CHAPTER 7 FILING AND CHAPTER 13 FILING

If you are facing bankruptcy in Brevard County, FL, attorney Paul Daley concentrates his practice on Chapter 7 & Chapter 13 cases. Bankruptcy is a federal statutory procedure that provides relief to individuals and businesses in serious financial trouble. Bankruptcy attempts to provide those who file with a fresh financial start. Bankruptcy was developed to help people, who are suffering through difficult financial circumstances, get back on their feet.
Cases filed after October 17, 2005 must meet the requirements of the Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 (BAPCPA). One of the Act’s many requirements is that consumers must complete a credit counseling session before the bankruptcy petition can be filed, and must complete a financial management course before a discharge can be entered. The U.S. Trustee for each area must approve the counseling and financial management instruction agencies.

WHAT IS CHAPTER 7 BANKRUPTCY?

What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is the most frequently used chapter of bankruptcy and to some, it is the most scary.  It is called a “liquidation bankruptcy” because in this chapter all of the debtors assets become part of the bankruptcy estate. As non-exempt assets are sold, the funds generated are disbursed to creditors in the case.

WHAT IS CHAPTER 13 BANKRUPTCY?

What Is Chapter 13 Bankruptcy?
Chapter 13 of the Bankruptcy code is often referred to as a “wage earner” bankruptcy, wherein the debtor pays to the secured and unsecured creditors monthly based upon income and reasonable expenses. Here, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay regular payments to secured creditors, pay off priority debts, and pay all or part of the unsecured debts based on the debtor’s future income.  It is used more by the debtors who want to keep secured assets and those who have valuable nonexempt property. In short, this process makes up for the past due payments on secured debts over time and reinstates the original mortgage or loan agreement.

Therefore, a Chapter 13 bankruptcy is an apt choice if the debtor is behind on the mortgage or auto loan payments and wants to keep their property.

Preparing and Filing The Petition
A debtor can represent themselves for filing personal bankruptcy; however, representation by an attorney is still recommended. A corporation must be represented by an attorney.

Effective from June 1, 2015, every unrepresented party, including debtor(s) wishing to file a voluntary bankruptcy petition and petitioning creditor(s) wishing to file an involuntary petition in any division of the United States Bankruptcy Court for the Middle District of Florida, must provide acceptable photo identification at the time of filing, and the required debtor(s) or petitioning creditor(s) signatures on the petition.

All official Bankruptcy forms are available on the United States Court’s website at: http://www.uscourts.gov. In filing the petition, the following rules need to be followed:

  • Documents be printed on a 8 ½ X 11 inch paper on one side of the paper only, and
  • Original signed documents provided to the Court.

Further, the below documents must be filed and arranged in the following sequence:

  • Voluntary Petition (B101)
  • Summary of Assets & Liabilities and Certain Statistical Information (B106Sum)
  • Schedule A/B – Property (B106A/B)
  • Schedule C – The Property You Claim as Exempt (B106C)
  • Schedule D – Creditors Who Hold Claims Secured By Property (B106D)
  • Schedule E/F – Creditors Who Have Unsecured Claims (B106E/F)
  • Schedule G – Executory Contracts and Unexpired Leases (B106G)
  • Schedule H – Your Co-debtors (B106H)
  • Schedule I – Your Income (B106I)
  • Schedule J – Your Expenses (B106J)
  • Declaration About An Individual Debtor’s Schedules (B106-Declaration)
  • Your Statement of Financial Affairs (B107)
  • Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period and Calculation of your Disposable Income (B122C-1 & 2)
  • Mailing matrix, on paper, Complete Names and Addresses only
  • A fully completed form (B121) – along with a Statement About Social Security Numbers
  • Disk containing creditor information

Other applicable documents that can be filed as and when required:

  • Application for Individuals to Pay the Filing Fee in Installments (B103A)
  • Chapter 13 Plan available at:
    http://www.flmb.uscourts.gov/procedures/documents/Chapter13Plan.pdf
  • Disclosure of Compensation of Attorney for Debtor (B2030)
  • Disclosure of Compensation of Petition Preparer (B280)
  • Declaration and Signature of Non-Attorney Petition Preparer/Notice to Debtor by Non-Attorney Petition Preparer (B119)
  • Statement of Military Service (B2020)

Filing Fees
The payment mode needs to be in the form of a money order, cashier’s check, or through cash if filing in person. Personal checks are not accepted. Current rates of the fee is available at: http://www.flmb.uscourts.gov/filingfees/

However, B103A provides for payment of the filing fee in installments. The number of installments is limited to 4 and the final payment must be made within 120 days after filing the petition. Bankruptcy Rule 1006(b) allows for waiver of the filing fee.  In order to completely waive (B103B) the filling fee, qualifications under 28 U.S.C. § 1930(f) must be met.

Credit Counseling
Before filing the petition for Bankruptcy in Chapter 13, debtors are required to obtain a certificate of completion from approved credit counseling provider. This certificate  is required to be obtained within 6 months prior to filing of the petition. During the counseling, an individual provides information regarding his or her income, expenses or debt and the counselor evaluates his or her financial options and determines his ability to repay debts through a repayment plan without filing for bankruptcy. This helps individuals explore all options before seeking Bankruptcy relief.  Following the filing of bankruptcy a debtor education course is required.  This course is meant to instruct individuals and promote responsible use of credit in the future.

On April 15, 2013, the Executive Office for U.S. Trustees (EOUST) announced new policies on credit counseling and debtor education requirements noted as under:

  • Quality – The counseling must not be generic but individually specific to the debtor.
  • Fees – Credit counseling agencies and debtor education information providers must charge a reasonable fee that is $50 or less.
  • Testing – If an individual takes the course over the phone or Internet, they will have to take a test before completion of the course.

Petition Review
Before the actual filing of the Bankruptcy Petition, the petition should be carefully reviewed so that the debtor’s monthly plan payment can be based upon the current circumstances. It is highly recommended that you use an attorney.  The Middle District of Florida, Orlando Division has a pro se clinic that may be able to assist if you do not have an attorney.

Meetings and Notices
Once the petition for Bankruptcy is filed, there is an automatic stay that prevents creditors from attempting to collect on their debts. A trustee is appointed within a few days of filing the petition, and the notice of appointment is then received from the court. Next, the court sends the notice of Chapter 13 case to the creditors containing the general information about Chapter 13 bankruptcy, a summary of the Chapter 13 plan, the date of the meeting of creditors; the date of the initial confirmation hearing, and the deadline by which the creditors have to file their claims. Once the trustee has been appointed, they will hold the meeting of the creditors (341 meeting) and will review the petition filed. The meeting is scheduled at least 21 days but not more than 50 days following the filing of the bankruptcy petition. The 341 meeting takes place in a room, not in a court room and there is no judge to preside over the meeting. The trustee is the sole chairman of the meeting. Documents such as driver’s license, social security card, etc. for identification is required at the meeting.

Within 45 days of the end of the meeting, an initial confirmation hearing is scheduled by the clerk before the bankruptcy judge. The judge will review the repayment plan to determine if the plan is feasible. If any issues arise that cannot be addressed at the 341 meeting, the bankruptcy trustee or any creditor can raise those issues during the confirmation hearing. After the plan is confirmed, the repayment plan continues for the designated period of 3 – 5 years.

Deadlines Of Objection
The Bankruptcy Code provides creditors with certain rights, including the right to question the debtor, review the debtor’s financial affairs, and appear and be heard in matters that affect the creditor. To protect those rights, creditors need to be aware of and comply with the deadlines set by the court. In a chapter 13 case, a motion objecting to the debtor’s discharge under §1328(f) shall be filed no later than 60 days after the first date set for the meeting of creditors under §341(a).

Creditor objections are usually designed to push you to modify the plan to pay more each month or increase the total paid to the objecting creditor. There are many reasons why a creditor might file an objection and some of them may be monthly payments being too low, plan running too long, plan filed in bad faith, etc.

