in debt each month, living paycheck to paycheck, with no emergency fund in case something happened to the car or house (i.e. robbing Peter to pay Paul), then you will have some padding to pay for those new snow tires or new water heater without having to sacrifice necessities. See the section titled ”Am I paying too much on credit cards?”
  • If you were about to have your car repossessed, you will stop repossession and get caught up on your payments, probably paying off your car loan in full in the Chapter 13 plan. See the section titled “What do I do if they want to repossess my car?”
  • If student loan companies are garnishing so much from your paycheck that you cannot afford to live a normal life, you will stop the garnishment and be allowed to pay only the amount that you can afford to pay back each month. See the section titledHow do I stop wage garnishment for my student loans?”
  • If you filed a Chapter 7 bankruptcy less than 8 years ago, but new problems arose since then preventing you from paying what you owe each month, you can file Chapter 13 and stop lawsuits, foreclosures, tax sales, IRS collection, car repossession, student loan garnishments and more, because you don’t have to wait 8 years before filing a Chapter 13. You are not permitted to obtain a second Chapter 7 discharge until 8 full years have elapsed from the time you filed a previous Chapter 7 case. See the section titledCan I file a second bankruptcy case if I find myself back in debt after I already had a bankruptcy?”

What do I do if I am Facing Foreclosure?

If you are named as a defendant in a mortgage foreclosure lawsuit, Chapter 13 bankruptcy is an option which may allow you to avoid losing your home (or a business or rental property). A Chapter 13 plan can be used to cure a default on the debtor’s mortgage over a period from three to five years. In Chapter 13, you don’t need your bank’s consent to accept payments. Instead, the bank is required to accept payments under the Chapter 13 plan, provided that those payments will be enough to bring the loan current by the end of the plan term. Most banks would prefer to receive payments than to foreclose on property, but a combination of government regulations and shareholders’ demands for profits causes banks to foreclose anyway. When borrowers file for Chapter 13 protection to stop foreclosure, banks are more than happy to accept payments from the trustee, so banks tend to limit their objections to issues concerning whether the correct amounts are being paid to them under the plan (which normally are easily resolved).

Catching up on back taxes

One of the two certainties of life (along with death) are taxes. Taxes cannot be avoided, and are often difficult to pay. It is no surprise, then, that unpaid taxes are a leading cause of financial hardships and bankruptcy. One of the best kept secrets about Chapter 13 is that even the government (federal, state, local, it doesn’t matter) is required to accept a payment plan for back taxes.

Income taxes must be paid in full in a Chapter 13 plan, but in most cases no additional interest or penalties can be added (unless a lien has been filed against you before your bankruptcy was filed, or unless the tax returns were filed late or not at all) by the IRS, the State, or the Local Government, even if you take 5 full years to pay the taxes under the plan. All collection activity is stopped, and any GARNISHMENTS of your wages are stopped.

Delinquent property taxes could lead to your local government selling your property at a TAX SALE, but filing a Chapter 13 stops that from happening. Instead, you have up to 5 years to pay the back property taxes in full under the Chapter 13 plan.

Am I paying too much on credit cards?

If your monthly credit card payments are causing you to cut back on necessities, and despite making the minimum required payments, the balances never seem to drop, you need a FRESH START. If you make a list of your monthly expenses without including credit card payments, and compare that to your monthly net income, are those expenses affordable? Now, add the credit card payments to the list of expenses; do those payments cause your expenses to exceed your income? If so, the budget is not sustainable, and something must give. Some lower income people really aren’t able to afford to pay anything beyond their basic necessities, and for them, Chapter 7 might be the best solution. Many people could make payments if the monthly amount could be reduced and/or they could pay over time without finance charges being piled on top of their balances, and for them, Chapter 13 could be the best move they ever made. Not only do finance charges stop accruing, and not only is there up to 5 years to make payments, but the amount which must be paid is dependent on what can be afforded, with remaining unpaid balances discharged completely at the end of the plan term.

There are other factors affecting the amounts which must be paid, such as substantial equity in a home or other property, but for many individuals, the FRESH START begins with the moment your attorney can tell you to stop paying the credit card bills, because a Chapter 13 bankruptcy is being filed.

What do I do if they want to repossess my car?

There is an old saying, “The best way to get back on your feet is to miss 2 car payments!”

