12.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 and 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.
17.The Percent Paid to Creditors
When your plan was proposed, you and your lawyer calculated what Percent would be paid to your unsecured creditors and this Percent was included on the Order which confirmed your Chapter 13 plan. If your Chapter 13 does not pay at least a 70 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. 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.(see # 26 -Tax Refunds-)
18.Cosigners and Comakers
A cosigner, comaker or guarantor on any of your consumer debts is generally protected from 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.
15.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(except some government agencies) from the Meeting of Creditors to file a claim. After the 90 days is up, you attorney will file a piece of paper with the Court called Schedule of Allowed Claims. Your attorney should send you a list of all creditors that filed a claim in your case, and the amount of the claim. You should carefully review the list of claims that your attorney sends you to make sure that the amount of money the creditor is asking for in your Bankruptcy is correct. If a creditor is listed incorrectly or any amount claimed does not appear correct, you should contact your lawyer at once, so that your attorney can object to the claim amount.
16.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 your 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.
If your plan pays anything less than 100 percent to unsecured creditors, you are required to also send all of your Federal and State Tax Refunds to the Office of the Chapter 13 Trustee, IN ADDITION to your regular payments. If you fail to send the refunds in to the Chapter 13 Office, your case can be dismissed by the Court. It's YOUR responsibility to endorse the refund check and send it to the Trustee's office.
6.Calls to the Trustee's Office
The Chapter 13 Trustee's phone number is (502) 581-9042. The office is open five days a week from 8:30-5:00 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 Trustee's 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 Trustee's staff cannot give any legal advice, however, and encourage you to direct all legal questions to your attorney.
27.One Final Word
Complying with a Chapter 13 plan is not easy. You may have to make a real sacrifice to meet the obligations which you have specified in your plan and still live within your Chapter 13 budget. Hundreds of families have successfully completed their Chapter 13 plans and know that they have resolved their debt problems without filing straight bankruptcy and have paid most, if not all, of their obligations to their creditors. Chapter 13 will only work for you if you work very hard at meeting your obligations under your plan.
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. 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 Trustee's office is able to answer many questions, the law prohibits the Trustee's staff from giving you any legal advice. If you have a problem, a question or need advice, please call your lawyer's office first.
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 check, 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 CASH.
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.
22.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 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.
If you fail to make the payments to the Trustee as required by your plan, the Trustee will ask you to come to Court to Show Cause why your case should not be dismissed for failure to make your plan payments. It's 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 or longer, so it's 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.
20.Obtaining Credit Without Permission
Obtaining credit without permission of the Court is not only a violation of the Court's order, it's 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.
24.Contact by Creditor after Completion of Chapter 13
When a creditor has had their 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's 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.
14.Annual Debtor Reports
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. Once per year, the Trustee's Office will send you a Report of all of your payments into your Chapter 13 Plan, and how much each creditor was paid by the Chapter 13 Office.
25.Paying More Than Required (in a 100% Plan only)
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.
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.
19.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's 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.
8.Payroll Deduction Orders
At the time you filed your Chapter 13 petition, the Judge probably 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's 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 its duty to administer the plan you voluntarily filed and in which you gave the Court exclusive control 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.
9.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 check, money order, postal order or cashier's check. It's 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 have you show cause why your case should not be dismissed because you did not make your payment.
2.Your Number(Case 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 Trustee's office or when you make a payment to the Trustee. ALWAYS PUT YOUR CASE NUMBER ON ANY PAYMENTS OR LETTERS TO THE TRUSTEE'S OFFICE.
In order for you to retain your property, even though your creditors must wait to 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 five days. It's a good idea to keep your insurance policies handy should any creditor ever believe that your insurance has lapsed.
11.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.
3.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. The Trustee fee for the Western District of Kentucky is currently 4.50 percent.
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.
23.Request for Dismissal
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.