1. Introduction to Chapter 131.1 About Chapter 13
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.
As you may already know, one of the benefits of a Bankruptcy Case is the “automatic stay” that is put on all of your assets at the time of filing. This typically means that as soon as you file, most collection actions are stopped. This includes foreclosures and repossessions.
Prior to filing the case, you and your attorney review your assets, your debts, and your income. Then you propose a “plan” of repayment. This plan, for example, may indicate your intention to pay your mortgage arrears in full, your tax arrears, and 10 percent to your general unsecured creditors via a monthly payment that you make to the Trustee for a minimum of 36 months, a maximum of 60 months.
Once your case is filed, you begin making payments to your Chapter 13 Trustee. Thereafter, if your plan is confirmed, you continue to make payments to the Trustee until your plan is paid in full. Individuals who file Chapter 13 cases are commonly referred to as “debtors.” A Chapter 13 plan cannot exceed 60 months from the date it is filed.
1.2 Creditors and debtors
A creditor is a person or company who extends credit to you (credit card companies, mortgage companies, etc.).
A debtor is one who borrows or incurs debt from creditors.
You are the debtor in a Chapter 13 case and the individuals or companies to whom you owe money are your creditors.
1.3 Pro-se debtors
A debtor who decides to file a Chapter 13 bankruptcy case without attorney representation is considered a pro-se debtor.
If you choose to proceed as a pro-se [prō-say] debtor, you are fully responsible for representing yourself. You must follow the law and file all documents accordingly. You are expected to represent yourself and be able to appear in court for all hearings that may be scheduled during the life of your plan.
Also, you should be prepared to tell the Trustee at the 341(a) meeting if anyone helped you fill out the Chapter 13 petition and schedules. Bring any receipts, business cards, or written information you received from the person who assisted you.
2. Your Chapter 13 Case2.1 Your case number
Your case number is a number uniquely and specifically assigned to your case. It is your identification number and is very important.
Your Chapter 13 case number is very important. This case number is your identification number with both the Court and the Trustee’s office, and should be kept handy. Always include it. Your case number must appear neatly on any and all payments or correspondence you send to the Trustee’s office. Your name and address should also be included.
2.2 The role of your attorney
When your attorney agreed to represent you and signed your petition with you, he or she became obligated to appear and represent your interests throughout your Chapter 13 case. If you have a problem, a question, or need advice, always call your attorney.
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 contact your attorney first.
Your attorney must explain to you how much you will pay in legal fees and how your attorney expects the fees to be paid. Be sure that you have discussed fully whether additional legal services during the life of your plan will cost you more money (such as appearing on your behalf on motions or in adversary proceedings) or whether the initial fee will cover all legal services. In some cases your attorney may agree to be paid the allowed fees, or some portion thereof, through the Chapter 13 plan. This would allow you to pay your attorney over time and would alleviate you from having to raise the entire amount of the legal fees prior to filing.
Rule of thumb
When you need advice or assistance, you should contact your attorney. He or she is there to help you; that’s what you paid for. While the Trustee and his staff can answer some questions, the law prohibits the Trustee and his staff from giving you legal advice. If you have a problem, a question, or need advice, always call your attorney.
2.3 Court appearances
There will be several hearings at which you must appear during the course of your case.
You must appear before the Trustee (or his attorney) at a 341(a) Hearing, also known as a “meeting of creditors.”
If you have an attorney, contact him or her to determine whether or not you have to appear at the Confirmation Hearing. If you are a pro-se debtor (see Section 1.3), you must appear at the Confirmation Hearing.
Additionally, you may be required to appear in court from time to time throughout the life of your case for motions or adversary proceedings.
You should contact your attorney immediately if you receive documents that have a hearing date on them.
2.4 If you forget to list a creditor in your petition
You must list all of your creditors in your petition. You cannot pick and choose the creditors that you include.
You should contact your attorney immediately and speak to him or her about filing an amendment to your schedules to include a creditor that you forgot.
It is very important to talk to your attorney if you think that you forgot to list a creditor to whom you owed money prior to filing your Chapter 13 Petition. Problems may arise when creditors are not listed.
