Chapter 13 Bankruptcy Attorney
These are some of the common questions regarding Chapter 13 Bankruptcy. Just click on the question for the answer. If you cannot find the answers you need below, or have a new question you think might be helpful to others, please contact us for additional help. – Robert C. Russell
You don’t have to pay anything to meet with us. The only exception might be those few with more complicated business issues (because they often take more time and have complicated issues). If you drive for Uber or have a small home business, there is no cost to meet. So, if you have the normal car, house, credit card, medical debts etc, it’s no cost to review the issues and options. If you hire us, then the time spent during the initial consult is just included in the normal fee.
No. Generally, in Chapter 13 only a few important (“priority”) debts must be paid in full. Those debts include the balances due on recent taxes, mortgage arrears for retained homes, secured claims for things such as retained cars, and administrative fees such as Chapter 13 attorney and Trustee fees. Your other creditors receive only the money that is left over after the above important creditors are paid in full. Generally, at the end of your Chapter 13 Plan, you will be relieved from any legal obligation to pay any remaining balance due to the creditor’s claim.
No. Unlike most non-bankruptcy options, such a consumer credit counseling services, creditors do not have to agree to the terms of your plan. The Court is the only entity that has to approve the plan. And, generally, as long as you are paying as much as you reasonably can, your plan will be approved – even if your creditors are not getting paid in full or otherwise don’t like it.
Bankruptcy is a matter of public record. However, generally, it is not publicized beyond notice to your creditors and co-debtors. Employers and newspapers are NOT generally notified of the bankruptcy.
In order to qualify for Chapter 13 relief, you must:
(a) be an individual or married couple [corporations and LLC’s cannot file Chapter 13];
(b) be presently making “regular income” from wages, pensions, unemployment, self-employment business income, or some other regular source;
(c) owe less than about $360,475 in unsecured debt (as of 2013);
(d) owe less than about $1,081,400 in secured debt (as of 2013); and
(e) be able to make the necessary monthly plan payment
In Chapter 13 you make payments to a trustee over 36-60 months. You do not have to pay back all of your creditors; you just do the best you can. However, if you want to keep a financed house or car, you will have to pay these creditors. You send the money to the trustee and the trustee sends it to your creditors based on the terms of your approved Chapter 13 “Plan”. Generally, at the end of making payments, the debtor receives a discharge of any debt not repaid through the Chapter 13 process.
Chapter 13 is part of federal law that protects a person while they attempt to repay some or all of their debts over a period of time. A person who files under Chapter 13 is called a “debtor.” Generally, a debtor does NOT have to pay all his/her debts in Chapter 13; debtors generally just have to do the best they can base on their assets, income, and reasonable expenses. In a Chapter 13 case, the debtor submits to the Court a “Plan” for paying some or all of the debtor’s debts over a period of three years to five years. The debtor’s payments are generally based on the debtor’s income and reasonable expenses. Once the payment is determined, the debtor makes the monthly payment for the length of the plan. During the period of the plan, debtors continue to pay their own living expenses. During the plan period, the plan payments are paid to a person called the “Chapter 13 Trustee.” The Trustee collects the money, takes a small fee, and distributes the balance to creditors as indicated in the approved Plan. In our jurisdiction, we are blessed with a Chapter 13 Trustee that is very reasonable and easy to work with. The Chapter 13 Plan is complete when the debtor makes all the payments required under the plan. When that happens, with only a few exceptions, the debtor is no longer personally obligated (or is “discharged”) on any balance left on any debts not paid in full through the plan. Generally, obtaining a discharge is one of the major reasons why people file for Chapter 13 relief. A Discharge Order is an actual Order of the Bankruptcy Court that, when entered, releases a debtor from the personal obligation to repay the debtor’s discharged debts. The Discharge Order also orders creditors to not attempt to collect on a debt that has been discharged.
It’s also worth noting that a Chapter 13 bankruptcy can be filed even when a debtor is not entitled to a discharge. In that case, Chapter 13 can help the debtor manage and pay certain debts. For example, Chapter 13 can still be filed to help a debtor get caught up on mortgage arrears and stop foreclosure, and pay non-dischargeable debts such as certain taxes.
