Q: What is Chapter 7 bankruptcy?
A: Chapter 7 bankruptcy is “liquidation” bankruptcy. Chapter 7 does not guarantee you can keep your assets, like chapter 13 does. The filer’s household income must qualify for chapter 7. Chapter 7 is a good fit for lower income households that have primarily unsecured debt. Chapter 7 does not resolve recent taxes or student loans. Chapter 7 does not provide a long term solution to foreclosures, or strip second mortgages. Contact us today to discuss if chapter 7 would be helpful in your situation.
Q: What is Chapter 11 bankruptcy?
A: Chapter 11 bankruptcy is another chapter of bankruptcy, which is in many ways the most complicated of the chapters discussed here. While chapter 13 can only be filed by individuals, chapter 11 can be filed by a number of legal entities, including most businesses, as well as individuals. If an individual has secured debts (such as mortgages and car loans) of more than $1,184,200 or unsecured debts of more than $394,725, then they may not qualify for chapter 13 and may choose to file chapter 11.
In certain situations, a person may want to file chapter 11 bankruptcy even if they qualify for chapter 13 also. Chapter 11 bankruptcy can “cram down” rental properties in many situations to their market value, and lower their interest rates. Sometimes chapter 11 plans can extend longer than chapter 13 plans, which can be helpful in situations with large mortgage arrears. Contact our office today and we can discuss if this option might be better for your situation.
Q: Will filing chapter 13 stop my foreclosure sale?
A: Yes. If you file the chapter 13 at least one day prior to the foreclosure sale, it will stop the sale unless you have two bankruptcy dismissals in the prior year. If you have prior filings, we can likely still help and stop the sale. Please contact us right away to discuss so that we can discuss the options and timing to maximize your situation.
Q: How quickly can I file Chapter 13 bankruptcy with your firm?
A: We can file cases very quickly when needed. We routinely file cases on the same day or next day, although there are requirements that need to be completed so it is much easier on the client to not file in an emergency situation when possible.
Q: How does a Chapter 13 Plan work?
A: In a chapter 13 plan, the filer makes payments to a “trustee.” The trustee then disburses the payments to the filer’s creditors according to their plan. The trustees takes a percentage of the disbursements (usually about 8%) and administers the plan. The filer pays a set amount each month to the trustee (we will review with you the factors that determine the amount, and we can quickly give you a very specific range of payments you might make in a plan that could resolve debts, potentially in different ways, to ensure you get the best result).
After the case is filed, the first payment must be received by the trustee within 30 days (we have a very high rate of success as we have our clients pay within 21 days so they are never behind on the cycle and subject to dismissal). Around 4-5 weeks after filing the case, the filer goes to a “section 341(a) meeting of creditors”, with our attorney. (the date and time are known quickly after filing and we will give you that information so you can plan). The “meeting of creditors” is an administrative hearing where the trustee asks some basic questions of the filer about the information they provided – mostly to ensure that the filer is not hiding information or misrepresenting information such as their identity. Despite it’s name, creditors very rarely (in perhaps 2% of cases) show up at these meetings, they are normally very short (about 5 minutes), and usually the only hearing the filer has to go to.
If the trustee has no objections to the plan, the plan is normally confirmed by the judge, and then the debts are all locked into a plan, which is typically 3 or 5 years, depending on income. Filers that qualify for a 3 year plan can choose a 5 year plan instead if they prefer to keep their payments lower. All unsecured creditors, such as credit cards, payday loans, medical bills, and collection agencies must file claims within 70 days of the filing of the case or they do not have to be paid in the plan. Our firm monitors all claims to make sure they are valid and in the correct amounts, and we can object to any claim that has errors or improper accounting. Often times, our clients end up with shorter plans than expected because creditors either don’t file claims (which happens quite often) or because we object to a claim and if successful, it becomes disallowed and does not have to be paid.
Q: How many hearings will I have to go to?
A: In almost all chapter 13 cases, there is only one hearing that the filer has to go to, called a section 341 “meeting of creditors.” This is an administrative hearing and not a court appearance. The hearing lasts 5-10 minutes on average, and the trustee asks the filer if they have listed their assets and debts on their “schedules” (the documents we would draft for you and file), listed their income correctly 0n the schedules, and ask some basic questions to ensure the plan meets all the rules.
Q: Can my chapter 13 plan “not be accepted” or “be thrown out”?
A: There can be objections to a chapter 13 plan, but they can almost always be resolved. We only file cases that we are confident can be successful. Often times a creditor or trustee may file an objection – for instance, if the filer stated his car loan balance was $9,000.00 but in fact the car lender showed the balance was $9,400.00. The car lender might object to the plan, but the filer can easily “amend” their plan to pay the $9,400.00 if correct, and the car lender then would withdraw the objection, and the plan would be accepted and “confirmed.”
Q: What are the fees for a Chapter 13 case?
A: Attorneys have the choice of charging their fees upfront or as part of the payments in their Chapter 13 plan (that are disbursed by the trustee). We offer $0 down Chapter 13 filings – we charge $0 before filing the case, the only fees needed are the court’s $310 filing fee. All of our fees are built into the chapter 13 payments, and we use the standard “guideline” fees set by the court and trustee and commonly used in bankruptcy cases. Before filing the case, we always provide a breakdown of the guideline fee structure on our contract so the client understands and can ask questions about any fees. All fees are paid through the plan payments to the trustee, so the client never pays a separate payment directly to the attorney or law firm during the plan.
Q: Can I get a new car during my chapter 13 bankruptcy?
A: Yes. Typically, it is necessary to file a “motion to incur debt” if you want to get a new car loan, where you show the new car loan is affordable and makes sense with the plan. But trustees and judges understand that cars break down, and it is very common to get new cars during plans.
Q: Can I try a loan modification during my chapter 13 bankruptcy?
A: Yes, you can try loan modifications with your bank during a chapter 13 case. There are several ways that modifications can impact a chapter 13 plan, and often the timing of the application can make a difference on whether it may be approved. Our firm has extensive experience with loan modifications and real estate law and can guide you in mapping out a plan towards maximizing your overall situation and ability to save your home.