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Chapter 13 Bankruptcy

The principal attorney in our law firm, William A. Cohn, has over 25 years of experience in Bankruptcy.

Chapter 13 - Wage Earner Plan/For persons who earn wages, for small business owners, and for individuals who have a source of income.
I. FEES AND COSTS

COST:
$475.00 DOWN to cover filing fees, photocopies, postage, check handling, etc. to cover credit reports, printouts, computer fees," just before "filing fees

PLUS:
Attorney Fee Retainer $500.00

***The balance is part of the money deducted from your paycheck

An attorney fee of $3,800.00 is set by the Court in a Chapter 13 case. Your payment of $500.00 is applied to the $3,800.00 awarded, and the balance is paid as part of the money deducted from your payment of the plan. The Court can award additional fees upon the request of the lawyer.

Talk to a lawyer, not a paralegal. Call us for a free appointment to discuss your situation.
We do NOT recommend Chapter 13.
Only about 35% of Chapter 13 plans payout. Clients have over the years routinely complained that they go to Court many times and are always having their payments raised by the Chapter 13 Trustee. As lawyers, we have no control over payments. The Chapter 13 Trustee uses his computer at the Creditors' Meeting and tells the client and the lawyers the payment amount and schedule. Very often the Chapter 13 Trustees later advise that the debtor has not paid enough in and the payments must be raised. Lawyers' fees have routinely been substantially underpaid in relation to non bankruptcy areas of law (even though the Bankruptcy Code forbids this). In fact, Lawyers are usually actually paid only about 1/3 of what the Court "awards." Do you think that this would lead to good representation in Chapter 13 cases?

There are absolutely no heads of any large law firms that appear in Bankruptcy Court on Chapter 13 cases. Usually, the low man on the totem pole in the law firm is sent. Far too much negotiation results. To make matters worse, very few debtors who file Chapter 13 know: the amount of the lawyers' fees, the filing fees, the trustees' fees, and creditors' lawyers fees. Neither the judges nor the trustees tell the amount to the debtors if their lawyers do not. The judges have a great many cases and do not even personally sign all of their own Orders.

At least one judge, Judge Jennie Latta, to her credit, has openly attempted to improve the quality of the law practice in her court. However, the principal lawyer in this firm has, in the past, routinely encountered an unwillingness of the Bankruptcy Court judges and personnel and appointees to seriously consider changes consistent with their policies. As a client, does this assure you that your interests are properly litigated?

We therefore only recommend Chapter 13 as a last resort. Only if you are several months behind on your car note or house note and cannot bring the note current prior to filing, do we recommend Chapter 13.

A BETTER ALTERNATIVE:
We recommend that you file a Chapter 7. We do not agree that there is a moral or ethical basis to have you re pay your debts if you are not able to do so, if your efforts to do so are proving fruitless, or if your financial condition is causing family or marital problems. Our experience is that more marital problems are caused by financial burdens than any other basis. Your marital relationship and your family's health are far more important than re paying your debts in whole or in part.

Chapter 13 is nothing more than an additional payment burden for up to 5 years. Chapter 7 is usually over in 4 to 6 months. If a creditor files an objection to discharge and asks that its debt not be wiped out, you still wipe out all of your other debts in 4 to 6 months, with far fewer total court appearances than in Chapter 13. Chapter 7 saves you money, stress, and time.

Call 901-757-5557 for a free appointment to discuss your situation.

II. SECURED DEBT vs. UNSECURED DEBT
A. Secured debt is a debt where the Creditor can take back, repossess, or foreclose an item in satisfaction of his debt. In other words, a mortgage company can foreclose on your house; a bank or finance company can repossess your car or household goods; a furniture sales company can take your furniture back; or a jewelry store can take back your jewelry. Where the Creditor extends to you the credit to make the purchase for consumer goods, that is a secured debt also.

B. An unsecured debt is a debt where a creditor cannot repossess an item or foreclose on any item. Examples of this type of debt are: Credit cards, such as Master Card, VISA, and American Express; Signature Loans; Deficiencies on Cars that have been repossessed or houses that have been foreclosed; doctor bills, hospital bills, lawyer bills; and suppliers of small businesses that do not have a security interest in the goods.

CHAPTER 13 . . . (Wage Earner) Bankruptcy
A Chapter 13 bankruptcy used to be called a "Wage Earner" plan. It is a type of bankruptcy where you pay out your debts.

