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Chapter 13 is one method under the Bankruptcy Code to obtain relief from your creditors while at the same time providing a fair means to pay them back as much as you can. It allows you to keep some or all of your property during the time you are paying creditors back and it permits you to modify some contract payments and interest rates. Your plan can eliminate late charges and penalties and allow you to extend payments on some of your debts. Chapter 13 has gained widespread acceptance across the country as an attractive alternative to a straight bankruptcy.
Your Number
At the time your Chapter 13 petition was filed, the Bankruptcy Clerk assigned
the case a number. this number is very important. You will need it whenever
you write to the Trustees' office or when you make a payment to the Trustee.
Your case number has been printed on the cover of this booklet. ALWAYS PUT YOUR
CASE NUMBER ON ANY PAYMENTS OR LETTERS TO THE TRUSTEE'S
OFFICE.
Chapter 13 Costs
The costs for Chapter 13 are paid by each case. There are basically three
types of costs in each case. they are filing fees, the fee for your attorney
and the Trustee 's fee. The filing and administrative fees are fixed by law
and will be paid first. The fee for your attorney is set by the Court and the
Order Confirming your plan covers this item. The United States Bankruptcy Code
states that the Chapter 13 Trustee is to charge an expense and compensation sum
to cases and sets the maximum charge to be 10 percent of the amounts paid into
the case. The percentage fee will vary during the life of your case, but the
percentage is generally less that 10 percent and would not be more that 10 percent
at any time.
Your Attorney
When your attorney agreed to represent you and signed your petition with you, your
attorney became obligated to appear and represent your interests throughout your
Chapter 13. Your attorney must continue to appear on your behalf as long as your
case is active or until the judge permits your attorney to withdraw from your case.
If you ever have any questions concerning your case, your creditors, your rights
under the Bankruptcy Code or your options under Chapter 13, Make it a rule to
ask your attorney first.
Your attorney should have explained to you how much the legal fee would be and
how it will be paid. Be sure that you have specifically discussed fully whether
additional legal services during your plan will cost you more money or whether
the initial fee will cover all legal services. The attorney's fee will be
increased to cover additional postage costs incurred by your lawyer. You will not
receive any notice of the increases for postage costs because it is done
automatically by local rule. In most cases, your attorney will be paid the allowed
fee through the Chapter 13 plan. All fees charged by your attorney must be
reviewed and approved by the Bankruptcy Judge, even if you agree to pay more.
If you decide that you must change attorneys during your Chapter 13, be sure
that you let the Court and the Trustee know that you have changed and who your
new attorney is.
When you need advice or assistance, you should be able to get help from your
attorney. Although the Trustees' office is able to answer many questions, the law
prohibits the Trustees' staff from giving you any legal advice. If you have a
problem, a question or need advice, please call your lawyer's office first.
Your Address
We need to know your exact mailing address for as long as you are under Chapter 13.
We have the address which you put on your petition and we will send all notices
to that address until you or your attorney tell us 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.
Calls to the Trustees' Office
The Chapter 13 Trustees' phone number is 615 244 1101. Outside of Nashville, call
toll free in Tennessee at 800 231 5928. The office is open five days a week from
9:00-4:00 p.m. If you have a question which your attorney cannot answer, you may
wish to ask the Trustee by writing a letter with your case number and question.
If you cannot wait for a written response, you may call the Trustees' during the
office hours. do not feel that you have to talk personally with the Trustee; the
staff is familiar with the policies and guidelines under Chapter 13 and is well
qualified to discuss with you any problems or questions that may arise. the Trustee
and the Trustees' staff cannot give any legal advice, however, and encourage you
to direct all legal questions to your attorney.
Payments
Most Chapter 13 payments are made through a payroll deduction at your place of
employment. Only in unusual circumstances will the Court allow plan payments to
be made by you directly to the Trustee instead of by payroll deduction order.
Should you make a plan payment personally, do so by money order, postal order or
cashier's check, and be sure to include your name, address and your Chapter 13
case number on the check. DO NOT SEND PERSONAL CHECKS OR CASH. Any such payments
must be received by the Trustee by the 20th of the month to be credited for
that month.
Payroll Deduction Orders
At the time you filed your Chapter 13 petition, the Judge issued an order to your
employer telling your employer to deduct your plan payment from your paycheck and
send it to the Chapter 13 Trustee. It is important that both you and your employer
understand that such an order is not a garnishment. A garnishment or attachment
can come only from someone whom you owe money, and you do not owe the Court or
the Trustee any money. The court is just carrying out it's duty to administer the
plan you voluntarily filed and in which you gave the Court exclusive jurisdiction
over your future pay as long as you are subject to a Chapter 13 plan. We find that
most employers understand that you are making a serious effort to repay your debts
instead of avoiding them and think more highly of an employee who seeks to pay
their debts. If your employer has any questions, he or she may call our office for
an explanation.
