As an attorney primarily serving debtors, many of whom are in Chapter 13 bankruptcies, these “Lessons Learned” are quite valuable. As for the first case described, that may not be the end of the road for those debtors. Depending on how severely their income was restricted and if/when they may have received a discharge in a prior bankruptcy, a subsequent Chapter 7 may give them a fresh start. However, if they could not afford the Chapter 13, they would need to surrender the motorcycle in the Chapter 7.
As for the second case discussed, I find that it is very, very common that debtors miss various deadlines. This happens most often in a Chapter 13 with reporting bonuses and with step-ups in payments. These increases in plan payments often occur because loan repayments on 401k loans are completed and this is planned for at the beginning of the Chapter 13. With the loan repaid, they have more income to devote to the plan. I strongly encourage my clients to create an electronic calendar, such as a Google calendar, and go ahead and input every deadline for the duration of their plan with reminders.
Attorney’s can advise and inform, but ultimately it is your life and livelihood, so be sure to be pro-active by being organized. Sometimes, disorganization was a factor that led to the financial challenge to begin with, so forcing this discipline of advance scheduling may help stay on track after the bankruptcy concludes.
When debtors cannot comply with terms of a confirmed plan due to unexpected circumstances, the noncompliance cannot always be fixed by modifying the plan or seeking court approval after the fact. This post is about two cases that were dismissed for reasons you might find surprising (but shouldn’t).
Case #1 – Keeping “Toys”: Debtors proposed a 100% plan in exchange for keeping a Harley and three vehicles. They only had about $7,000 in general unsecured claims, but they really wanted to keep their Harley and a truck they didn’t need, and they had a very good income at the time. Plan confirmed.
By month 50, the debtors’ income dropped because their employers cut back on hours and reduced hourly rates, and the debtors fell behind in plan payments. They tried to modify the plan to surrender the Harley, lower plan payments, and substantially reduce the dividend to unsecured creditors. …
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Most of the items in this Chapter 13 Trustee’s blog post pertains mainly to your Chapter 13 attorney. However, the section about obtaining a new car while in your Chapter 13 is very pertinent to you as a Debtor. This is no longer a streamlined process. Now, you will have to have a more in-depth communication with you attorney. Also, you will need to plan on spending more time shopping around for the least expensive car that will meet your needs and a reasonable interest rate.
You may think you are limited to the buy here/pay here type of car sales. However, most of the larger new and used car dealers are familiar with Chapter 13 issues and they will work with you. One of the things your car dealer needs to understand is that the new debt would not be discharged at the end of the Chapter 13 so it is “safe” to loan to you in that respect. It could be surrendered and discharged if you convert to a Chapter 7, but let’s not go there. No need to make your dealer nervous.
This post briefly discusses the following topics: Amended Federal Rules of Bankruptcy Procedure eff. 12/1/16; Motions to Incur Debt for Purchase of Vehicle; Motions to Compel Debtors to File Notices of Address Changes; and the 2017 Judge Joe Lee Bankruptcy Institute.
AMENDED FEDERAL RULES OF BANKRUPTCY PROCEDURE BECAME EFFECTIVE 12/01/2016: Of particular importance to creditors’ attorneys is Rule 3002.1(a), which governs notices relating to claims secured by a security interest in the debtor’s principal residence. The rule is now applicable to claims “for which the plan provides that either the trustee or the debtor will make contractual installment payments.” The amended rule also provides that unless the court orders otherwise, the notice requirements of Rule 3002.1 cease to apply when an order terminating the stay is entered.
All practitioners should note that Rule 9006(f) removes the 3-day additional time for taking action if service is by electronic means.
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