A Chapter 13 Plan is like a consolidation loan at a bank. In a consolidation loan, you borrow the money from the bank, you pay off your creditors all at once , and you pay the bank back each month at $100.00/$200.00/$300.00 per month or whatever the amount necessary to pay off the loan.

In the Chapter 13 plan the Chapter 13 Trustee is the bank. You pay your $100.00/200.00/300.00 or whatever the amount to the Chapter 13 Trustee each month. He takes each payment and divides it up and pays your creditors. Secured creditors get 100 cents on the dollar plus interest. Unsecured creditors also get 100 cents on the dollar, unless we can show that because of the amount of income and expenses you cannot fund a Chapter 13 plan sufficiently to pay out 100 cents on the dollar. In that case the unsecured creditors may get less than 100 cents on the dollar: 70%..50%.. or even 10 cents on the dollar. There is an automatic injunction when you file your Chapter 13 which stops any creditor from suing you, from issuing a garnishment against you, from repossessing your car, from foreclosing on your house, or from doing any other act to collect the debt. This automatic injunction is what makes the Chapter 13 plan work by keeping the creditors away from the debtor.

If your property (such as a car) was repossessed before the filing of your Chapter 13, we can ask the Court to Order the creditor to return the property to you. It will take 3 to 4 weeks to obtain possession of your car, and you will probably have to pay repossession and storage fees which have accumulated to regain the vehicle.

Call 901-757-5557 for a free appointment to discuss your situation.

V. THE AUTOMATIC INJUNCTION
The automatic injunction is in effect on all bankruptcies. Anytime you file a petition for relief in the Bankruptcy Court, there is an automatic injunction preventing any creditor from doing anything to collect a debt.

VI. TYPICAL RECOMMENDATIONS
Typically, we see two situations develop in Consumer Bankruptcies.

A. The first situation is where a client has secured debts in which he is current or only one or two months behind. In other words, he may be one or two months behind on his house note, one or two months behind on his car note, and the same for his furniture and jewelry note. However, he comes to us and says "I have been sick and I have a tremendous amount of medical bills (unsecured debt)"; or "I'm going through a divorce (or some sort of domestic problem); and I am at my limit on all my credit cards and I owe a tremendous amount" (of unsecured debt). He says if he just didn't have all of this unsecured debt and that if he wasn't making monthly payments on this unsecured debt, then he would be able to make his payments on his secured debt. In that instance, we recommend a Chapter 7 straight bankruptcy because he is able to discharge all of the unsecured debts and obtain a "Fresh Start". After reaffirmation of this debt and payment of delinquent installments, he can easily keep up his monthly notes.

B. The other situation is where the client arrives and states that he is three or more months behind on his house note, three or four months behind on his car note, several months behind on his jewelry and furniture note, and that even if he discharged all of his unsecured debts he still would not be able to bring his secured debts current. He may not even have any unsecured debt. However, he does not wish to lose his assets, but merely needs time to pay off any arrearages that he owes. This person is a candidate for a Chapter 13 wage earner plan. It allows him to pay off his debts and to preserve his assets. That is our recommendation in such a circumstance.

C. There is a gray area in between the two recommendations. Many people also feel that they have a moral and ethical obligation to pay out their debts. In those circumstances, a Chapter 13 (Wage Earner) Plan would be our recommendation. In the gray areas, it is largely a decision of the client.

D. If the Bankruptcy Chapter that you choose does not work out, you may be able to convert to another Chapter. You have the absolute right to dismiss a Chapter 13, or to convert a Chapter 13 to a Chapter 7.

Call 901-757-5557 for a free appointment to discuss your situation.

VII. STUDENT LOANS
Government issued student loans are not dischargeable, unless there is a hardship acceptable to the Court. The debtor must file a complaint for a hardship discharge. This is not a part of a simple Bankruptcy filing. The Bankruptcy Court will generally not grant this petition unless the debtor is elderly and disabled, penniless, and unable to earn sufficient income to pay the debt. Does this appear too restrictive? It certainly is a very conservative interpretation of the law.

VIII. TAXES
Generally, taxes cannot be discharged in a Chapter 7 straight bankruptcy.

However, under certain limited circumstances, Federal Income tax can be discharged in bankruptcy if they are more than three calendar years old, all tax returns have been timely filed, and the tax has not been assessed by the IRS within the 9 months before the filing of the Bankruptcy petition. Liens placed by the IRS can also prevent discharge. You need to consult with the attorney if this is a problem.