You should avoid incurring new debt after the filing of the petition. If you must incur a debt after the filing of the petition, you are responsible for repayment and that debt amount cannot, in most instances, be included in your Chapter 13 plan.
2.5 Your Chapter 13 Plan
You and your attorney should discuss your reasons for filing a Chapter 13 case, review your assets and your debts, and then prepare a plan of re-payment.
When you meet with your attorney and review your financial situation, he or she will explain to you how Chapter 13 can help you. Your attorney will prepare a plan that will allow you to repay some or all of your debts, depending upon the assets that you own and what you can afford.
A debtor who handles his or her own Chapter 13 case without legal counsel is wholly responsible for creating his or her own Chapter 13 Plan.
Neither the Court nor the Trustee’s office can assist in this process, and failure to produce a viable plan may result in dismissal.
The duration of a Chapter 13 plan will vary from case to case. The minimum plan length is 36 months (3 years) and the maximum is 60 months (5 years).
2.6 Changing your Chapter 13 Plan
If your financial situation has changed, either for better or for worse, you can ask the Court to modify your Chapter 13 Plan, even after it has been confirmed.
You should contact your attorney and ask him or her about filing a Modification of Plan. (Remember that you may incur additional attorney’s fees.)
2.7 Proofs of Claim
What it is
A Proof of Claim is a form that your creditors file with the Bankruptcy Court that indicates what type of claim they have (secured, priority unsecured, or general unsecured), and how much they are owed.
Who must file
All creditors must file a Proof of Claim in order to receive any money under your Chapter 13 plan. The creditors have 90 days from your first scheduled 341(a) hearing (even if it was postponed) to file a Proof of Claim.* After the 90 day period, as a general rule, the creditors will not be able to file a Proof of Claim.
You may file a Proof of Claim on behalf of any creditor. This will ensure that the creditor will receive funds through your plan.
*Government agencies generally have 180 days from the filing of a Chapter 13 Petition to file a Proof of Claim.
2.8 The Discharge of Debtor
What it is
A discharge of debts means that you are no longer legally liable for any balances remaining to any creditors listed in your Plan, with the exception of long-term, ongoing debts, such as taxes, mortgages, alimony, child support, etc.
How it happens
After your case has been completed and all outstanding disbursement checks to your creditors have cleared, you will receive a copy of the Trustee’s Final Report and Account listing all creditors who were paid by the Trustee’s office.
Approximately 30 to 90 days later, you will receive your Discharge of Debtor directly from the Court.
Hold on to it
Keep both the Trustee’s Final Report and the Discharge of Debtor in a safe place. You will, most likely, need them at some point in the future to prove that your Chapter 13 case is closed. Even five years after the discharge, these documents may be required when trying to get a mortgage or buy a car.
A Discharge of Debtor does not necessarily mean that any judgments or liens are automatically removed.
The discharge generally means that creditors who were listed in the petition may not proceed against you for the balance of any debt that was incurred prior to the filing of the case. If, however, a creditor obtained a judgment against you prior to the filing of your Chapter 13 case, and that judgment was not dealt with in your Plan, the judgment will remain.
If this pertains to you, contact your attorney to talk about your options with regard to removing the judgments or liens. You may be able to file a Motion to Void Judgments or Liens in the Bankruptcy Court to remove the judgments that were obtained by creditors prior to filing the case.
3. Your Chapter 13 Trustee3.1 About the Chapter 13 Trustee
The Trustee is a neutral third party who oversees the administration of your case. Your Trustee is responsible for receiving your payments, dividing up the money based on the provisions of your Chapter 13 Plan, and sending payments to your creditors on your behalf.
Albert Russo is the Trustee in your case. The Trustee is responsible for the administration of your case throughout its 36 to 60-month life.
The Trustee is not your attorney, nor is he the creditor’s attorney. Therefore, he cannot give you legal advice.
What the Trustee does
The primary functions of the Chapter 13 Trustee are:
– To receive payments from you and make sure that they are posted to your case in a timely manner,
– To make payments to your creditors on your behalf, and
– To give information regarding Chapter 13 cases to debtors, creditors, and attorneys.
