EVEN THOUGH WE CONSISTENTLY ADVISE OUR CLIENTS TO NOT BE WORRIED ABOUT THEIR APPEARANCE AT THEIR CREDITOR’S MEETING, IT IS INEVITABLE THAT IT FALLS ON DEAF EARS.
Every person who files for bankruptcy must attend what is commonly referred to as a “creditor’s meeting” or Section 341 meeting. Because it is referred to as a “creditor’s meeting” bankruptcy clients assume that they are going to be grilled by questions from their creditors. In actuality it is extremely rare for a creditor to appear at a creditor’s meeting and ask questions of a Debtor.
For those persons filing for Chapter 7 bankruptcy they can expect that they will be asked a series of questions by us that will track very closely with this outline. In addition, since the Trustee’s role in a Chapter 7 bankruptcy is to identify any assets that might be non-exempt under the law, you should be prepared to respond to the Trustee with information associated with assets. You can expect that if we have filed your bankruptcy we are going to discuss this possibility prior to your appearance at the meeting.
In a Chapter 13 bankruptcy you should expect that a member of the Trustee’s staff to ask a series of questions that will track closely with this outline. In addition, be prepared to discuss with the Trustee’s office those things that we have previously advised you might be a topic of discussion.
The greatest piece of advice that I can offer you is to relax and not be anxious about your appearance at the creditor’s meeting. These meetings are very routine and you have hired a lawyer for a purpose, to help shepherd you through the process.
IF YOU ARE A CHAPTER 13 CLIENT YOU CAN COMPLETE THE DEBTOR EDUCATION COURSE THROUGH THE CHAPTER 13 TRUSTEE’S EDUCATION NETWORK (TEN)
All consumer bankruptcy clients must complete a second course in order to receive a discharge upon plan completion. This second course is referred to as Debtor Education or Financial Management. The Chapter 13 Trustee in the Eastern District of Texas participates in the Trustee’s Education Network and offers the completion of the second course online. This brochure offers information regarding the course, which can be accessed online at www.13class.com. If you are an existing client I can provide you with the information needed for registering for the course online.
HAVE YOU RECEIVED A MOTION FOR RELIEF FROM AUTOMATIC STAY IN THE MAIL WHILE YOU ARE IN A CHAPTER 13?
I always tell Chapter 13 clients if they receive what is known as a “Motion for Relief from Automatic Stay” it generally means that they are not doing what is required under their Chapter 13 Plan of Reorganization. There are exceptions, but they are rare and I want to provide information to my Chapter 13 clients who are facing a Motion for Relief.
If you receive a Motion for Relief from the Automatic Stay in the mail and I am representing you in a current Chapter 13 case, then I have already received the Motion electronically before you receive the same in the mail. If I don’t make contact with you about the Motion, then I would respectfully request that you make contact with me to discuss why the Motion was filed. Even though car creditors can file a Motion for Relief, it is more common for your mortgage company or mortgage servicer to file the Motion.
Why was the Motion filed? Typically it means you have failed to stay current with the direct payments to your mortgage company during the course of your Chapter 13 Plan. This means you are not in compliance with the terms of your plan. Under those circumstances the mortgage company is asking the bankruptcy court to lift the automatic stay (which prevents the mortgage company from foreclosing while your in the bankruptcy).
When a Motion for Relief is filed it is necessary for me to object to the Motion within a set period of time. The bankruptcy court then sets the Motion for hearing. The setting of that hearing generally spurs a conversation between myself and the attorney representing the mortgage company. For informational purposes we are going to assume that an agreement is worked out between myself and that attorney, which is the case the majority of the time. That agreement is typically reduced to writing in an Agreed Order that is presented to the bankruptcy court for approval. Again, most typically the agreement gives the Debtor a six month period to cure the post-petition mortgage arrears. These are the payments that came due after the filing of the bankruptcy case, but were not made by the Debtor. It is important to keep in mind that these post-petition arrearages must be made in addition to the plan payments and the normal direct payments to the mortgage company.
What happens if a payment called for under the Agreed Order is not made, or the normal direct payments to the mortgage company and/or plan payments are not kept current? If this occurs the mortgage company will send the Debtor a Notice of Default by mail. This Notice of Default will give the Debtor ten (10) days to cure the default. If the default is not cured within that ten (10) day period, then the automatic stay will lift and the mortgage company can resume all collection activity, including proceeding with a foreclosure. If the Debtor defaults for a third time under the typical Agreed Order, then the stay will automatically lift upon that third default.
As always, any opinions expressed on this website are just that, opinions. Your individual situation might be different than outlined above, so it is probably best that you give me a call to discuss your individual situation.
CHAPTER 13 PAYMENTS FOR THOSE PERSONS WHO ARE NOT EMPLOYED CAN BE SET UP TO COME OUT OF THE DEBTOR’S BANK ACCOUNT
The Chapter 13 Trustee for the Eastern District of Texas uses TFSbillpay to allow for monthly payments to be deducted from a bank account. For those persons on a fixed income the payment can be set for a date that falls after the day on which deposited funds have hit the bank account.
Click on this link to go to the TFS website. Instructions on setting up the automatic debit can be found on the TFS website.
If the Debtor in a Chapter 13 case has been required to file federal income tax returns in the years prior to the filing of bankruptcy, then a refund amount for future years is estimated based on these refunds and circumstances of the past.
All Chapter 13 bankruptcy filings are based on a budget that is proposed by the Debtor which reflects all of the Debtor’s income and expenses. The income of the Debtor includes any estimated income tax refund, because any refund represents money that the Debtor did not actually owe to the Internal Revenue Service.
An example of a typical scenario in a Chapter 13 case might help to understand income tax refunds in a Chapter 13 case. Assume that the Debtor received a refund of approximately $3,000.00 in the year prior to the filing of bankruptcy.
Again, because that money was not owed to the Internal Revenue Service it is added to the Debtor’s income in the proposed Chapter 13 budget.
Since that income is available to fund the Debtor’s Chapter 13 Plan the estimated refund amount will be given to the Debtor.
If the refund amount from the Internal Revenue Service exceeds the estimated amount put in the budget (i.e. The amount estimated in our sample case, $3,000.00), then the Debtor is required to turn the excess refund amount over to the Chapter 13 Trustee.
So, if the Debtor receives a refund of $4,000.00, then $1,000 must be turned over to the Chapter 13 Trustee. This $1,000.00 will go to pay unsecured creditors in the Debtor’s case.
Income tax refunds are of course monitored by the Chapter 13 Trustee through a review of the annual income tax returns of the Debtor during the pendency of the case.
Debtors are required to furnish a copy of their return to the Chapter 13 Trustee within ten (10) days of filing the same with the Internal Revenue Service.
One important thing for a Debtor to keep in mind when calculating refund amounts is that the Trustee will not allow the Debtor to deduct amounts paid for a rapid refund.
So, if the Debtor is paying $200.00 to the tax preparer for a rapid refund and is required to turn over $1,000.00 to the Trustee, the $1,000.00 cannot be reduced by the rapid refund amount.
The Trustee will however allow for the deduction of the normal fee paid for the preparation of the income tax return.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law, can be very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.