Bankruptcy – Chapter 13 – Living With Your Plan
Bankruptcy – Chapter 13 – Living with your Chapter 13 Plan
BANKRUPTCY: Living With Your Plan: What happens after the confirmation of the Plan.
Q. How do I make Plan payments?
A. Plan payments are made directly to the Trustee. Your employer will be required to deduct the amount of the payments from you paycheck, and send it to your Trustee. If you are self-employed, you will be required to make the payments and keep them current.
Q. What is an Employer Deduction Order?
A. This is an order issued by the Court directly to your employer to require the employer to withhold money from your paycheck and pay it directly to the Trustee. The Order will specifically inform the employer that is not a garnishment and it cannot be considered one for employment law purposes.
Q. How are my creditors paid?
A. All debts provided for under the Plan will be paid by the Trustee according to the priority of their class. Debts within a specific classification (i.e. unsecured debts, priority unsecured debts, etc.) are treated the same. Generally, creditors are paid in the following order: Expenses of case administration (including your attorney’s fees), arrearages on secured debts, secured debts, priority unsecured debts and unsecured debts. Based on the priority of the payment, each creditor within a class is paid a monthly percentage of the amount due them.
Q. What is a Proof of Claim?
A. A Proof of Claim is a statement filed by a creditor with the Court which sets out the amount they are owed, what the debt is for, and what type of debt it is (secured, priority, unsecured). Generally, a creditor will be required to file a Proof of Claim with the Court in order to receive payments under the Plan. If no Proof of Claim is filed, then most debts are discharged without payment at the end of the case. Sometimes a debtor will want to file a Proof of Claim for a creditor so that the creditor is paid under the Plan. This would typically be for a non-dischargeable debt (example: taxes).
Q. What happens to my property during the term of the Plan?
A. You keep your property and have full use of it with one major exception. You cannot sell, pledge as security, give away or otherwise dispose of the property during the course of the bankruptcy. Technically, all of your non-exempt property is a part of the bankruptcy estate as long as the case is pending.
Q. Can I get a credit card? A personal loan?
A. NO. You cannot voluntarily incur any new debt during the course of your Chapter 13 bankruptcy without the express approval of the Court. This basically means no credit cards. The Trustee and the Court will sometimes agree to allow borrowing for special needs situations but this is very limited. And, no, your daughter’s wedding is not a special need.
Q. Can I buy a new car?
A. YES. The good news is that you can buy a new car. The bad news is that, without the prior approval of the Trustee, you cannot borrow money to purchase a car. Cars wear out and sometimes it is necessary to replace them. Trustees are aware of this, and approval of a reasonable loan amount for the replacement of a vehicle will be given if possible. Typically, there may already be a car payment being made under the terms of the Plan, and the replacement vehicle loan payments will not be in excess of the amount of that existing car payment.
Q. Can I buy a car for my teenage daughter or son?
A. YES. But we are back to the good news/bad news situation. You can buy it, but you better be thinking of purchasing the care for cash. It is unlikely that borrowing for this purpose will be approved.
Q. Can I co-sign a college loan for my daughter or son?
A. NO. Co-signing a college loan for your child is the same, from a legal point of view, as borrowing the money yourself.
Q. Can I keep my tax refunds?
A. NO. You are generally going to have to agree to pay all of your tax refund money to the Trustee during the term of the bankruptcy. It will not reduce the amount of your Plan payments nor the length of the Plan. The refunds will be additional money paid to the creditors.
Q. Can I at least keep part of the tax refund money?
A. Maybe. You may be able to keep part or all of your tax refund money if there is a serious need for keeping the money. You will need to file a Motion to Retain Tax Refund and set out fully what the retained money will be spent on. Replacing a heating and air conditioning unit, major car repair and paying state income taxes are typical examples of needs that can be approved.
Q. How do I know what has been paid to my creditors?
A. The Trustees will send you a statement of your account at least once a year. Additionally, the Trustees for the Northern District of Georgia periodically post a summary of your account on a website maintained for that purpose. The site is the National Data Center at www.13datacenter.com. Once your Plan is confirmed, you can register with this site and view your Plan account at any time.
Contacting the Right Attorney: Bankruptcy can be a complicated matter. The responses to these Frequently Asked Questions are general in nature, and are not intended to provide legal advice for specific cases. A consultation with a Georgia bankruptcy attorney can provide you with the information you need to determine which option best addresses your circumstances. As a solo practitioner, I am able to give more time and personalized attention to my clients. I will personally communicate with creditors or banks to resolve your issues. Your case will never be handed down to a legal assistant or other staff member.
NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.