About Your Chapter 13

What you should know about
your Chapter 13 Case

1. Introduction
2. Your Number
3. Chapter 13 Costs
4. Your Attorney
5. Your Address
6. Calls to the Trustees' Office
7. Payments
8. Payroll Deduction Orders
9. Obligation to Pay
10. Dismissal
11. Contacts by Creditors

12. Dealing with Creditors
13. Insurance
14. Balance Due Creditors
15. Base Plans
16. Claims of Creditors
17. Late Claims
18. Creditors Not Listed
19. How Creditors are Paid
20. The Dividend to Creditors
21. Counseling Assistance During Your Plan
22. Cosigners and Comakers

23. Credit Cards and Post Petition Debt
24. Obtaining Credit Without Permission
25. Selling Property
26. When You're Through
27. Request for Dismissal by You
28. Credit Rating
29. Contact By Creditor After Completing Of Chapter 13
30. Paying More Than Required
31. Tax Returns
32. One Final Word

Introduction

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 Chapter 7 liquidation.

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 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.

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 than 10 percent and would not be more than 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. 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.

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 either you or your attorney tells 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 Trustee's Office

The Chapter 13 Trustee's phone number is (901) 576-1313. The office is open five days a week from 8:00 a.m. - 4:30 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 staff 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. We 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 5th 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 to 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 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 primary 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 two or more months 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 separate rule requiring you to keep all motor vehicles insured at all times. 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 Trustee's office will send you a document 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 document 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 Trustee's office to look at the record of your case. The "Debtor Balance Letter" will list the balance due 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 Trustee's 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.

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 an "Administrative Order Allowing Claims", 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 a proof of claim. 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 Trustee's 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 (clerk and trustee fees). Thereafter, we will begin payments to your creditors. There are three basic types of claims: priority, secured, and unsecured. We do not pay anything to general unsecured creditors until the priority claims and the secured claims are current in monthly payments. For this reason, it could be some time before the first payment is made on the unsecured claims.

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, you are prohibited from incurring any debt without prior approval from the Court or the Chapter 13 Trustee. This prohibits you from borrowing any money from a finance company, bank or your credit union. 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 you 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. If for some reason you feel that it is important for you to be able to buy something in installments, or to be able to borrow money, your attorney must obtain the Judge's 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 is illegal; the goods would have to be returned and you very likely would be out any payment you have 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 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 at least one 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 Court’s. 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. Lawsuits, 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 Creditors 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.

Tax Returns

You are required to timely file and forward to the Chapter 13 Trustee all tax returns during the pendency of your case. You are also required to forward to the Trustee half of all tax refunds received during the pendency of the case which exceed $2,500.00.

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.

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