Obviously, taxes CAN be paid out in a Chapter 13 wage earner plan and the IRS can be stopped from enforcing any liens or other collection procedures by the filing of the Chapter 13 Wage Earner Plan.

A complaint to determine the dischargeability should be filed. This is not a part of the simple Bankruptcy filing.

IX. BANK ACCOUNTS
Any time you file a bankruptcy, if you have a checking or savings account or any other kind of deposit account with a bank to whom you owe any money for a loan or credit card or other matter, then you should close out your checking and savings account and certificate of deposit or any other account that you have, and move it to a bank to whom you owe NO money. This will prevent that bank from obtaining a set-off of your funds.

XII. ADVERSE SITUATIONS

Call 901-757-5557 for a free appointment to discuss your situation.

Chapter 7 discharge can be denied by the Court under certain circumstances such as concealing property, destroying or falsifying records, or fraud. These also can be criminal matters.

A discharge under Chapter 7 can also be denied as to specific debts when a creditor files an "Objection to Discharge." Only that creditor's debt or a portion of that debt may be kept from being "wiped out." Examples are certain taxes, support, loans obtained by false financial statements or by fraud, and loans obtained when you are insolvent ( that is, when you borrow money by loan or by credit card and your debts exceed your assets-at the time of the loan-, and you are unable to repay the money borrowed).

A Chapter 7 should not be filed before a divorce is finalized.

A proposed Chapter 13 Plan can be denied confirmation (approval by the Court) if the Court, after a hearing, feels the proposed plan to be unfeasible (not enough available income to fund the plan), not proposed in good faith, or not paying the correct amounts according to the law.

A proposed Chapter 11 Plan can be denied confirmation if not approved by vote of the creditors, or if it fails to meet certain guidelines required by law.

XIII. MISCELLANEOUS
A Bankruptcy will stay on your credit record from the time of filing until the credit reporting agency's roll over period. This is usually eight years, and can be as much as 10 years.

There are always other circumstances that need to be addressed and questions that need to be answered. Please feel free to ask the lawyer what happens in these circumstances.


WILLIAM A. COHN

Member: American Bar Association

Member: Commercial Law League of America

Author of: "Deferring Vesting of Property in a Chapter 13 Wage Earner Plan"

Commercial Law Journal (August, 1983).

WHAT HAPPENS AFTER FILING CHAPTER 13?
(PLEASE READ THIS AND YOUR INFORMATION SHEET BEFORE CALLING YOUR ATTORNEY)

I. The filing of a Chapter 13 Plan constitutes an automatic injunction against any creditor to collect any debt.

A. If you are called by a creditor or collection agency before the filing of the Chapter 13 Plan, merely tell them that THE COHN LAW FIRM represents you and that we are filing a Chapter 13 plan for you and that they should direct all calls to our office and not call you anymore.

B. Approximately five days after your interview in our office where you have signed all of your petitions and documentation to be filed in Court you should call our office to obtain your bankruptcy number. This is the number that the Court uses and is called a DOCKET NUMBER. If any creditor or collection agency calls you or any one has threatened to repossess your car or has started foreclosure proceedings you should call this creditor and tell them the bankruptcy number. Also inform them if they start to question you, that ALL communication is to be through your attorney THE COHN LAW FIRM in as much we have instructed you to do so.

C. Additionally, once we have filed the Chapter 13 plan and you have obtained your bankruptcy number from us, if you want a payroll deduction and have a garnishment about to be placed or it has been placed on your wages, you should inform your employer immediately of the bankruptcy number and the type of bankruptcy and that they should contact our office for further information if they need it. They should also contact their lawyer if they have any questions. In any event, they are prohibited from honoring any garnishment on your wages once the Chapter 13 petition is filed. The same applies to any sheriff appearing to repossess any car or any other item such as a car. Merely tell them the bankruptcy number and the attorney's name and he should be aware of the automatic injunction preventing him from collecting this debt or doing anything attempting to collect this debt.

D. After the Petition for bankruptcy is filed, you do not directly pay any creditors who are listed in the Chapter 13 Plan. The Trustee will pay the attorney, and the Court can approve any additional attorney's fees.

E. You must make your first payment within 25 days of the date of filing of your petition.

F. Any payments not deducted from your paycheck must be paid by you to the Trustee whenever it is due, even before your plan is confirmed.

