Chapter 13

Chapter 13 Articles:

Chapter 13 Questions:

Q: In a joint case, can you convert one debtor to a chapter 7 while the other debtor continues with his chapter 13 bankruptcy case?

A: No, you can’t convert only for one debtor. The court would deny a motion to sever the case. At least here in St. Louis, MO. It might be different in other districts. You have three options: both debtors continue with their chapter 13 case, you file a motion to dismiss as to one debtor only and that debtor files then a chapter 7. Or your attorney files a motion to sever the case and appeals the court decision. This is only an option if you really want to argue in front of the Appeals Court and have plenty of time.

Q: Who is the Chapter 13 Trustee in St. Louis?

A: John V LaBarge, Jr. is the Chapter 13 Trustee for the Eastern District for Missouri. Even though we have eleven chapter 7 trustees in St. Louis and St. Charles, two in Cape Girardeau, and one in Hannibal, we have only Chapter 13 Trustee for the whole St. Louis Metro area. That mean all debtors have to come to St. Louis for the Trustee’s meeting. In a chapter 7, clients in St. Charles, Lincoln and Warren County meet in Wentzville for the Trustee’s meeting.

The trustee has a huge office to run, he has over 11,700 ongoing cases to administer, he has 34 full-time employees, and disburses over 6 million dollars to creditors per month. He sends out about 3,300 checks each month. In a chapter 13, the debtor sends a monthly payment to the trustee in form of a money order or cashier’s check. Each day, the trustee process an average of 750 payments.

Q: Why does my payment not show up on the trustee’s website?

A: The trustee’s website is updated daily but it is published one day delayed. That means even though the trustee received your payment today, it will not show until tomorrow.

Q: When is my first plan payment due?

A: Your first plan payment is due and should be made right after filing of your bankruptcy case, your payment is delinquent to the trustee after 30 days of filing of your petition. If you are employed, you should ask your attorney to set up a Wage Order, so that your monthly payment is automatically taken out of your pay check. It is important that the trustee’s payments are made timely. If you send it the payment to the trustee, make sure the trustee receives it before the 15th of each month. If he receives it after the 15th, he will distribute the money to creditors the following month. When creditors don’t receive their monthly payment from the trustee, they might report negatively to credit reports. You have 30 days for each payment. You can split your monthly payment and send it weekly or bi-weekly. You don’t have to send the full amount in one payment.

Q: Why are my creditors not getting paid?

A: Creditors are being paid according to your chapter 13 plan. The trustee will start disbursing funds after your plan has been confirmed by the court. The confirmation hearing is normally two months after the filing of the case. Secured creditors will small payments before confirmation, so called adequate protection payments. This is a payment to compensate creditors for depreciation of their collateral each month.

Q: The trustee is paying a creditor even though you surrendered the collateral or dispute the debt, what can you do?

A: If you dispute a debt or surrendered the collateral, the trustee will pay on a claim filed by your creditor until your St. Louis bankruptcy attorney objects to the claim. If a secured creditor has filed a Motion for Relief, no objection is necessary, because the trustee stops making payment as soon as the Motion for Relief is filed.

Q: What should I do when a Motion for Relief is filed?

If you want to surrender the collateral, meaning you don’t want the car, or house that secures the loan, you let the motion be granted, but then you should make sure the chapter 13 plan is changed to show the collateral is being surrendered. This has a legal reason, otherwise it might be that the debt is still owed and does not participate in the discharge of your case.

If you want to keep the collateral, and the motion for relief was file because you fell behind with your payments, you should work something out with your creditor or become current with your plan payment. You can either file a new plan that catches you up with your plan payment and set up a wage order, or you can enter into a stipulation agreement with your creditor in which you make additional monthly payments towards the post petition arrearage.

Q: I entered into a stipulation agreement but the creditor filed a Notice of Default, what should I do?

A: Your bankruptcy attorney has now 14 days to file a response. Then, the creditor will set the original motion for relief for hearing. If you are not current with your plan payment and your stipulation payment, the court will grant the motion for relief. If you don’t file a response within 14 days, the original motion for relief will be automatically granted.

Q: The motion for relief for my home was granted, what should I do next?

