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Chapter 13 is the only sure way to stop a mortgage foreclosure, vehicle repossession or wage garnishment. With very limited exception, the minute you file your Chapter 13, all creditor action stops. This means that you can file a Chapter 13 the morning of your scheduled foreclosure, or while the repo truck is circling your block, and you are protected. Any past due payments on your account will be folded into your Chapter 13 plan payment.
Chapter 13 can also help if you have too many monthly payments. The debt consolidation feature of Chapter 13 means that all those minimum payments get rolled into one affordable monthly payment, and in many cases, your total debt will be reduced as well.
Unlike those debt consolidation programs that advertise on the radio and TV, Chapter 13 debt consolidation operates under the authority of the federal bankruptcy court. Once your plan is approve, your creditors must accept the terms of your plan, and if a creditor steps out of line, you may have the option of pursuing money damages.
The automatic stay even applies when creditors do not know about it - thus, if we filed your Chapter 13 at 10:07AM on foreclosure Tuesday, and the foreclosure sale was completed at 10:08AM, the foreclosure would not be valid. Mortgage lenders know this so they do not record foreclosure deeds until after they check the bankruptcy court docket.
Your Chapter 13 filing stops the foreclosure and your Chapter 13 plan provides for repayment of missed mortgage payments through the Chapter 13 trustee. As long as you make your trustee payments, you will save your house and if you complete your plan the default that triggered the foreclosure will be canceled.
The automatic stay provision of Chapter 13 works best if you have not filed bankruptcy before - if this is your second or third case, the automatic stay protection may be more limited - ask your lawyer for details if you have previously filed.
How much each creditor gets every month, interest rates, the total amount paid, and the starting date for payments depends on the payment plan that you and your lawyer submit to the bankruptcy judge. Your Chapter 13 trustee and your creditors will have an opportunity to object to your plan, but usually these objections can be resolved by your lawyer. About 6 weeks after you file, your proposed plan will come before the judge for approval called a “confirmation.”
You fund your Chapter 13 plan by payroll deduction and over the five year term of your plan, you must make sure that all payments are made, that your property remains insured and that certain payments (mortgage, leases, student loans) are paid directly. If you fulfil your obligations under your confirmed plan, then you will receive a discharge of all debts at the end of your case.
Your budget, however, is not the only factor we need to worry about. The bankruptcy code includes something called a means test which sets out certain requirements for your plan. Your trustee and creditors also have a say - and we very well may face objections demanding a higher plan payment.
As your Chapter 13 lawyers, we will advocate for you. Many times this means fighting for the lowest reasonable plan payment. Sometimes it means that we have to get creative, for example, we may submit a “step plan” that calls for a lower payment now, and a higher payment down the road when your budget is likely to change.
The five year term of your Chapter 13 plan will likely require our active management. Unlike some of our competitors who use temporary staff lawyers or who experience regular employee turnover, you can rest assured that Susan and Jonathan will be here for you for the full duration of your plan.
Similarly, if your household expenses change significantly - increased medical costs, higher insurance, support of a parent or child - you will not have enough money in your budget to survive.
Other problems arise if creditors file claims higher than expected - this often happens with tax claims.
Whatever the issue, Susan and Jonathan will stand with you and work to fix any problems that arise and advise you about all of your options.
A terms objection is another common objection. This happens when your plan runs longer than 60 months (5 years). Your plan will run long when creditor claims come in higher than expected.
The trustee might also object if your testimony at your meeting of creditors hearing differs from the information on your schedules. The trustee might also object and demand proof of certain expenses, such as grocery bills or utility bills.
Susan and Jonathan are very familiar with trustee objections in Chapter 13 cases and we know how to fix whatever problems arise.
Every Chapter 13 debtor must attend a meeting of creditors (also called a "341 hearing). Your 341 hearing will be held in the bankruptcy courthouse but no judge will be present. Instead, the Chapter 13 trustee will preside at this hearing, which is fairly informal and held around a big conference table. Most 341 hearings last less than 10 minutes.