An objection to confirmation of the plan shall be filed with the court and served upon the debtor, debtor’s attorney, the Chapter 13 trustee, and any other party in interest at least seven (7) days prior to the confirmation hearing date set in the Notice of Hearing on Confirmation of Plan or Notice of Modification of Chapter 13 Plan.

Proof Of Claim
A proof of claim is a written statement that notifies the bankruptcy court, the debtor, the trustee, and other interested parties that a creditor has a valid claim against the bankruptcy estate. All unsecured creditors must file the proof of claim within 90 days after the first meeting of the creditors (non-governmental creditors) and 180 days after the date of order of relief (for governmental creditors). An unsecured claim which arises in favor of an entity or becomes allowable as a result of a judgment may be filed within 30 days after the judgment becomes final. The proof of claim must be filed in Form B10. If the creditor does not file a proof of claim, it may not be eligible for disbursements through bankruptcy.

Any party in interest may object to a claim in a Chapter 13 bankruptcy case. This often includes the debtor objecting to the amount of the claim being incorrect; or when the claim is incorrectly classified as a secured or priority debt; or when there is no supporting documentation attached to the claim form.

Motions
Usually in Chapter 13 cases, there is no involvement of a judge, except when a dispute, objection or other issue arises. Following are some of the motions filed on the bankruptcy cases.

  • Relief From Stay: Motions are routinely filed by secured creditors to obtain relief from the stay that bars them to from foreclosing, repossessing or seeking relief they are entitled to under a security agreement while the bankruptcy is open. If filed with negative notice and the debtor fails to respond in 21 days of the notice of the motion, the motion is promptly granted. If not filed with negative notice a hearing will be set on the matter before the judge.
  • Objection To Claim: When creditors file proofs of claim that the debtor, trustee or other party in interest believe is improper an objection must be filed. If filed without negative notice most objections will be heard at the confirmation hearing.  If filed with negative notice, the creditor has 30 days to respond; otherwise, the claim will be disallowed.
  • Valuation: Secured creditors are entitled to payment of their claim, payment of the value of the asset in some circumstance or have their collateral returned. There are often cases when the parties disagree about the value of the collateral. The debtor can obtain a court ruling on value by filing an objection to a creditor’s proof of claim or a motion to value the asset. If the judge determines the value to be something the debtor can afford to pay during the bankruptcy, the debtor can keep the secured asset and only pay the value of the asset not the amount owed under the contract.
  • Motion To Dismiss Or Convert: The US Trustee is an employee of the Department of Justice and is different from a Chapter 13 Standing Trustee. The US Trustee, charged with, among other things, enforcing the “means test” requirement that requires debtors whose earnings exceed the median file 5-year Chapter 13 repayment plans. If the US Trustee is correct, the debtor is allowed to choose to dismiss the filing as an alternative to proceeding in Chapter 13 for a 5-year period.
  • Motion To Determine Secured Status: Applicable law provides that a Chapter 13 debtor may avoid a junior lien on the debtor’s residence or other assets under certain circumstances. First, if a debtor wishes to confirm a Chapter 13 plan that treats a junior lien holder as unsecured, the debtor must file a motion pursuant to Rule 3012 of the Federal Rules of Bankruptcy Procedure. Second, if the Court grants the motion and confirms the Chapter 13 plan, then at the end of the case that the lien is invalid.

Chapter 13 Plan
A plan is basically the crux of the Chapter 13 Bankruptcy case. A Chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. Chapter 13 offers individuals an opportunity to save their homes from foreclosure and their vehicles from repossession. By filing under this chapter, individuals can stop foreclosure proceedings. An individual who is self–employed or operating a business is eligible for this relief. To begin the process, various forms are filed listing the income, property, expenses and debts. A payment plan is also filed giving information regarding how the debts would be handled. This plan must be confirmed by the court in order to be finalized. All the interested parties have a chance to review the plan. A Chapter 13 trustee is appointed to review the plan and make sure it complies with the Bankruptcy Laws. Creditors have the right to object to it, if they feel they are not properly treated in the plan. There are different types of debts that are paid and those are secured claims, unsecured priority claims and general unsecured claims.