Obligation to Pay
Even though the Court will usually order your employer to deduct plan payments and send
them to the Trustee, you must remember that you have the obligation to make sure
payments are made. If your employer ever fails to make a plan payment deduction,
you must tell your lawyer that the deduction was not made and you must send the
needed plan payment to the Trustee by money order, postal order or cashier's check.
It is a good idea to keep your pay stubs to demonstrate that the deductions are
taking place. If a payment is not received by the Trustee as required by your plan
any creditor in your case may ask the Court to dismiss the case. The Trustee will
ask the Court to dismiss your case if you fail to make the required payments during
any month of your plan.
Dismissal
If you fail to make the payments to the Trustee as required by your plan, the
Trustee will ask the Court to dismiss your case. It is very important to contact
your attorney if you ever expect to miss a payment due to being laid off, being
medically disabled or because you have changed jobs. If your case is dismissed
(unless you request to be dismissed), you might not be eligible for any kind
of bankruptcy relief for six months, so it is important to talk to your attorney
if you know of any reason why the Trustee would not receive a payment. Remember
the Trustee's office has no authority to let you miss a payment or allow you to
pay less than your plan requires. Only the judge can make such a decision, and you
should contact your lawyer soon enough to ask the judge to change the requirements
of your plan if you feel that you cannot meet the obligations of your plan.
Contacts by Creditors
All the creditors that you listed on your Chapter 13 petition are under an automatic
restraining order which prohibits them from bothering you in any way. If you get
notices in the mail from your creditors, send them to your attorney. Delinquent
notices need not cause any great concern, but if you get a more personal, direct
contact from a creditor, such as a telephone call, a personal letter, a summons,
or a visit in person, you should immediately inform them that you are under
Chapter 13 and give them your case number, and your attorney's name and address.
Under no circumstances should you discuss the debt with them in any manner. Be
sure to tell your lawyer the name of the person who contacted you. Your lawyer
will want to follow up on such a call and the name of the person calling you is
very important.
Dealing with Creditors
You may not deal with a creditor, just as a creditor may not deal with you. You
cannot pick and choose some particular creditor pay him "on the side", because all
of your debts 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.
Insurance
In order for you to retain your property, even though your creditors must wait
be paid through your Chapter 13 plan, you must make certain that your property
is insured. This is especially true of motor vehicles since the Bankruptcy Court
has a seperate rule requiring you to keep all motor vehicles insured at all times.
If you ever let insurance lapse on your car, truck van, or motorcycle any creditor
with a lien on it can repossess the vehicle within three days. It is a good idea
to keep your insurance policies handy should any creditor ever believe that your
insurance has lapsed.
Balance Due Creditors
Most people are very interested in knowing how much they owe to their creditors
and how much they have left to pay on their Chapter 13 plan. If you want to find
out how much each creditor is owed and what your payoff balance is on your Chapter
13 plan, please write to the Trustee's office and ask for a "Debtor Balance Letter"
The Trustees office will send you a letter listing all of your debts and the balance
due to each of your creditors at that time. the Trustee's office will send you such a
letter as often as you write and ask for one up to four times a year. If you want
to see your record more often you may visit the Trustees' office to look at the
record of your case. The "Debtor Balance Letter' will list the payoff balance to
each of your creditors and of your Chapter 13 plan. It will not include any
unmatured interest which your plan requires you to pay. It is therefore, only an
approximate figure. If you have not requested a "Debtor Balance Letter", the Trustees'
office will send you one anyway, once a year. The Debtor Balance Letter gives you
an idea of how your plan is going. Please review it carefully.
Base Plans
In every case in which a debtor is unable to repay all of his or her debts in full
the plan provides an amount known as a "base". If your plan has a "base", it is
listed on your confirmation order. this "base" amount is the total amount of money
that you will pay into your Chapter 13 plan - the sum of all your payments to the
Trustee. Unless your plan proposes to pay 100% of your debts, your confirmation order
should include both a minimum payment(20%,70%,etc) as well as a "base". Your plan
will not be completed until your plan pays the minimum payment, or you pay the "base"
to the Trustee, whichever is greater. If you have a "base" plan, whenever you receive
a status letter from the Trustees' office it will tell you what your plan requires
to complete, both to meet your minimum payment and to pay your "base". In no event
will you have to pay more to the Trustee than is necessary to pay all your debts
in full.