II. Approximately one week after the filing date, the Trustee will begin to send out letters that you will receive. You should read these letters over carefully. One of the letters will be an order directing your employer to withhold the plan payment from your wages. Make sure that this plan payment is the correct amount and for the correct time period. If not, contact us or the Chapter 13 Trustee to have it corrected. You will also receive an order from the Court setting your creditor's meeting. This will be a piece of paper with many boxes but which will list your Bankruptcy number and the date, time, and place of your creditors' meeting.

Call 901-757-5557 for a free appointment to discuss your situation.

III. CREDITORS' MEETING
Approximately, three weeks after you receive the notice from the Court and four weeks after the filing of your bankruptcy, there will be a Creditors' Meeting held at the Bankruptcy Court. YOU MUST ATTEND OR YOUR CASE WILL BE DISMISSED. Call our office: 1) if you do not receive notice of the Creditors' Meeting within three weeks; or 2) if you cannot attend the Creditors' Meeting. YOU WILL BE CHARGED AN ADDITIONAL FEE IF THE LAWYER GOES TO THE CREDITORS' MEETING AND YOU DO NOT APPEAR. You must attend a Creditors' Meeting. You should arrive approximately ten minutes early to the creditors' meeting. Have a seat in the creditors' meeting hearing room. An attorney from THE COHN LAW FIRM will be present to hear your case. If the hearing examiner or Trustee calls your name or the attorney's name and he is not there, stand up and mention to the examiner that we are arriving shortly. Many times we get caught in another court and arrive late for a hearing. However, we will try to avoid this situation.

The Creditors' Meeting is not like a trial in which Perry Mason is working. It is merely an informal question and answer session. Creditors will want to have the correct amount of payments and interest rate in the Chapter 13 plan. They will ask you questions about what happened to certain collateral security or about your income or any other financial information. You should be prepared to answer these questions. If you have any questions, you should contact us and discuss these matters prior to the hearing. The vast majority of the time, the questions asked are harmless and present no problems to the Debtor.

A. If you do not have any car INSURANCE and the Chapter 13 Trustee will add collision coverage to protect any creditor whose debt is secured by a vehicle. They will also raise your monthly payment to cover the cost of the INSURANCE. Therefore, if you have car INSURANCE, you must have evidence of the INSURANCE policy and that you have paid the premium on the policy. You must bring a copy of the policy and a paid receipt showing that you have car (collision) INSURANCE to the Creditors' meeting in order to avoid having the Trustee placing collision INSURANCE in your plan and raising the plan payments which you must pay to the Trustee. We highly suggest that you obtain your own INSURANCE which would include liability INSURANCE. I think that you will find this to be much cheaper and more economical than paying the Trustee's rates.

IV. CONFIRMATION HEARING
Two weeks after the Creditors' Meeting there will be a confirmation hearing. Your plan will be confirmed and your Chapter 13 plan will continue to run for the time period that your plan proposed if there are no objections to the plan. Generally, there are no objections to the plan. Under some circumstances, a creditor will object to the payment plan. If there is an objection filed, then you must appear at the hearing and defend the objection.

V. After the Chapter 13 plan is confirmed and your plan goes into effect, several things may happen. For each of these things, our contract with you states that these items will incur additional attorney fees. We will bill you by the hour, or in advance, for additional items. If you do not have the money to pay these fees, with your approval, we will file a proof of claim with the Trustee and be paid through your plan.
A. If you have failed to make certain payments, a secured creditor may ask the Court to lift the automatic injunction to allow them to repossess an item such as a car or to foreclose on real property such as a house or building. Obviously this is not part of getting your plan implemented, so we must charge you an additional amount.

B. Motion to Amend
If you leave off creditors or you fail to tell us about creditors, then add a creditor later, requires an additional proceeding. There is a $20.00 filing fee plus an attorney fee.
The filing fee goes to the Court. You must pay to us the filing fee before the motion to amend can be filed.

C. Trustee's Motion to Dismiss or Convert
If you fail to make your Chapter 13 plan payments the Chapter 13 trustee will seek to have your plan dismissed or converted to a straight bankruptcy. Obviously this is something far different from setting up your Chapter 13 plan and implementing it. This would require additional attorney's work and additional billing by the attorney. You must appear at the Court for this motion. The Trustee may schedule an 8:30 am hearing. You must attend, but your attorney will not.

D. If you are hurt or laid off and cannot work, your payments must still be made. You should double up your payments to the Chapter 13 Trustee to make up for any missed payments. Your payments cannot be reduced lower than the amount of your house note. Your house note cannot be reduced, and must be paid every month.