The Trustee is not lending you any money. He is simply receiving your payments and distributing the money to your creditors in accordance with the Bankruptcy Code and your Chapter 13 Plan.
3.2 Who pays the Trustee and his staff
The Trustee’s costs for administering your case are paid from the funds you pay into your Chapter 13 plan.
The United States Bankruptcy Code states that the Chapter 13 Trustee is to charge an expense and compensation sum to all cases under his or her administration, and sets the maximum charge at 10 percent of the amounts disbursed in your case. The percentage fee may vary during the life of your case, but the Trustee’s percentage is always less than 10 percent.
3.3 Sending payments to the Trustee
Payments must be made payable to Albert Russo, Trustee, and must be in the form of a certified check, bank check, money order, or, if you have a wage garnishment, a check from your employer. The Trustee’s office cannot and will not accept personal checks or cash.
Your name, address, and case number must be neatly printed on the face of each payment you send to the Trustee for prompt and accurate posting to your case.
Payments should be sent to:
PO BOX 933
MEMPHIS TN 38101-0933
This is a lock-box with National Bank of Commerce, a national bank used by many Chapter 13 Trustees throughout the country.
Payment due date
All payments are due on or before the first business day of each month.
SEE ALSO “Mortgage payments and taxes” (Section 4.4) and “If you are unable to make your payments’ (Section 4.6).
3.4 Wage orders for payments
If a wage order was entered in your case, your employer is required to withhold money from your pay and send it to the Trustee’s office on your behalf.
Nature of the order
Your employer should understand that such an order is not an attachment. An attachment and garnishment can only come from someone to whom you owe money, and you do not owe the Court or the Trustee any money.
The Court is simply carrying out its duty to administer the plan you voluntarily filed and in which you gave the Court exclusive jurisdiction over your future pay during the course of the plan.
Until your employer begins making payments on your behalf, it is your responsibility to make your payments to the Trustee. Additionally, if you are laid off or you are on disability and your employer stops making your monthly Trustee payments, you must make the payments.
Verify with your employer that your case number and name will appear on the face of each and every check that he or she sends to the Trustee’s office. Otherwise, your payments may not be posted quickly or accurately.
3.5 Receiving case statements
You will receive a Trustee’s Report of Receipts and Disbursements at least every six months.
You should examine your report very carefully. Check that the receipts we have posted agree with your records and that the creditors to whom we are disbursing are correct.
If you have questions about the receipts that have been posted to your case or the payments the Trustee is making to creditors, you should contact your attorney immediately.
The Trustee’s office is required to send you a report every six months showing receipts posted to your case and payments made to creditors. This usually happens in January and July.
In addition to receiving the semiannual Trustee’s Report of Receipts and Disbursements, you may request that one be sent to you at any time. Simply call or write to the Trustee’s office and ask for one. If you call, be sure to have your case number handy. If you write, make sure you neatly write your case number and your name on the letter.
If you require a figure to pay off your Chapter 13 case, you cannot use the “balance to complete” amount that appears on the Trustee’s Report. You must contact the Trustee’s office in writing and request a “Payoff Letter.”
An explanation of the Trustee’s Report of Receipts and Disbursements is provided in Appendix A, along with answers to many common questions.
3.6 Completing your plan
As your plan nears its final months, you should request—in writing—a payoff letter. Your case will be fully audited and your payoff letter will indicate the remaining balance required to complete your plan.
Plan Complete Letter
Once you have satisfied the amount in your payoff letter, you will receive a “plan complete letter,” indicating that you have satisfied the payments due on your Chapter 13 plan.
If you have a wage order in effect (your employer is making your Trustee payments directly from your wages), you should show your employer the plan complete letter, so that payments to the Trustee will stop in a timely manner and your money will not be held up. If your employer requires additional verification that payments to the Trustee should stop, have him or her contact the Trustee’s office for a “halt wage order” letter.
3.7 Calling the Trustee’s office
The Trustee and his staff are committed to helping you complete your plan successfully and will help you in any way possible.
The Trustee and his staff can provide general information about your case, such as receipts that have been posted and payments that have been made to your creditors.