Generally, you are protected immediately when the case is filed with the court. Upon filing, the “automatic stay” prohibits all collection efforts including foreclosure, repossession and related legal proceedings including lawsuits and garnishments. Any creditor who intentionally violates this Court ordered “automatic stay” may be liable to the debtor for damages. Please note that not all lawsuits are stopped by filing including criminal proceedings and actions for the collection of alimony, maintenance, or support.
There are several major differences between the two. Only a few of them are outlined here. Basically, both protect from creditors on the date of filing and result in a discharge of debt when completed. However, how you get there is completely different. Several key differences are as follows:
- Chapter 7 lasts about three months, where Chapter 13 can last between 36 and 60 months.
- Chapter 13 will provide a plan to pay for a financed car, mortgage arrears, taxes, and other debts. Chapter 7 just highlights what debts are discharged and you are left to make a plan to pay any debts that are not discharged or you want to keep such as a car or home loan.
- The debts discharged in Chapter 13 are about the same as those in Chapter 7. One big difference is that divorce property settlements are discharged in 13 and not 7.
Chapter 13 is usually better than Chapter 7 for the debtor who:
(a) has the ability to repay all of his/her creditors, but just needs a little more time or lower payment than the creditors are willing to accept;
(b) needs more time than the creditor is willing to give to get caught up on mortgage arrears and/or car payments;
(c) owns a home with a second mortgage and more is owed on the first mortgage than the home is worth (in which case you can “disconnect” the second mortgage!);
(d) owes a lot more on a car (purchased more than 910 days before filing) than the car is worth;
(e) has non-exempt assets that would be lost to the Trustee if Chapter 7 were filed;
(f) has one or more substantial debts that would possibly not be discharged under Chapter 7 (such as a recent tax debt); or
(g) is not eligible for a discharge under Chapter 7 because of a previous bankruptcy filing or for some other reason.
Usually not. Under Chapter 13, debts are normally paid out of the payments made to the Chapter 13 Trustee, and not out of the debtor’s property. If the debtor has considerable nonexempt property, however, and cannot make sufficient payments to pay enough of debts to satisfy the Court, some of the debtor’s property may have to be used to pay creditors, but that is very rare. Also, if a secured creditor is not being paid under the Plan, the secured creditor may be permitted to repossess the property securing the claim if the debt owed is not paid.
Also, you must list all claims you have against anyone or any entity – even if you have not filed a lawsuit or received any money for the claim. For example, if you have a claim against someone for an auto accident injury, you MUST list the claim for injuries as an asset in your bankruptcy or you may be FOREVER PROHIBITED from getting paid on the claim. If you do not list the asset, you might never collect even one dollar on the claim. If you have a million-dollar claim, you will lose the million-dollar claim if you do not list it in your bankruptcy!
Generally, obtaining a discharge is one of the major reasons why people file for Chapter 13 relief. A Discharge Order is an Order of the Bankruptcy Court that releases a debtor from the personal obligation to repay the debtor’s discharged debts. The Discharge Order also provides that creditors may not collect on a debt that has been discharged.
Although a debtor is generally protected during the plan from these debts, Chapter 13 discharge does not release a debtor from debts including, but not limited to, the following:
(a) debts that are paid directly by the debts outside of the Plan, including mortgages,
(b) debts for alimony, maintenance, or support,
(c) installment debts whose last payment is due after the completion of payments under the Plan (e.g. second mortgages on the retained property),
(d) debts incurred during Chapter 13 that were not paid under the Plan,
(e) debts for restitution included in a criminal sentence imposed on the debtor,
(f) debts for criminal traffic fines (such as Driving While Suspended),
(g) debts for death or personal injury caused by the debtor’s operation of a motor vehicle while unlawfully intoxicated, and
(f) debts that qualify as a student loan.
A Chapter 13 Plan usually lasts between three and five years. If your income in the six months before filing was above average (“above median” for your household size), your plan will normally be five years. If your income in the six months before filing was below average (“below median” for your household size), your plan minimum length is three years, but you can extend as needed for up to five years. Of course, you can end a plan at any time if you have paid all of your creditors.