In reality, there’s nothing fun or funny about having your car repossessed. Banks might threaten to repossess if you miss a couple of payments, but when they are ready to take your car, they will do it suddenly and without concern for how you will get to work or to your doctor’s appointment. If you have missed one or two payments, or more, you should know that it is time to do something about it. Banks might be willing to work with you if you are experiencing a temporary reduction in income and you talk to the bank about the situation, but you can’t count on that buying you much time, if any. So, if you find yourself behind on your car payments, consider Chapter 13 relief.

If you file for Chapter 13 relief, lenders are prohibited from repossessing your car without being granted permission to do so by the bankruptcy court. If you are proposing to repay the bank through a Chapter 13 plan, and if you are making your plan payments, it is unlikely that the bankruptcy court will allow the lender to take your car. If the car was repossessed before you filed the Chapter 13, but the lender has not yet sold the car, you may be able to get the car back, on the basis of your proposed payments under the Chapter 13 plan.

Caveat: If the bank wants to repossess your car because you do not have insurance, get insurance, immediately. No bankruptcy court would refuse to let a bank repossess your car if you do not carry the required insurance coverage.

How do I stop wage garnishment for my student loans?

When a Chapter 13 bankruptcy is filed, student loan wage garnishments are stopped. Student loans are not generally dischargeable in bankruptcy, but the garnishments are not permitted against your wages for the entire term of your plan, up to 5 years. During that time, your income might increase to the point where you can afford to make student loan payments after the Chapter 13 case is over, or you might qualify at that time for an income based repayment plan. Many lower income individuals with large student loan balances file for Chapter 13 relief solely due to the existence of wage garnishments. Whether student loans are just a component of your financial hardships, or if they ARE the cause of such hardship, Chapter 13 is a very effective way to deal with the student loan burden. Individuals with higher levels of income may find that they can pay off or at least reduce their student loan balances by including provisions in the Chapter 13 plan for payment of such debts.

Can I file a second bankruptcy case if I find myself back in debt after I already had a bankruptcy?

Eligibility for a second bankruptcy case depends on the amount of time which has passed since the date on which the previous bankruptcy case was filed. The real issue is whether you would be eligible for a second discharge. In rare cases, someone who filed a previous case too recently to be eligible for a second discharge might still find it advantageous to file a second bankruptcy case, in order to get the benefit of the automatic stay against collection. But for most people, a second bankruptcy is only worth considering if it will result in new debts being discharged.

If a Chapter 7 discharge was obtained in a case filed less than 8 years before a second Chapter 7 case is filed (measured from the filing date of the first case to the filing date of the second case), the debtor is not eligible to receive a discharge in the second Chapter 7 case. However, if the second bankruptcy case is a Chapter 13 case, the rule is different. Only 4 years must have elapsed between the filing of the Chapter 7 case and the filing of the Chapter 13 case for the debtor to be eligible for a discharge in the Chapter 13 case. There are some differences between a Chapter 7 discharge and a Chapter 13 discharge, and the Chapter 13 discharge will be dependent on completion of a Chapter 13 plan, but Chapter 13 relief can be an excellent solution for someone who has incurred medical expenses or endured severe financial setbacks of almost any kind within 8 years of a previous Chapter 7 filing.

Once I am in a Chapter 13 are there things that I can or cannot do?

You will remain in control of the money you have over and above the amounts being used to make the plan payments.

In Chapter 13, you pay only a portion of your income to your creditors, with that amount being determined with your living expenses taken into consideration. If your income qualifies you for Chapter 13, you keep enough of your money to pay for your utilities, food, clothing, transportation needs, medical expenses, even a modest amount of recreation, while only paying what is left into your Chapter 13 plan. The goals of your plan will determine the minimum amount you must pay the creditors, including things like saving your home from foreclosure or keeping your car. We can help you decide what you want to accomplish with a Chapter 13 plan and show you how it would impact your budget.

There are some rules that you must follow while your Chapter 13 plan is place, designed to make sure you do not swerve off the road to completion of your plan.

Keep in mind that your primary obligation as a Chapter 13 debtor is to make your plan payments. If you are employed, your plan payments can be automatically deducted from your wages and sent to the trustee, so you don’t have to worry about buying money orders and mailing them every month. Your plan payment will be large enough to allow the trustee to pay your creditors what is required under your plan, but you will be allowed to keep enough of your income to continue buying groceries, paying your utility bills, putting gas in your car, etc., as well as leaving you enough for a modest amount of recreation.