Claims of Creditors
While every creditor which you list on your Chapter 13 petition is given the
opportunity to file a claim for payment, they are allowed only 90 days from the Meeting
of Creditors to file a claim. After you have been under the plan for about four months,
we will send you a complete list of every creditor who has filed a claim in your case
and the amount which they claim you owe them. You should read and examine this list,
called a "Notice of Intent to Pay", very carefully. If a creditor is listed
incorrectly or any amount claimed does not appear correct, you should contact your
lawyer at once. Unless your lawyer objects to a claim, we will pay the amount the
creditor requests, not the amount listed on your petition.
Late Claims
As noted above, creditors have 90 days after the Meeting of Creditors to file their
for payment. Generally, they are not entitled to payment if they file after that
date. If we receive a claim after that time, we will send you a notice advising you
that the Trustees' office intends to pay the claim. If you do not want us to pay
the claim, your attorney MUST object to its payment. Generally, any claim which is
not allowed, will not be paid and, if you complete your plan, any claim that was
listed on your petition but for which no claim was filed will be discharged except
alimony, child support, certain long term debts, criminal restitution obligation,
debts incurred while operating a motor vehicle under the influence of alcohol or
drugs, and some student loan obligations. Unless your lawyer objects to our paying
such a claim, however, we will pay the claim, even if it was filed late.
How Creditors are Paid
The money which you pay to the Trustee is used to pay expenses of administration,
including payments to your attorney, and then will be paid to your creditors. So that
you will have some idea as to how the creditors are paid, you should know that there
are three basic types of claims: priority, secured, and unsecured. Generally you can
say that we pay administrative costs and you attorney's fees first, then creditors
with claims on your property (secured claims), then creditors holding tax claims
(priority), and then everyone else (unsecured claims). We do not pay anything to
unsecured creditors until the priority claims and the secured claims are current
in monthly payments. Due to this, it could be some time before the first payment
is made on the unsecured claims.
The Dividend to Creditors
When your plan was proposed, you and your lawyer calculated what minimum payment
would be paid to your unsecured creditors and this "dividend" was included on the order
which confirmed your Chapter 13 plan. Because your plan may also include a "base", you
could wind up paying your creditors more than the minimum which you promised in your
plan. the amount and size of the dividend is important to you and the effect which
Chapter 13 will have in the future.
If your Chapter 13 does not pay at least a seventy percent dividend, you will not
be able to obtain a discharge under Chapter 7 (straight bankruptcy) for six years
after your 13. Although you may feel that this is not important, giving up the right
to full bankruptcy relief is significant and could work to your disadvantage if, in
the future you were faced with a catastrophic financial problem.
We have found that most people would like to pay all of their debts back and if
your plan pays a one hundred percent dividend, we will advise the Credit Bureau
of the fact so they can add that to your credit file. Paying all debts in full
will help you reestablish your credit after your Chapter 13 is finished.
If your financial situation improves while you are in your plan, you can increase
the dividend to your creditors and thus improve the effect of your discharge. If
you want to do this, meet with your attorney to review whether a better discharge
is possible.
Counseling Assistance During Your Plan
Many people involved in Chapter 13 feel that they can be helped by some financial
counseling and general budget assistance. The Trustees' office provides financial
counseling assistance to any debtor in Chapter 13. If you are having difficulty
evaluating your living expenses or living within your budget, you should call the
the Trustees'office and make an appointment with the counselor. Often the help and
assistance of this counselor early in your plan will prevent future problems, so
you are encouraged to take advantage of this service.
Cosigners and Comakers
A cosigner, comaker or guarantor on any of your consumer debts is generally protected
from the contact by the creditor by something called the "Co-debtor stay". This
automatic protection applies in Chapter 13 cases. If the cosigner, comaker
or guarantor had given collateral for the loan, the creditor must request a hearing
before the Judge in order to proceed against the property. The co-debtor stay will
only protect cosigners, comakers or guarantors for the amount of debt your plan
proposes to pay. If your plan is not scheduled to pay all of the cosigned debt in
full, a creditor may obtain permission to collect from the cosigner, comaker or
guarantor, that portion of the debt that your plan is not going to pay.