While some general issues can be resolved by telephone, many issues require that a written request be submitted, including payoff requests, changes of address (see Section 4.3), as well as sensitive personal and financial information.
Remember, the Trustee and his staff cannot give you legal advice or act as your attorney.
The Trustee’s office is open to take calls from 9:00 a.m. to 5:00 p.m., Monday through Friday, with the exception of all federal holidays and the Friday after Thanksgiving at (609) 587-6888.
Always have your case number ready when calling the Trustee’s office.
3.8 How the Trustee pays your creditors
Creditors are paid based on upon their classification.
Generally, creditors are classified and paid in the following order:
1. Attorney fees,
2. Secured creditors (mortgage arrears or auto loans),
3. Priority unsecured creditors (property taxes or income taxes due to the IRS or state), and finally,
4. General unsecured creditors (credit cards, etc.).
The money that you pay to the Trustee is used to pay any attorney fees that you didn’t pay up front and to repay your creditors pursuant to the confirmed Plan.
Disbursements to creditors
Payments to creditors who have filed a Proof of Claim begin after the case is confirmed and the Trustee’s office has received a signed Order Confirming Chapter 13 Plan from the Bankruptcy Court. Generally, this takes place six or seven months after your case is filed.
Additionally, since secured and priority unsecured creditors are paid first, it could be several years before your unsecured creditors (credit cards, etc.) begin to receive any money from the Trustee’s office, presuming that your Plan provides for any payment at all to these creditors.
4. During and After Chapter 134.1 If your creditors contact you after filing
The creditors listed in your petition are not allowed to contact or harass you in any way once you’ve filed your Chapter 13 Petition.
If you are contacted by creditors who were listed in your Chapter 13 Petition after you have filed the case, you should advise them of the filing, give them your case number and the name and telephone number of your attorney.
If the creditor continues harassment, they could be held in contempt of court.
Bills or notices
Should you receive notices or bills in the mail from a creditor who was listed in your Chapter 13 Petition, simply write your case number and your attorney’s name and telephone number on the bill and return it to the creditor.
If you receive other notices or bills from that creditor, notify your attorney immediately so that he or she may deal with the creditor in a timely manner.
Remember, you must list all creditors to whom you owe money in your Chapter 13 Petition. You may not pick and choose the creditors that you list.
4.2 Obtaining copies of lost documents
Depending upon whether or not the case is closed and how old it is, the Bankruptcy Court should be able to provide you with copies of documents relating to your case.
4.3 Change of address
If you move, you must advise the Trustee of your change of address in writing.
Please remember that, during the course of your case, the Trustee and his staff will need to contact you or send you activity reports. If you move, you must let the Trustee and the Court know. You should write a short note to the Trustee and to the Court with your name, case number, and new address.
The staffs of the Trustee’s office and Court cannot take address change information over the phone. It must be done in writing.
Writing your new address directly on your monthly payment is not sufficient. You must send the Trustee’s office a note stating that you have moved and advising of your new address.
4.4 Mortgage payments and taxes
Unless a special arrangement has been made, all post-petition mortgage payments and taxes (payments due after the date that the case is filed) are paid directly by you to the mortgage company or taxing authority.
Usually mortgage arrears and past-due taxes are paid through the Trustee’s office in accordance with the Chapter 13 Plan. At the same time, you are required to make all ongoing, post-petition mortgage and tax payments directly to the mortgage company or taxing authority.
Because you have been making your current mortgage and tax payments, and your mortgage arrears and past-due taxes have been paid through the Trustee’s office, you should be completely up-to-date upon completion of your plan.
If you are unable to pay your post-petition taxes, you should contact your attorney immediately.
4.5 Selling your home
You cannot sell or otherwise dispose of any of your property, including real estate, without obtaining permission from the Court.
If you sell any of your property for a profit, some of the profit may have to be applied to your Chapter 13 debts. If you wish to sell your house or other property, you should contact your attorney.
4.6 If you are unable to make your payments
You are required to make a payment to the Trustee each and every month without fail, unless otherwise ordered by the Court.
If you are unable to make your monthly payments, contact your attorney immediately to discuss your options with him or her.