If you want to let your house go back to your creditor, your attorney should change the plan and list the house as being surrendered and possibly change the plan payment. If you want to keep your home and think you now can afford the payments, contact your mortgage company to see if something can be worked out. After the motion for relief is granted, your mortgage company might talk to you directly. Your attorney cannot talk to your mortgage company directly, he is required to talk to their attorneys and the mortgage company would not talk to your attorney as he is not listed on your account. In the case your mortgage company does not want to talk to you because you are represented by an attorney, have your attorney write a letter giving your mortgage company permission to speak to you directly.

Q: My mortgage company does not work with me, they say they will start foreclosure proceedings. What should I do?

A: You should discuss the next steps with your bankruptcy attorney. It appears that you cannot make the plan payment including your mortgage payment. One consideration is to let the house go. If you think that income increased or expenses decrease or it was not good budgeting that led to the motion for relief and you want to keep your house, your attorney might suggest to let the chapter 13 case get dismissed to re-file a new chapter 13 case. However, if you voluntarily dismiss the chapter 13 case because a motion for relief has been granted previously, you cannot file a new chapter 13 case for 180 days. Your mortgage company might file an objection to the new case stating that according to paragraph 109(g) U.S.C. saying that you cannot be a debtor if you dismissed your previous case because of the motion for relief. It is important to mention that the dismissal must be in relation to the motion for relief. Our office had a case in which a motion for relief was granted, the debtor decided to let the house go, but was unable to convert to a chapter 7 because of a previous chapter 7. However, dismissal and re-filing of a new chapter 7 was possible. The chapter 7 trustee objected saying, the debtor was not eligible to file a chapter 7 because she was barred for 180 days. The trustee erred and misunderstood the provision of 109(g). The chapter 13 was not dismissed because of the motion for relief was granted and to re-file a chapter 13, the chapter 13 was dismissed because conversion to a chapter 7 was not possible. So the reason for dismissal will be important. If you dismiss your chapter 13 case a few days before the foreclosure and then re-file a new chapter 13 case to stop the foreclosure, it appears that the case has been dismissed because the motion for relief has been granted and you wanted a new automatic stay to stop the foreclosure. You won’t have a good argument why you should be allowed to re-file your chapter 13 bankruptcy case.

The alternative is to stop making plan payments to the court, and letting the bankruptcy case get dismissed by the court for failure to make plan payments. If the case gets dismissed prior to your foreclosure, you can re-file. You normally need to be two months behind in your payments for the trustee to file a motion to dismiss. When you refile, you most likely will have your previous case dismissed within the last year, in this case, the automatic stay is in place for only 30 days. Your attorney will have to file a motion to extend the automatic stay. The stay will only be extended if you set up a wage order, and can show a change in circumstances from your previous case. That means you should have either more income or less expenses or other reasons which will make it more likely that the new case will be completed and not dismisses again.

Q: Why do I have to provide pay stubs for the last two months before filing?

A: The trustee is required by law to verify your income, and must review your pay advises (how it is called in the Code), covering the two months prior to filing. If the chapter 13 trustee does not receive the pay stubs within a week prior to your 341 meeting, the trustee will not hear your case. Your case will be continued.

Q: Why is the trustee filing an “intent do pay claims” document?

A: This is important. You and your attorney should look at all claims filed. If you a claim is not listed that should be paid, such as your car or mortgage, contact your creditor to file a claim. Your creditor will not get paid without the claim filed with the court. If you creditor is not filing the claim, your attorney can file the claim for the creditor. Even though your attorney will not have the exact loan information, the court will consider it to be sufficient to file the most recent statement you received from your mortgage company together with the claim. If a claim is not filed and the loan is not getting paid, the creditor still has the lien on your house or vehicle. After your bankruptcy is over, your creditor might start foreclosure proceedings or repossess the car if no payments were made. The creditor however must file documents showing that the lien has been perfected. If these documents are not filed, the trustee will object to the claim.

Q: Can I keep my tax refund or do I have to turn it over to the chapter 13 trustee?

A: In St. Louis, you can keep $600 of your tax refund or the amount of two monthly plan payments whatever is less. If you are a joint filer, meaning you filed together with your spouse, you cannot  double that amount, it is still only $600 maximum. The trustee does not have a procedure in place to check on your tax refund every year. It is your responsibility to turn it over to the trustee. If you need the tax refund to pay necessary and reasonable bills, your bankruptcy attorney can file a motion to retain the tax refund in the amount necessary to pay these bills, the remaining portion of the tax refund would have to be turned over to the trustee. If you don’t turn over your tax refund, and the trustee notices this later, he will just add the tax refund to your payments due. That means if your tax refund was $4,000 and your monthly plan payment is $1,000, it would be treated as if you are 4 months behind with your plan payments. The next step would be that the trustee files a motion to dismiss for failure to make plan payments. When you want to amend a confirmed plan, the trustee will request a copy of last years tax return to check if you received a tax refund that should have been turned over to the trustee. It is important to make sure the tax refund is either turned over or a motion to retain is filed by your attorney.

