Before the court confirms your chapter 13 plan, you will have to pass what is commonly referred to in bankruptcy law as the “feasibility” test. This isn’t really a test, but the court will look at whether or not the information we provide in the bankruptcy forms and schedules show enough income so that you can make the proposed payments. Whether it is the monthly payments you are proposing or a lump sum payment to be paid at the end of the plan, we should be able to show that the plan can be reasonably completed with the resources we report in the schedules.
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What Happens to Utility Bills in Bankruptcy? When debts pile up, it can become overwhelming to pay any bills. And during the summer especially, Arizona utility bills can be astronomical. And because utilities are very important, you may wonder what will happen to your service if you file a bankruptcy petition. Will you still have utility services after filing for bankruptcy? Section 366 of the Bankruptcy Code governs utility bill debt obligations, and what happens to them in Chapter 7 and 13 bankruptcy. Generally, filing...
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In previous blogs, I have written introductory information about the basic process in chapter 13 bankruptcy. In this next series of articles, I will discuss some of the issues surrounding chapter 13. In order to file chapter 13, you must be an individual with regular income. There are limits to the amount of debt you can have and still be eligible to file chapter 13. As of April 1, 2013 the limits are now $1,149,525.00 for secured debt and $383,175.00 for unsecured debt. These numbers are adjusted every three years. If you are close to these numbers, be sure and contact our office to get the current applicable limitations.
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In the last article I touched briefly on whether or not you could continue to make payments on property used as collateral without having to reaffirm the debt with the lender. To understand your options with regard to personal property used as collateral, I will be using the example of a car loan.
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The overhaul of the U.S. Bankruptcy laws in 2005 significantly impacted the way secured debt is handled in a bankruptcy proceeding. Those changes were to the great benefit of debtors, our clients. Secured debt is a loan where you have pledged an asset (most commonly a car or a house) as collateral. In the event you do not repay the loan, the creditor has the right to take possession of the property, sell it, and recover what money it can from the sale.
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I guarantee that no one wished upon a star as a young person and thought to themselves “I want to be a real estate mogul and a famous singer and…bankrupt!” That has NEVER happened. However, even real estate moguls and famous singers have ended up bankrupt. Do the names Donald Trump or Toni Braxton ring any bells? And look at them both now – very successful again. What they have in common is that they both needed to go through the bankruptcy process in order to regain their spots at the top.
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The ultimate goal of your chapter 7 or 13 bankruptcy is receiving a discharge from the court. In a chapter 7 bankruptcy this occurs after your paperwork is filed, the meeting of creditors is held, the time period has passed for any creditors to object to a discharge, and you have completed your required financial education course.
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After your bankruptcy papers are filed, the court will send a Notice of the Appointment of a Trustee and Notice of the Section 341(a) Meeting of Creditors. Your next step is to make sure you keep any paycheck stubs, direct deposit stubs, bank statements, etc. We will let you know about any other payments that need to be paid within a month or two after your case is filed. Your actual chapter 13 plan payments generally begin within 30 days after you file your petition. We sign you up for the credit counseling course and you will need to complete this course within a specified period of time.
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The Statement of Current Monthly Income is used by judges to determine if your income level raises the question of abuse of the bankruptcy laws. Part of the responsibility of the judge in a bankruptcy case is to ensure that debtors do not abuse the bankruptcy laws and avoid paying debts by filing bankruptcy when they have the means to pay. Prior to 2005, this determination was made at the discretion of judges. After new bankruptcy laws were passed in 2005, judges are no longer able to use their discretion, but instead follow the formulas outlined in the law to determine if there is abuse. The Statement of Current Monthly Income provides this information to the judge.
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Once you file for bankruptcy, there are two things that automatically occur: the automatic stay springs into effect to prevent your creditors from collecting, and the bankruptcy estate is created. The bankruptcy estate defines the nature of your assets by the date and time that you filed for bankruptcy. Money earned immediately before filing for bankruptcy is considered property of the estate, while money earned after filing your petition is not a part of the estate.
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