The Trustee’s job is to make sure that you are making payments each month and, in turn, that your creditors are paid each month. If you cannot make your payments, the Trustee may file an action in court to dismiss your case for non-payment (a Motion to Dismiss or an Affidavit of Non-Payment). This is very serious.
If you do not contact your attorney and address the situation right away, your case could be dismissed, in which case you will lose the protection of the Bankruptcy Code and your creditors can resume collection actions against you, including repossession and foreclosure.
4.7 If you receive a Motion to Dismiss or an affidavit from the Trustee’s office
If the Trustee’s office sends you a Motion to Dismiss or an Affidavit of Non-Payment, call your attorney immediately.
What is happening
When these documents are submitted, your case is in imminent jeopardy of being dismissed. If your case is dismissed, your creditors can start collection actions against you. This is very serious.
Why it is happening
Usually these actions are filed by the Trustee because you are behind in your payments or because your plan cannot be completed as it was confirmed, which may be the result of higher-than-anticipated claims, stay relief being granted to one of your creditors, or any of a variety of other causes.
What to do
Your attorney may be able to work something out with the Trustee so that your case does not get dismissed.
For this reason, it is very important that you call your attorney to discuss your options as soon as you receive a motion or affidavit.
If you do nothing, your case will most likely be dismissed.
4.8 Requesting a dismissal
The Bankruptcy Code allows you to request that your Chapter 13 case be dismissed at any time. If you want to stop your case for any reason, you should contact your attorney and ask him or her about a Voluntary Dismissal (you may incur additional attorney’s fees).
Remember that once your case is dismissed, the creditors to whom you still owe money may resume collection actions against you.
4.9 Establishing new credit
Your credit rating during and after the completion of your Chapter 13 case will be based upon the opinion of any creditor who reviews your credit record.
Your credit rating is not A, B, or C. It is a record of all your past credit performances. It will take time to rebuild your credit. You can, however, contact the primary credit reporting agencies and advise them that you have successfully completed your Chapter 13 plan and have received a discharge.
You should contact these companies in writing and provide a copy of your Final Report and Account and your Discharge of Debtor as proof that your Chapter 13 case is now closed.
The primary credit reporting agencies are:
PO BOX 740241
ATLANTA GA 30374,
PO BOX 390
SPRINGFIELD PA 19064, and
PO BOX 9556
ALLEN TX 75013.
When writing to any of the above agencies, be sure to include the following:
– Your full name (including Jr., Sr., III, etc.),
– Your Social Security number,
– Your current and previous addresses within the last five years,
– Your date of birth, and
– Your signature.
AppendixYour Trustee Report
The information in this appendix will answer some common questions and help you understand the Trustee Report, which you will receive twice per year from the time your case is confirmed until the completion of your Chapter 13 plan.
The Trustee Report outlines the progress in your Chapter 13 plan. This report will show how much you have paid into your plan, how much has been distributed to each creditor, and will provide an estimate of how much remains to be paid according to your plan.
As your plan nears completion, you should request—in writing—a payoff letter, which will include the actual amount remaining to pay off and complete your plan.
How much have I paid so far?
The amount next to “TOTAL NET RECEIPTS” on the last page of your report shows how much the Trustee has received from you up to the date of the report.
Each of your payments that has been received by the Trustee’s office is detailed near the top of the first page.
Why does the report indicate that I am in arrears?
Even if you have made every payment to the Trustee, it is possible that your plan has fallen into arrears (see “ARREARAGES” on the last page of your report). Over the course of your plan, your attorney may apply for additional fees, creditors may amend their claims, or your plan may be modified to require increased payments.
The Trustee Report shows the amount due to all of your creditors, including your attorney. Your attorney should notify you of any changes in your plan, and you should consult him or her first if there are any discrepancies.
Why have some creditors received money, while others have received nothing?
Each type of claim is prioritized for payment differently. The highest priority is attorney fees, after which secured claims, such as mortgages, are paid. After these are paid, money will go to priority unsecured claims, such as taxes. Only after all other classes of claim are paid will any disbursements begin for general unsecured creditors.
Why is the Trustee paying a company with which I have no debt?
