Why I will be Rude to You After You File Chapter 13
I like my clients. I find bankruptcy work rewarding because I can offer positive change to the lives of honest, hardworking people who have an immediate financial problem.
However, I can be an absolute pain in the rear end to my Chapter 13 clients after we file and during the two to four month period of time prior to the plan confirmation hearing.
Why does this disconnect exist? Why would you want to hire a lawyer who will be demanding and abrupt? The answer is simple – if you want your Chapter 13 to work, you and I have a lot of work to do after we file but many Chapter 13 debtors do not realize this.
It is tempting to think that your problem has been solved the minute we file your Chapter 13 case. The immediate pressure of foreclosure, repossession, wage garnishment and lawsuits is gone and all adverse creditor action stops. The phone stops ringing and the collection letters dwindle.
The first court hearing – your meeting of creditors – won’t occur for 30 to 45 days so it is only natural that you will enjoy the quiet.
Unfortunately the peace and quiet you are experiencing will not last and I cannot allow you to become complacent. Here are just a few of the things that I will start nagging you about:
Funding your plan – a lack of funding is the number one problem in Chapter 13 cases. Your obligation to fund your case begins the minute we file. Yes we have filed a payroll deduction order but often the deductions from your employer won’t start for two or three pay cycles. Until the payroll deduction kicks in, you and you alone are responsible for sending money to the trustee. I tell my clients to assume that they should expect to personally mail in the first one or two bi-weekly or semi-monthly trustee payments.
Your case will not be confirmed if the trustee shows a funding delinquency so I will bug you repeatedly to send money in to the trustee.
Post-petition mortgage payments – if you have a home that you intend to keep and if your plan calls for direct payments of your mortgage, you are responsible for sending in your mortgage payments on time starting with the next payment that comes due. You cannot be late. You will most likely not get a mortgage statement, and the lender may cut off phone access (they do this to avoid bankruptcy stay violations). You need to know how much you must pay every month and you must send in the money. And you must keep records to prove you have made the payments. I will bug you about this.
Child Support – if you are paying child support, you must remain current for the duration of your case. The judge will not confirm your plan or issue a bankruptcy discharge in 5 years if your child support falls behind. You will be asked to show proof that you have made each and every child support payment after your filing date so keep records.
Insurance – mortgage lenders and vehicle lenders have a right to demand that you keep insurance on your house or vehicle. If you let the insurance lapse they will file a motion for relief from stay so they can take your property. Here, too, you have to have proof.
Identification – you will need two forms of ID at your meeting of creditors hearing. One must be a photo ID (driver’s license or passport) and the second must be a government or insurance issued ID with your full Social Security number (not just the last 4 digits). If you show up at your meeting of creditors without 2 forms of ID, the trustee will not hold your hearing and we will both have to come back. Get your ID info together now.
Tax returns – we will need to submit a copy of last year’s federal tax return to the trustee prior to your meeting of creditors hearing. Not the day before, but at least a week before. So you will need to get that tax return to me so I can redact your personal information and send to the trustee. You will also need to file your tax returns on time each year while you are in Chapter 13.
If you failed to file a tax return for past years, you need to get those returns filed. The IRS will file an estimated liability claim for unfiled tax return years and the judge won’t confirm your plan if there are unfiled returns. Don’t wait until the week before confirmation to address this.
Student loans – I see student loan issues in just about every Chapter 13 case I file. Do you know how your student loans will be treated in your Chapter 13? Is your plan funding them? Are you paying your student loans directly? Are you keeping them in deferment? Do they become payable at some point during your Chapter 13. You need to know.
Step plans – many Chapter 13 plans I file contain “step” provisions which require us to increase or decrease your plan payment at some point during the 5 year term of your case because something has happened – you have paid off a lease, your student loan deferment stops, your child graduates college. You need to read and understand your Chapter 13 plan so you know what to expect.
Your budget – when we file your Chapter 13 case, we will propose a repayment plan that reflects our best guess as to what is needed to pay back your creditors as the law requires. I believe in starting with an aggressive plan since I want you to pay as little as you have to pay. I will tell you that your plan payment is likely to go up so assume that it will.
100 times out of 100, however, our estimates of claims filed in your case will be wrong. The trustee or creditors may object. We may (probably will) have to increase your plan payment to get it confirmed. As your attorney, I will bring you the bad news that you need to pay an extra $100, $200 or more each month to your plan. You should expect this and not be surprised when I call you the week before confirmation.
Last minute shenanigans. I hate to leave things to the last minute (well, my wife might tell you otherwise but that is a different story). In the bankruptcy world, however, it seems that everything happens last minute. Chapter 13 trustees are busy. If I call your trustee two weeks before confirmation he/she may be too busy to call me back. It is not uncommon for me to get a response from the trustee at 10:47 pm on the Sunday night prior to Monday’s confirmation hearing with a list of changes the trustee wants. This is just reality. So don’t be surprised if I call you with an urgent demand for a decision NOW. This means that I need to be able to reach you on your cell phone or by email at any time. I am trying to avoid the need for you to have to take time off work to go to court and I am trying to avoid resets where we have to go through this mad rush yet another time.
So there you have it – a glimpse behind the scenes of what to expect when you file Chapter 13. It is messy, illogical and often unfair. Everyone operates on a last minute time-table and you will be expected to produce documents at the drop of a hat and to make important decisions within minutes.
Most of the time I can prepare you for likely problems but unexpected issues will pop up. If you are not sure about something – ask. Chapter 13 is inherently illogical so if you assume something, there is a good chance your assumption will be wrong.