Generally, your payment is usually only what you can reasonably afford. In most situations, your payment is the amount you have leftover from your paycheck after you pay your basic living expenses such as rent, food, transportation, utilities, recreation, etc. Your monthly Chapter 13 Plan payment is generally based on three different factors: (1) your income and reasonable expenses, (2) the amount and type of debt you must pay during the plan, and (3) the dollar value of your non-exempt assets. Again, because you do not generally have to pay all your creditors in full, your payment in Chapter 13 is usually far less than it would be if you tried to pay all of your creditors directly yourself or through a consumer credit counseling service.
Your first Chapter 13 Plan payment must be received by the Chapter 13 Trustee on the 30th day following your date of filing. Payments thereafter are due at the same time each month.
The Chapter 13 Trustee strongly prefers that plan payment be paid through a payroll deduction; that way a debtor does not have to remember to send payments. If a payroll deduction is not desired, you can ask the trustee to make payment direct if you have a strong basis for it, e.g., you are in management and a payroll deduction might hinder workplace advancement.
If you are authorized to make direct payments, you will have to make payments through the TFS payment system. If you miss a plan payment, do not be surprised if the Chapter 13 Trustee sends your employer a payroll deduction request.
Life still happens when you are in Chapter 13. If the Debtor is temporarily out of work, injured, or otherwise unable to make the payments required under the Chapter 13 Plan, the Trustee will normally give a Debtor a few months to get through the rough patch and come up with a plan to continue in the Chapter 13 case.
Once Debtor’s budget is again stable, Debtor proposes a new plan that addresses the missed plan payments and how the case will move forward to completion. If the Debtor cannot come up with a new plan, then the Trustee may file a Motion to Dismiss the case giving debtors at least 30 days to figure out a plan. If a Debtor cannot make a Chapter 13 work, the case can be dismissed or, in some cases, Debtor might convert to Chapter 7.
Presently, Section 341 First Meetings of Creditors are conducted by phone for health and safety reasons. So, the items debtors used to bring to in-person 341 Meetings are now provided to the Chapter 13 Trustee ahead of the meeting. [Those items are a picture ID such as a Driver’s License and proof of your Social Security number such as a Social Security Card, an IRS Form W2 or 1099, or anything else that you did not create that shows your full and accurate SSN.] If and when we return to in-person 341 Meetings, you should be prepared to bring them with your to the 341 Meeting.
HOW DO I PREPARE FOR A 341 MEETING?
Section 341 Meetings are to allow the Chapter 13 Trustee and any interested parties time to ask you questions. The Court normally schedules about 12 meetings an hour. That means each meeting might take about 5 minutes each. So, yes, it’s pretty quick. We give our clients the expected questions ahead of time so you know what to expect. To be ready for the questions, please review your petition thoroughly ahead of time. Please let us know immediately if you see any errors/corrections or budget updates to make.
We know that you don’t have a lot of money. That’s why you are here. But just be careful picking an attorney that is cheaper and/or less experienced. It might just cost you more in money, time, stress and/or aggravation. We are hired from time to time to fix problems in some of those cases. Just be careful. And remember … we have payment plans and will work with you and how to pay for the bankruptcy. (See our client testimonials here!)
In the State of Washington the Chapter 13 “no look”/basic attorney fee is set by the Court at $4,000. So, the fee is the same wherever you go. No, you don’t have to pay that all upfront. (Who has that kind of money set aside and needs to file bankruptcy?!) So, the only question is how much is required to be paid prior to filing. Normally, we only require a small part of that based on your ability to pay and the situation. So, how does the rest get paid? It’s an after-filing payment plan. The part that you don’t pay upfront gets paid by the Chapter 13 Trustee from the money you send to the Trustee during your Chapter 13. The attorney you chose in Chapter 13 really matters because they will be helping you for the 3 to 5 years of Chapter 13. So, make sure you chose an attorney will great reviews and experience! (See our client testimonials here that have been gathered over more than 25 years and from helping thousands of people!)
The filing fee is currently $313.
The filing fee is presently $313 to file a Chapter 13. The court sets the original attorney fee at $4,000 in this jurisdiction. Different law firms will require different amounts upfront to file a Chapter 13. At the Robert Russell Law Group, you do NOT need to pay this upfront to file a Chapter 13. In fact, in a lot of circumstances, we simply need you to pay the $313 filing fee. If a different law office tells you the Chapter 13 attorney fees are less than $4,000, they are likely telling you that the amount they require to be paid upfront is less than $4,000. Their full original attorney fee is likely the standard and the court set $4,000.