Initial Confirmation
The initial confirmation hearing shall not be held earlier than 20 days and not later than 45 days after the date of the meeting of creditors. In the Orlando Division, most initial confirmation hearings are not held. At the initial confirmation, the judge can confirm a plan that provides for all creditors, priority unsecured claims and dedicates all disposable income to unsecured non-priority claims.

Confirmation
If the court confirms the plan, the Chapter 13 trustee will distribute funds received under the plan “as soon as is practicable.” If the court declines to confirm the plan, the debtor may request a continuation of the confirmation hearing and file a modified plan that may be acceptable to the court. When a plan is confirmed, it resolves all issues and determines the proper treatment of all claims filed with the court.

Financial Management Requirements
All debtors under this chapter are required to file a statement regarding completion of a course in personal financial management as a condition for receiving a discharge. Form B423 is filed in this regard. This form shall be filed not later than the last payment made by the debtor as required by the plan.

DSO Requirements
USC §1328 states that in order to receive the discharge of the debt, the debtor has to certify the court that DSO (Domestic Support Obligations) have been satisfied. DSO is basically a debt that accrues along with interest before or after the petition date. The debt must be in the nature of alimony, maintenance or support owed to a spouse, former spouse, child, or child’s parent, legal guardian or responsible relative, and established by an agreement (a separation agreement, property settlement agreement), a court order (including a divorce decree), or any determination by an appropriate governmental unit.  If the debtor files for the waiver of discharge in regard to domestic support obligation, the current requirement of filing of certification can be waived by the court. The domestic support obligation certificate should be filed within final 90 days of the plan. Unless and until DSO is cleared, the Bankruptcy Court cannot discharge the debtor under their Chapter 13 plan.

Discharges
A Bankruptcy discharge releases the debtor from specified types of debts. It basically prohibits the creditors’ of the debtor from taking any action against the debtor to collect their debts. In Chapter 13, the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. The clerk of the Bankruptcy court mails a copy of the discharge to the creditors and the debtors.

In Chapter 13, the debtor generally receives a discharge only after completing all payments required. There are few of the debts that are dischargeable for Chapter 13 and not for chapter 7 of Bankruptcy rules that includes debts for willful and malicious injury to property, debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings.

Also, in chapter 13, a hardship discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor’s control.

DO I NEED AN ATTORNEY TO FILE MY BANKRUPTCY?
The right decision for you depends on evaluation of your family status, assets, obligations, and other factors. Filing for bankruptcy is a very serious step that could affect you for the rest of your life. Without the right attorney, it is possible that a person filing a bankruptcy claim will lose all assets and still come out owing all of his or her debts. A bankruptcy attorney can explain how the process works, help you reach an informed decision, and protect your assets.

HOW DO I FILE A BANKRUPTCY PETITION?
When filing a bankruptcy petition, a debtor is required to appear at a meeting conducted by either a trustee or the United States Trustee, during which creditors may ask questions regarding the debtor’s finances, assets, and liabilities. While this may be intimidating, having an attorney represent you at your court appearance can provide you with the advice you need and, in turn, the confidence necessary for sound decision-making when dealing with financial distress.

WHAT ABOUT MY CREDIT RATING?
Does bankruptcy affect your credit rating? Yes. Bankruptcy stays on your record for seven to ten years. The law prevents certain governmental units and agencies from discriminating against persons who have filed bankruptcy. After filing, some people have found that by making timely payments, such as car, house, or utility payments, they can begin to re-establish their credit. However, individual credit ratings are based on overall credit history, as well as income and assets, and it may be harder for some people to re-establish a good credit rating than for others. Unfortunately, very often student loans are non dischargeable, regardless of the age of the loan, unless the borrower can establish substantial hardship.