Other hearings that you may need to attend will be in front of the judge, in a courtroom setting. In rare situations you will need to appear at your Chapter 13 plan confirmation hearing (this is when the judge says "yea" or "nay" to your plan). If you fall behind on payments to your mortgage company, or to the trustee, a hearing may be scheduled.
Bankruptcy is unlike other areas of the law in that nothing happens very quickly. We will always have weeks or even months warning about potential problems. Bankruptcy procedure also gives your many second and third chances to keep your Chapter 13 case alive.
The main purpose of your 341 hearing is for the Chapter 13 trustee to verify your identity, and to confirm that the information set out in your bankruptcy schedules is accurate. Trustees also use 341 hearings to announce preliminary objections - usually involving funding - which gives your attorney a head start in responding to those objections.
The main thing for you to remember about your 341 hearing is that nothing final happens that day and that you should immediately contact your lawyer to start working on resolving any objections to the confirmation of your case.
First, make sure you know where to go and leave in plenty of time to account for parking and the security checkpoint at the courthouse. If possible, make a dry run the weekend before your hearing so you will know where to go. These hearings run on time - if you are late your case could be dismissed. When you arrive early you can watch some of the hearings scheduled before yours, so you will better know what to expect.
Make sure to bring two forms of ID. One ID should be a photo ID like your driver’s license or a passport. The second ID must be government issued and display your full Social Security number (not just the last 4 digits). If you do not have these two forms of ID the trustee will not hold your hearing.
Read over your petition ahead of time. Pay particular attention to Schedules I and J (your budget).
If your plan provides for direct payments to a mortgage lender or vehicle lessee, make sure that those payments have been made and bring proof of payment with you.
If you have any questions at all about your hearing, ask your lawyer!
In most cases you will not need to appear at your confirmation hearing because your lawyer should be able to resolve any trustee or creditor objections to confirmation. In many cases this means that your plan payment will increase by some amount over the originally proposed plan.
Usually the biggest confirmation hearing issues has to do with funding - have you made all of your pre-confirmation plan payments - either directly or through payroll deduction.
If your plan provides for direct payments to mortgage companies or other lenders, you need to keep those payments current.
Most plans filed in the Northern District of Georgia require you to send the trustee any income tax refunds you receive - we recommend that you make a copy of both your refund check and your payment to the trustee.
Most importantly you need to keep in contact with your lawyer. Let us know about any changes or financial problems you may be facing. The earlier we can get to work on those problems the better for all concerned.
Generally, if you fall behind with your trustee payments, you will have time to “cure” the missed payments. The trustee will file a motion to dismiss your case, with a hearing date set for 3 to 4 weeks later. Prior to the hearing, your lawyer can generally negotiate an agreement to get you caught up. This may involve your making an extra half months payment for however long it takes to get you caught up. If you can get your hands on a lump sum, that would help as well.
If you find yourself in a default cure, you can expect that the trustee will insist on something called “strict compliance.” This means that for an agreed upon period of time, the trustee would not have to file another motion to dismiss. Instead the trustee would need only to send you and your lawyer a letter giving your 5 or 10 days to catch up the missed payments.
The takeaway from all this is that you generally will have a chance to keep your Chapter 13 case alive but after one or two “catch up” periods, you stand the very real risk of seeing your case dismissed.
Because your mortgage lender is a secured creditor (your house is the collateral), it has the right to demand that you provide something called “adequate protection” for payment of your loan. If you stop paying, or if the insurance lapses, the mortgage lender’s interest in your property becomes at-risk.
Mortgage companies are in business to minimize risk. Therefore if you become delinquent or let the insurance lapse, the lender can hire a lawyer to ask the judge to lift the automatic stay, so that the lender can initiate foreclosure proceedings.
If you receive a motion for relief from stay in the mail, you should contact your lawyer immediately to talk about terms for negotiating a cure for the missed payments. If we don’t respond to the motion for relief from stay, you will lose your house to foreclosure.
If you have already read up about bankruptcy and are ready to get started, we invite you to download and complete our full intake package. This intake package gives us everything we need to prepare a Chapter 7 or Chapter 13 petition for your signature.
As always, we invite you to call our office at 770-393-4985 to ask any questions you may have.
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