You may not incur new debts during the plan term unless you get prior court permission.

What if you find it necessary to replace your car? Maybe you can find a reliable used car, priced low enough to buy for cash, without taking out a loan. If not, you may need to finance the purchase. The sales representative at a dealership may tell you that you simply need a letter from the trustee giving you permission to buy a car. However, in the Western District of Pennsylvania, you are required to ask the court for permission before taking out any new loans, including a loan to buy a car. Your attorney will file a motion with the court, spelling out why you need to buy a car, how much you propose to pay for it, and the amount of the monthly payments the loan will require. If you can show that the car you wish to buy is modestly priced, and that the payments will fit your budget, and if you are otherwise current with your Chapter 13 plan payments, the court will likely approve it. You would then receive a court order authorizing you to incur the loan.

Yes, you can sell your Home or Car if you are in a Chapter 13 Bankruptcy

You can sell your car or even your home as long as you contact your Chapter 13 attorney who will get permission from the court.

If you want to sell something substantial, such as a car or your house, you will need court permission before doing so, because despite the fact that you remain in possession of your property during the Chapter 13 case, your assets are considered property of the bankruptcy estate until the plan has been completed and your case is closed. If you wish to hire a real estate agent to sell property, you must ask the court to formally approve the retention of a broker and the listing agreement itself. That is accomplished through a motion to appoint the broker, setting forth the terms of the listing agreement, including the proposed selling price and the amount, or percentage, of the real estate agent’s commission. You must make sure that your broker knows that you are currently in a Chapter 13 case, because any agreement of sale which you enter into must include a provision that says the agreement is not binding on you until it is approved by the bankruptcy court. If a buyer is found, with or without the use of a broker, court permission is required before you sign a deed and before closing may be held. In addition to the requirement of a motion seeking court permission, details of the proposed sale must be advertised a Legal Notice, in which the public is informed of the proposed selling price and invited to make higher or better offers during a court hearing. The purpose of the Legal Notice is to attract potential buyers, in order to test the reasonableness of the original offer and to obtain the highest possible price for the property, for your benefit and for the benefit of your creditors.

If you sell your home during Chapter 13 bankruptcy, you may be able to keep the “exempt” portion of the net sale proceeds remaining after payoff of any mortgages, other liens and closing costs. If the net proceeds are enough to pay all unsecured creditors in full, then you may be able to keep any amount remaining after payment of all unsecured creditors, even if that amount is more than the exemption you were able to claim in the property.

Yes, you can still sue if you are wronged

You must obtain prior court approval before hiring an attorney, an accountant, or other professionals to represent you in other matters during your Chapter 13 case. If you suffer an injury and want to take legal action against someone who was responsible for your injury, you will be permitted to do so, but you must ask the court for permission to hire any attorney who will be representing you. It is also important that you tell that attorney or other professional that you are currently in a Chapter 13 bankruptcy case! Permission is obtained by filing a motion explaining why you need an attorney, and the proposed compensation which would be sought by the attorney. When the legal matter involves a claim for money damages, it is customary for the bankruptcy court to limit the approval of compensation to a contingent percentage fee. Employment of professionals to be paid on an hourly basis may be approved if the services to be performed are likely to benefit the bankruptcy estate, or if contingent fees are not consistent with the type of services for which employment of a professional is sought, such as family law matters.

Yes, you may continue to be self-employed or become self-employed

You will be required to provide the trustee with a report each month, showing your profits or losses, so that the trustee can monitor the profitability of your business. The trustee may question the feasibility of a Chapter 13 plan where the primary source of funding is projected profits from a business, if the business has not been profitable. A self-employed Chapter 13 debtor is permitted to do all of the normal things involved in running the business, such as hiring employees, paying business expenses, and being paid by customers. The trustee may ask from time to time for proof that all required tax returns are being filed, and that taxes which come due are being paid, because those matters are essential to the continuing success of the Chapter 13 plan. Failure of a self-employed debtor to file tax returns and to pay postpetition taxes as they come due can result in the case being dismissed.

What about the taxes I owed when I filed my Chapter 13 case, and the lien that was filed against me by the state?

Your Chapter 13 plan addresses the back taxes you owed when the case was filed. If you owed income taxes to the IRS, and if they were incurred within the past three years (or under some circumstances, from earlier years), those will be paid by the trustee from your plan payments. Tax liens may have been filed against you, and if so, your plan provides payments to clear those liens from your property.