E. There are various other Motions which can be filed and which address select situations.

Call 901-757-5557 for a free appointment to discuss your situation.

IV. HOUSE MORTGAGE SITUATIONS
If your house mortgage payments are placed in the Chapter 13 plan, you will not have to pay your mortgage payments directly to the mortgage company so long as the plan is in effect. They will come out of your check or be included in your payment to the trustee. Your payments should be made to the Chapter 13 Trustee by the 5th of each month. However, when your plan is finished paying out, you will have to resume your payments directly to the mortgage company.

You should also make sure that the proper amount of the house note is being paid by your Chapter 13 Trustee. This means you should make sure that the correct amount of insurance and tax payments are included in the note. Otherwise, you will have a large amount of money still owed to the Mortgage company when your plan is finished.

If you wish to sell your house, or any personal property which has a mortgage, contact your lawyer as we must file a Motion to obtain approval of the Court.

VII. "In order to play, you must pay...". ALL payments to the Chapter 13 Trustee MUST be paid. There are no excuses. If your employer does not deduct the payments from your check, then you must make the payments directly to the Trustee. If your plan is dismissed, save the money which would go for payments, as you will have to pay ALL past due payments when the plan is reinstated. Make sure your employer is sending to the Trustee the payments which he is deducting from your check. If not, let the Trustee and our Law Firm know immediately.
If you get behind in payments to the Trustee-Trustee must pay additional interest to secured creditors

THIS WILL RAISE YOUR PAYMENTS TO THE TRUSTEE

It is therefore very important that you make your payment ON TIME to the Trustee. If you do get behind, such as being ill, injured, or laid off, you should increase your payments once you return to work in order to bring them current as soon as possible and reduce the increase in your payment.

Questions about payments should be directed to the Chapter 13 Trustee or our office.

VIII. Your payments to the Chapter 13 Trustee may go up after the Creditor's Meeting for the following reasons:
1. Your house note may be increased because of an increase in taxes and/or insurance.

2. Unsecured Creditors may file large claims late, after the Chapter 13 Trustee and set a percentage paid to unsecured creditors. This means it will take more money to pay these creditors. (You should contact us to file a Motion to Reduce Percentage Paid to Unsecured Creditors).

3. Creditors who become Creditors after you file Bankruptcy may file a proof of claim, such as the IRS for taxes incurred after your plan is confirmed.

4. The Chapter 13 Trustee may determine through the use of his computer that your payments should be higher in order that your plan pay out within 60 months, or because the Chapter 13 Trustee's computer says that your plan payments allow you to pay a higher percentage to unsecured creditors.

5. You may add pre-filing creditors which you previously failed to include. The Court charges a filing fee of $20.00 which must be paid before the motion is filed.

6. your payments may be suspended for 60 to 90 days. These payments must be made later. The Trustee does this by adding on an additional amount to your payments.

IX. After your Chapter 13 plan has finished being paid out, you will have paid all of your creditors in full. Any secured creditors such as a car, furniture, or jewelry whose loan was basically financed through the Chapter 13 plan will convey you a good title to the property at that time. Obviously if it is furniture or jewelry, there will be no title. However, if it is a car, mobile home, boat, or any other such item, the creditor should convey to you a certificate title free of any liens.
You will no longer owe any of the unsecured debts which were in the Chapter 13 plan.

The Chapter 13 Trustee is located at:
Chapter 13 Trustee

Suite 1113, 200 Jefferson Avenue

Memphis, Tennessee 38103-2352

Include your Bankruptcy Court Docket Number on your check. Your payments should be mailed to that address. The Trustee will not accept payments in person at his office, nor will he accept payments in cash. If you give him a check which bounces, you will then be required to make all future payments with a cashier's check or money order. Personal checks are not credited by the Chapter 13 Trustee until they have the check on deposit for 45 days.

Call 901-757-5557 for a free appointment to discuss your situation.

X. TELEPHONE CALLS AND APPOINTMENTS
The attorney will be happy to answer your questions if he/she is available. If not, the staff will answer your questions, or, if they cannot, they will take your question to the attorney and call you back with an answer. Do not expect call backs from the attorney. If you feel this is an important item, call and make an appointment to talk to the attorney. If you do not feel it is important enough to make an appointment, then it is clearly not important enough for a return call from an attorney.


Call 901-757-5557 for a free appointment to discuss your situation.