Q: What should I do when I received a Notice of Lack of Feasibility? Can I just pay more to the trustee?

If the plan is not feasible, it meas that the claims filed by your creditors are higher than the amounts listed on your plan. All the monthly payments added together is your “plan base”. The trustee will make payments to the creditors based on the claims they filed but he cannot pay out more money than the plan base. That means if your car creditor filed a claim of $5000, and your plan lists the debt owed to the car creditor with $3000, you plan is $2000 short of being feasible. If the feasibility problem is not resolved, the trustee will either file a motion to dismiss your case or he will object to discharge at the end of the plan. This can be a rough awakening at the end of the plan if you have made your plan payments for the last 5 years and your will receive either a motion to dismiss or an objection to discharge at the end of your plan. What can you do?  If your plan is only a few hundred dollars short, you still can file a motion to increase the plan base of your plan and file an amended plan. Even though you might have hit the 60 th month of the plan, you can extend the length of your plan, by filing the motion and perhaps obtaining a continuance. When the motion is granted, the debtors had hopefully sufficient time to pay more money to the trustee to cure the feasibility problem. If you are in your last 2 months of your plan, you can increase your plan base by sending a letter to the trustee signed by the debtor.

My chapter 13 bankruptcy case has been dismissed for failure to make plan payments, can I get it reinstated?

Yes, your bankruptcy attorney will need to file a motion to reinstate within 2 weeks of dismissal. You will have to be current within the 14 days after dismissal. The attorney normally waits several days after the 14 day deadline to review the motion. If a new payment is becoming due, and you have not made your most recent payment to the trustee, he will object to the motion to reinstate your case.

What is the interest rate secured creditors receive in my chapter 13 bankruptcy case?

The chapter 13 bankruptcy modifies the loan interest rate. You don’t have to pay the contract interest rate anymore in your chapter 13 bankruptcy case. The court’s interest rate is listed on the court’s website and changes every 6 months. In most cases the interest rate set by the court is lower than the interest contract interest rate. Currently, the court’s interest rate is 5.04%. You have to review the claim your creditor is filing with the court. The loan balance often includes not only the loan balance but also the contract interest. Your bankruptcy attorney would need to object to this claim. The claim should be allowed only for the loan balance. If the claim includes unmatured interest, it would violate section 502(b)(2) U.S.C.

What are the insurance requirements in a chapter 13 bankruptcy case?

Local Bankruptcy Rule2011 Local Rules Final requires a debtor to maintain insurance on any motor vehicle on which a lien exists to secure a debt. You need to have prepaid insurance for three months, the deductible is not more than $500, and the lien holder is listed as the loss payee. If your contract with your creditor requires you to have insurance with a lower deductible, you will need to maintain insurance with the lower amount during the bankruptcy. These provisions can be changes with consent of the creditor.

How do I value my car in a chapter 13 correctly?

The value of the vehicle is determined by the National Automobile Dealers Association (NADA), it is 97% of the retail value at the time of filing the petition. Why is this important? The value is important for example in the case where the debtor crams down the loan to the market value. If you purchased your car more than 2.5 years before filing of the bankruptcy case, you don’t pay the full loan balance, you only have to pay the value of the car.

I am a creditor and received the notice of commencement, I missed the deadline to file a claim, what can I do now?

The deadline to file claims is generally 90 days after the first set for the meeting of creditors. If you miss the deadline and file your claim later, the trustee will file an objection for a late filed claim. You can file a motion to allow late filed claim if you have a reason why the claim was filed late. If you have not been able to file the claim because you were in the hospital or you received notice late because the debtor did not list your correct address, the court most likely will allow your claim even though it was filed after the deadline.

My creditor has not filed a claim, but I want this creditor to be paid, what can I do?

If you creditor does not file a claim, the trustee will not pay the creditor even though the creditor is scheduled in your chapter 13 plan. If your want the debt to be paid, for example a student loan or a loan for your car, your bankruptcy attorney can the claim for the creditor.

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