The state may have filed a lien against you for personal income taxes, or it could have been the result of some other debt you owed to the state. For example, if you collected unemployment compensation but you were later determined to have been ineligible for the amounts you received (maybe because you had too much income while receiving benefits), the state may have filed a statutory lien against you. The state can get a statutory lien without suing you, like most creditors would be required to do before having a judgment lien against you. Regardless of the reason for the statutory lien, your Chapter 13 plan provides that the trustee will pay that lien off with your plan payments.

The objective of your Chapter 13 plan is to achieve a fresh start upon the completion of the plan, so that you will no longer have to worry about your property being sold on behalf of your creditors. The only liens which will remain on your home, for example, will be consensual liens which you voluntarily gave to creditors, such as the mortgage you used to buy the property. Unless that mortgage was nearly paid off when your Chapter 13 case was filed, you probably had more than five years left on the payments, and you will continue making those payments after the five years is up, but you will be current on those payments.

No, you are not going to get bills from your bankruptcy lawyer during the 5 year Chapter 13 plan term

Your bankruptcy attorney was required to tell the court how much you agreed to pay for legal fees for representing you in the Chapter 13 case, and aside from the portion you paid before filing, as a retainer, those fees will be paid by the trustee from your plan payments. If things happen in your case which require your attorney to do more than was anticipated at the beginning, your attorney will ask the court to approve any additional fees, to be paid by the trustee from your plan payments, as opposed to sending you a bill.

How long does a Chapter 13 take?

A Chapter 13 plan can take from 3 to 5 years, depending on your income. Although a person with lower income is not required to remain in Chapter 13 for more than 3 years, most people who are catching up on mortgage payments or back taxes appreciate having 5 full years to do so. The payments can be lower when spread out over 5 years. For a detailed explanation of how the minimum length of the plan is determined, see the section titled “Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period.”

How will I know when my Chapter 13 is completed?

Your Chapter 13 plan contains that information. The plan says how much you will pay to the trustee each month, and the length of time you will make those monthly payments. The plan also tells the court and the trustee if you plan to supplement your monthly plan payments with a lump sum of money from voluntarily selling some property, from an expected inheritance, or any other source you had available when your plan was being formulated. The total of all of those payments, including any lump sums, is called the “plan base.” When the amount of your plan base has been fully paid, your plan is “paid in full.”

The Chapter 13 Trustee has a website which you can visit to see the status of your case. You can view all of the payments the trustee has received from you, and all of the payments the trustee has made to your creditors. The website shows what creditors are being paid, as well as identifying all of the creditors who have filed claims in your case. Using that information, you can determined how far along you are in the plan, and you can see how much more you are expected to pay to complete your plan.

In addition, once per year you will receive a written report from the trustee, summarizing your payments into the plan and the trustee’s payments to your creditors. Your lawyer will help you understand this information throughout the term of your plan.

I owed $12,000 on my three year old car loan when I filed my Chapter 13 case, but my plan says I am only going to pay back $9,000 to the bank. Will I be able to get my title back with the lien released if I don’t pay the whole $12,000?

If you had your car loan for more than 910 days (two and one-half years) before you filed the Chapter 13 case, your attorney can propose a reduction in the amount to be paid to the bank. This is called a “cramdown.” The amount to be repaid is based on the value of the car, not the amount still owed under the contract. If you had borrowed the money to buy your car less than 910 days before you filed the bankruptcy, your plan would have been required to pay back the full $12,000 you owed, due to a technical provision in the Bankruptcy Code (commonly referred to as the “910 day rule,” or the “hanging paragraph” an unnumbered paragraph in Section 1325).

Any balance remaining on the loan over and above the secured amount is normally treated as an unsecured claim. Separation of the claim into secured and unsecured amounts is referred to as “bifurcation” of the claim. If your Chapter 13 plan provides that unsecured claims will not be paid in full, then the unsecured portion of the bifurcated claim will only be paid the percentage that the plan provides for unsecured claims, if any.

You must complete your Chapter 13 plan in order to fully bind the bank to the cramdown. If your case is dismissed or converted to Chapter 7, the bank will no longer be obligated to release its lien on the title, even if it has already been paid $9,000 under the plan.

I filed my Chapter 13 case jointly with my spouse, who had 2 years remaining on her car lease. Her car lease isn’t listed in the same places in the paperwork as my car loan is listed. Why is that?