It is common for debts to be transferred from one company to another. Some companies are in the business of buying and collecting on debts.
If an unfamiliar creditor name appears on your Trustee Report, it is likely that your debt has been transferred. Check for a note below the creditor name, or look at the amount due to determine on which of your debts this creditor may be collecting.
What is the “Forgive %?”
For base plans, the forgive percentage should always be zero.
For percentage plans, the forgive percentage is the amount that will not be paid to general unsecured creditors. For example, if your Plan was confirmed to pay 25 percent to general unsecured creditors, the forgive percentage will be 75%, because that amount will not be paid to the creditor.
Secured and priority unsecured creditors always have zero percent forgive, because these claims must be paid in full.
How much is the Trustee compensation?
The current percentage collected by the Trustee appears in the upper right-hand corner of the Trustee Report. This amount is subject to change, but will never exceed ten percent.
Glossary341(a) Meeting: A hearing at which you (and your attorney, if you have one), will appear before the Trustee or his attorney. This is also known as a meeting of creditors, because your creditors can attend to raise any concerns that they may have about your Chapter 13 plan. See Section 2.3
Arrears: The amount of a debt that is past-due. You may be paying your mortgage arrears through your Chapter 13 plan. If you fall behind in your payments to the Trustee, your Trustee Report will show an “ARREARAGES” amount. See Section 4.6
Case number: A unique number assigned to your specific bankruptcy case. It is essential that you include this number whenever you submit payments to the Trustee or contact the Trustee’s office with any inquiry. See Section 2.1
Chapter 13 Plan: The “road map” for repayment of your debts. This is filed with the court and eventually confirmed (perhaps after some modification), and lays out specifically how much you will pay to your creditors. See Section 2.5
Confirmation Hearing: A hearing at which your Chapter 13 Plan (or a modified version thereof) will be confirmed by the Bankruptcy Court. Only after your Plan has been confirmed will payments to your creditors begin. See Section 2.3
Creditor: An entity (person or company) to which you are indebted. See Section 1.2
Debtor: One who owes money to a creditor. In your Chapter 13 case, you are the debtor. See Section 1.2
Disbursement: A payment that the Trustee makes to your creditors. See Section 3.8
Discharge: Given by the court upon successful completion of your Chapter 13 plan. This means that you are no longer legally liable for debts covered in the Plan. See Section 2.8
Dismissal: Release of your bankruptcy case without satisfying your debts according to your Chapter 13 Plan. If your case is dismissed, your creditors can resume collection actions against you. See Sections 4.7 and 4.8
Meeting of Creditors: See “341(a) Meeting” above
Motion to Dismiss: A motion filed in the Bankruptcy Court by the Trustee’s office (often due to failure to make payments), which, if granted, will effectively cancel your Chapter 13 case and your creditors will again be able to take collection actions against you. See Section 4.7
Payoff: Represents the amount you must pay in order to satisfy the remainder of your Chapter 13 plan. As your plan nears completion, you should request a payoff letter so that your case may be audited and a payoff letter sent. See Section 3.6
Plan: See Chapter 13 Plan
Proof of Claim (POC): A form that your creditors file with the Bankruptcy Court, indicating what type of claim they hold and how much you owe them. See Section 2.7
Pro-se debtor: A debtor who files bankruptcy without the representation of an attorney. See Section 1.3
Stay relief: Releases a creditor from the automatic stay, allowing that creditor to pursue collection actions against you, including repossession or foreclosure. This is often the result of a failure to keep current on payments that come due after the filing of your Chapter 13 Petition. See Section 1.1
Trustee Report: A report that you will receive twice per year from the time your case is confirmed until your Chapter 13 plan is complete. The report outlines payments you have made, payments the Trustee has made to your creditors, and other information about the ongoing administration of your case. See Section 3.5 and the Appendix
Trustee: The party responsible for accepting your monthly Chapter 13 plan payments and distributing the funds to your creditors in accordance with the plan. The trustee in your case is Albert Russo. See Section 3.1
Wage Order: An order issued by the Bankruptcy Court requiring that your employer deduct your Chapter 13 plan payments directly from your wages, and remit them to the Trustee on your behalf. See Section 3.
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