The Bankruptcy Code requires that to the extent that a debtor is required to file returns that: (1) the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition, and (2) the required returns must be filed no later than 120 days after the initial 341 Meeting date. 11 USC § 1308. In short, the debtor must file at least the last four years’ tax returns and do so no later than 120 days after filing.
The following people should expect problems in bankruptcy:
(a) Persons who conceal, transfer, or destroy their property with the intent to defraud their creditors or the Trustee in the Chapter 7 case.
(b) Persons who conceal, destroy, or falsify records of their financial condition or business transactions.
(c) Persons who make false statements or claims in their Chapter 7 case, or who withhold recorded information from the Trustee in the case.
(d) Persons who fail to satisfactorily explain any loss or deficiency of their assets.
(e) Persons who refuse to answer questions or obey orders of the Bankruptcy Court, either in their case or in the case of a relative, business associate, or corporation.
(f) Persons who have engaged in pre-filing activity with the intent to defraud creditors.
Some people argue that filing bankruptcy is taking the easy way out. I suppose that it could be the “easy way out” if you never tried any other way to pay your debts. However, most people try their best to avoid bankruptcy. Some people even sacrifice their health and relationships to pay bills that are beyond their ability to pay. Bankruptcy is a gut-wrenching experience that most people try very hard to avoid.
Also, bankruptcy is a legal remedy made available by your United States’ Constitution. It was recognized by our Founding Fathers that there are certain circumstances where a person or family simply needs relief from their debts. And bankruptcy relief is only available to people that actually qualify for assistance.
Is it wrong to file bankruptcy? No, not if you need the help. You should not be forced into virtual life-long servitude to your creditors because you had a medical emergency, loss of employment, even made bad financial decisions or a worldwide pandemic occurred. Bankruptcy is rarely the first choice. But sometimes it is simply the best choice when all the options are considered.
The federal Fair Credit Reporting Act requires each of the nationwide consumer reporting agency to provide you with a free copy of your credit report, at your request, once every 12 months. The reports are available on-line here.
We provide all our clients copies of all documents filed with the court. If you lose them and need copies in the future, you have two options. You can order them from us, and (as with the Court) there is a small charge for us to gather and provide them again. HOWEVER, for new cases filed starting 2021, all clients will have free access to many documents filed with the Court via our online client access portal. Documents available include the Bankruptcy Petition and Discharge Order. If you do not have and want such access, please let us know and we’ll provide information.
Documents filed on and after 5/17/2001 are stored electronically on the court’s computer system (CM/ECF). To obtain copies of these documents, you have the following options:
- Internet (PACER)
Contact the PACER Service Center at www.pacer.gov(link is external) for registration information about obtaining a PACER account. A PACER fee of $0.10 per page applies. Please note: PACER restricts all documents in bankruptcy cases that were filed before 12/01/2003 and have been closed for more than one year. While unavailable to the general public via PACER, copies of restricted documents can be obtained via the public terminals in the clerk’s office lobby in Seattle and Tacoma or via mail request. See Restricted Access to Certain Documents in PACER.
- Visit the Clerk’s office
If you come to the Bankruptcy Court in person for your copies, the copy fee is $0.10 per page when using the computer in the court’s lobby. A copy fee of $0.50 per page applies if a clerk makes the copies. An $11.00 certification fee applies for each document that needs a certification.
Exact cash, cashier’s check or money order is required.
- Mail a request to the Clerk’s office
If you mail a copy request to the Bankruptcy Court, the copy fee is $0.50 per page. Please contact the Clerk’s office to determine the number of pages. An $11.00 certification fee applies for each document that needs a certification.
Each written request should include:
- debtor(s) name and case number
- documents to be copied
- your name (if you are not the debtor) and daytime phone number
- address where the documents should be mailed
The cashier’s check or money order should be made payable to “U.S. Bankruptcy Court.” You may mail your copy request to the Bankruptcy Court at either location:
U.S. Bankruptcy Court U.S. Bankruptcy Court
700 Stewart Street, #6301 1717 Pacific Avenue, #2100
Seattle, WA 98101 Tacoma, WA 98402