Credit Cards and Post Petition Debt
When your plan is confirmed, the Judge will prohibit you from incurring any debt for
as long as you are under Chapter 13. This prohibits your from borrowing any money
from a finance company or bank or your credit union. You cannot receive an advance
of your salary. You cannot buy anything over time, like a car or an appliance, and
you cannot run up a bill to anyone.You cannot sign, co-sign or guarantee an
installment note and you cannot use a credit card. This applies to any member of your
family that is supported by the debtor under Chapter 13, whether they themselves are
under the jurisdiction of the Court or not, as long as the party under Chapter 13
may be responsible for the debts. The only exception to this is for medical emergencies,
so the Court will permit you to run up a bill to a doctor, a pharmacist, a dentist,
a hospital or clinic during your plan. If for some reason you feel that it is
important for you to be able to buy something on installments, or to be able to borrow
money, your attorney must obtain the Judge's permission. If you are paying regularly
into your Chapter 13 plan, there is a good reason to incur debt, and your ability to
pay your plan payment is not threatened, the Judge will generally grant permission.
Obtaining Credit Without Permission
Obtaining credit without permission of the Court is not only a violation of the
Court's order, it is subject to reversal by the Court. Any credit purchase you make
without approval of the court will be illegal, the goods would have to be returned
and you very likely would be out any payment you had made. You would also place your
plan in serious jeopardy if you obtain credit without approval.
Selling Property
You cannot dispose of any of your property, including land, without Court approval.
If you dispose of your property without permission, the transaction may be set aside.
If you want to sell your property, trade a car or sell your home, be sure to discuss
it with your attorney.
When You're Through
After you have successfully completed your plan, that is, when the Trustee has
received enough money from you to pay your creditors what you promised to pay them,
you will receive a notice from the Trustee that your payments can stop. Do not stop
making payments to the Trustee until you receive this notice.
When your meeting of creditors was held, you watched a video discussion by the judge
of the effect of a discharge. This may have been some time before you receive a
discharge, and if you have any questions about your bankruptcy discharge you should
contact your lawyer. If you wish to see the video discussion again, call the Trustees'
office to find when and where it will be presented. When your plan is completed, and
you receive a written notice of completion, you may receive a small refund check
from the Trustee which is the amount of your last few payments not needed to pay your
creditors. You should not expect to receive this refund until the month after you
have received the notice of plan completion.
Request for Dismissal by You
Federal Bankruptcy law allows you to request that your Chapter 13 case be dismissed
at any time. 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
you should understand that a dismissal will reactivate all unpaid debts, all interest
finance charges, all late charges not allowed by the Bankruptcy Court, and all
debts of creditors who did not file their claims. In addition you will be forced to deal
with those creditors on their terms, not yours or the Courts. The request for dismissal
of your plan must be in writing and sent to the Bankruptcy Court.
Credit Rating
Your credit rating during and after completion of Chapter 13 will be, as it is now
and was in the past, the personal opinion of any credit grantor who looks at your credit
record. A credit rating is not A, B, C, or 1, 2, 3, it is a record of all your past
credit performances. This record is made available to a creditor and he makes up his
own mind, by his own standards, as to whether or not he wants to grant credit to you.
Suits, collections, attachments, straight bankruptcies and Chapter 13 are indications,
in one degree or another, of credit problems. After many years and hundreds of paid in
full Chapter 13 cases in this area, we find a good many knowledgeable creditors
looking with respect upon those who have paid debts in full under a Chapter 13 plan.
Any credit record that has been blemished by a payment problem must be gradually
rebuilt. Remember, though, that 13 is a good place to start. The Trustees make it a
practice to advise the credit bureau of the names of all Chapter 13 debtors who succeed
in paying their debts in full (100%).
Contact by Creditor after Completion of 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. Even if the
creditor fails to do this, it is not too significant since the official records of
the Court showing your plan is completely paid and you received a discharge would
overrule any claim he might make for additional money. Should you receive any
request for additional money after your plan is completed, do not pay without first
talking to your lawyer.
Paying More Than Required
If you are ever in a position where you wish to increase your payments to the Trustee,
even if only by a few dollars a week, this will have a big impact on finishing your plan
ahead of time. Paying a little more than required will reduce interest costs, administrative
expenses and cause the payroll deduction to stop that much sooner. If you ever wish to
increase your plan payments, contact your lawyer. If you wish to make a single extra
payment, you may do that by sending a money order or a cashier's check to the Trustee.
Be sure to put your case number on any payment you send to the Trustee. This will also
cause your plan to be shorter. Many people under Chapter 13 choose to pay a portion
of their income tax refund to the Trustee. This, too, will have the effect of shortening
your plan. By paying more than is required per month, you are still required to make
the minimum payments each month thereafter.