A car lease is considered an Executory Contract, and those are listed in Schedule G of your bankruptcy petition. You care loan is a secured claim, listed in Schedule D. In the plan, secured claims and car leases are listed in different places. Executory contracts may either be assumed or rejected in a Chapter 13 plan. If the lease was rejected, your spouse would have been required to return the car, but any remaining balance owing under the lease would have been treated as a non-priority unsecured claim. Since the lease was assumed, the remaining payments under the lease became a priority claim, which must be fully paid under the plan by the end of the lease term. Even if your plan payments would get behind, preventing the lease payments from being fully paid by the end of the lease term, the car would have to be returned at that time, and the balance of the lease payments would still be payable as a priority claim.

If your spouse likes the car enough to want to buy it at the end of the lease term, by paying the amount stated in the lease agreement for the buyout option, your attorney can file a motion seeking court permission to exercise the buyout option, along with permission for such financing as that might require.

Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period

Depending on how much income you had before you filed the bankruptcy case, you may be required to make plan payments for either 3 years or 5 years. Your attorney filed a document with your bankruptcy petition entitled Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period (let’s just call it Form 122C-1). All of the money you and everyone else in your household received during the 6 months before your bankruptcy case was filed (with some exceptions, such as Social Security benefits), divided by 6, was shown on Form 122C-1 as your “Current Monthly Income” (CMI), even though the total income included amounts that might not have been received monthly, and which you might not have been currently receiving when the bankruptcy was filed, and might have included lump sums not actually amounting to “income.”

That number (your CMI) was then multiplied by 12 to generate an annualized amount to compare to the median income in your state for a household of your size. If your annualized CMI was lower than the median, your “Applicable Commitment Period” (ACP) is 3 years. If your annualized CMI was higher than the median, your ACP is 5 years. Regardless of any changes which may have occurred as to your income after you filed your Chapter 13 case, your ACP does not change.

If your ACP is 5 years, your plan term cannot be less than (nor more than) 5 years, UNLESS your unsecured creditors (like credit cards or medical bills) are being paid in full under your Chapter 13 plan. If your ACP is 3 years, the plan term may not be less than 3 years (unless the unsecured creditors are being paid in full), but you are permitted to stretch your plan out to 5 years, if you need more than 3 years to achieve the goals of the plan, like paying off mortgage arrears with an affordable monthly payment. Sorry you asked?

Can I end my plan early if my rich aunt offers to give me enough money to pay the remainder of my plan base to help me out?

If your Applicable Commitment Period (ACP) is 3 years, and 3 years or more have elapsed since your plan term began, the answer is usually yes. If your unsecured creditors are being paid in full, regardless of your ACP, the answer is usually yes. If you are not paying your unsecured creditors in full, then your plan may NOT end before the expiration of your ACP (3 years or 5 years), even if you are able to pay the remainder of your plan base early.

Who is the Chapter 13 Bankruptcy Trustee?

When you file a Chapter 13 case, the Chapter 13 Trustee is appointed to your case. The trustee does not represent the creditors, but is responsible for overseeing the bankruptcy estate. The trustee does not work for the Bankruptcy Court, but instead is an independent attorney who has been appointed by the Department of Justice to serve as trustee in cases filed under Chapter 13 of the Bankruptcy Code.

Unlike a Chapter 7 Trustee, the Chapter 13 Trustee does NOT take possession of your property, even if its value is too high to be exempted. Instead, the Chapter 13 Trustee administers your payment plan, receiving funds that you dedicate to the plan, and disbursing them to the creditors provided for in your plan.

Like a Chapter7 Trustee, the Chapter 13 Trustee is required to ensure that you are the person on the petition, review your case for accuracy, and ask about your recent financial affairs.

Remember that a Trustee is simply a lawyer whose job includes reviewing your case for any errors or omissions and to evaluate whether you have listed all of your property on your paperwork. During the Trustee meeting you will be asked a series of yes or no questions while you are sworn to tell the truth.

Part of the Trustee's job is to make sure that the creditors are being treated fairly, since they will be the ones that are losing money in the bankruptcy process. Keeping this in mind, the trustee will make sure that you were entirely forthcoming in your paperwork, and will ask questions and look for issues that may benefit your creditors. In the Chapter 13 meeting, the trustee reviews your income and expenses to determine whether the payment plan you have proposed is appropriate based on your finances.

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