Chapter 13 Bankruptcy
Regardless of the threats made by creditors, you have options as to how you resolve your debt. Chapter 13 bankruptcy puts you in control. The law offices of Charles A. Maglieri can show you how. Contact attorney Maglieri now to schedule a free initial consultation.
As you have probably heard, a means test is now part of filing for bankruptcy. But Chapter 13 bankruptcy still allows you to deal with your debts on more favorable terms than your creditors may present. It can allow you to:
- Stop foreclosure on a home mortgage
- Keep your car and other assets from being repossessed
- Set up a repayment plan that works for you
- Satisfy income tax obligations without paying interest or penalties
To protect your best interests, you need an attorney who knows how to properly implement Chapter 13 bankruptcy. Since 1981, Attorney Maglieri has helped people in Hartford, Bloomfield, and throughout Connecticut resolve their debts favorably. He understands debtor-creditor law and how to make it work for you.
Attorney Charles A. Maglieri‘s in-depth knowledge of the law is reflected in his role as an instructor in debtor-creditor law. Mr. Maglieri has taught at both Western New England College School of Law and Tunxis Community College. He uses his in-depth knowledge of bankruptcy and debtor-creditor law to provide continuing education to other attorneys throughout Connecticut.
Mr. Maglieri brings not only knowledge, but also nearly 31 years of experience to his clients’ cases. He has a proven track record of helping clients in need of debt relief.
Summary Description of Chapter 13 Bankruptcy
Chapter 13 of Title 11 of the United States Code is known as Adjustment of Debts of Individuals with Regular Income.
The concept behind Chapter 13 is provide a bankruptcy court forum to individuals within which to restructure debts and to receive a discharge after providing a payment plan to creditors which lasts for either 36 or 60 months, depending upon ones income. If the Petitioner’s gross income is above the calculated median income in the State of Connecticut for the same household size then the Plan goes for 60 months. If the income is below the median income the Plan term is reduced to 36 months.
Not all debts have to be paid in Chapter 13 by the Petitioner. Creditor claims are categorized into three groups, each group having certain rights to payments and also being subject to having its claims modified or restructured in accordance with the Bankruptcy laws. The three groups are as follows:
1. Secured Creditors: Known as “lien creditors” such as holders of mortgages against real property; liens against automobiles of all kinds, motorcycles, ATV etc., furniture and other large ticket items bought on credit financed by the retail merchant or finance company.
2. Priority Creditors: Known as unsecured creditors but whose debts are given a “special status” in Bankruptcy in that the debts can’t be discharged and must be paid back in full in a Chapter 13 over the term of the Plan, without interest.
3. General Unsecured Creditors: Known as “Non-priority” unsecured creditors which include all other creditors whose claims don’t belong in numbers 1 and 2. It is these creditors whose claims can be discharged or paid in whole or in part, depending upon the Petitioner’s ability to pay or how much asset value would be distributed to these claims by a Trustee in a hypothetical Chapter 7 Liquidation case.
The participants of a Chapter 13 case are:
- Trustee, Molly T. Whiton
- Debtor=Petitioner or client
- Holders of Claims=Creditors
- Bankruptcy Judge
- Office of United States Trustee in New Haven.
A case is commenced by the filing of a Petition accompanied by Schedules, Means Test, Declarations, Statements and of course, the Plan. About 30 days after filing the Attorney and the Petitioner must attend a First Meeting of Creditors held at Hartford, New Haven, or Bridgeport Bankruptcy Court, depending upon in which town the Debtor/Petitioner resides. The meeting is conducted by the Trustee or her Attorney and the Petitioner is examined based upon all of information disclosed in the filed schedules, the Plan and the Means Test. The focus on the meeting is to provide all Creditors with an opportunity to appear and be heard and to allow the Trustee to analyze the feasibility of the Petitioner’s Plan and the chances for a successful completion of the Plan payments.
Creditors participate more fully in the process by submitting written Proofs of Claims to the court evidencing the amount of the claim and the terms of repayment. The Petitioner and the Attorney rely on the filing of these Proof of Claims in order to draft the Plan of repayment and calculate the amounts due to each claim holder so the Plan can be funded correctly. Further, Creditors can file motions with the court to contest the case or challenge the right of the Petitioner to do what is being proposed in the Plan.
The Trustee is the person who administers the case for the term of the Plan and she is the one who actually disburses the Plan money to the holders of approved claims. The Petitioner sends in money to the Federal Bank Account held by the Trustee known as the “lock box” which holds all the money for the Trustee and the Petitioner. The money can’t be released until such time as the Bankruptcy Court Judge approves the Plan and authorizes the Plan Payments. Prior to the court’s approval of the Plan all money is held by the Trustee and is sent in by the Client directly to the lock box. After the Court approves the Plan the Judge will order that future Plan payments be sent to the lock box by way of a wage deduction or “voluntary payroll deduction”. If the Client is not a wage earner or receives income from fixed benefits of some kind and there is no “employer” who pays the Client then in those cases the Client will be allowed to continue sending monthly payments directly to the lock box for the duration of the Plan.
The hearing before the court when the Judge determines whether or not to approve the Plan is known as the Confirmation Hearing. This hearing is usually held about 6 months after the case is filed. The Clients don’t have to attend the hearing but are encouraged to do so, if they can take the time off from work. If the Judge approves the Plan then all parties are bound by it for the term of the Plan. If the Judge doesn’t approve it then the Attorney may submit an amended plan for further Judicial review and consideration and ultimately approval.
As the Plan is paid over the 36 or 60 month term events may arise which necessitate the Attorney for the Petitioner to file motions to amend the Plan or seek to convert the case to Chapter 7 or simply dismiss the case. Post Confirmation changes in the Clients financial status may render the confirmed plan no longer feasible and payments no longer able to be made. The Client must then come in to the Office to discuss the changes and the Attorney will make whatever recommendations that are necessary to address the situation. Chapter 13 cases are voluntary Plans so the Client can decide to withdraw ( Dismiss) the case whenever he or she believes that it is no longer in his or her best interests to remain in Chapter 13.
Once the Client finishes the Plan the Trustee reports this fact to the Court and files a report detailing the payments made to all creditors and requests that the case be closed and the Discharge enter. The Client must then submit a request for Discharge filed with the court. The Court will enter the Discharge and likewise Order that the “voluntary wage deduction” cease and any unused funds held by the Trustee which were not paid out to creditors be immediately returned to the Client.
Once the case is closed and the Discharge enters the Debtor/Petitioner should check one’s credit report to see if the Discharge was accurately noted on the credit report. Failure to so note the discharge will delay the ability of the Client to rehabilitate one’s FICO score promptly to the fullest extent allowed.
Attorney’s fees charged by the Attorney differ from case to case but all fees charged must be approved by the Court. Fees paid both before and after the case is commenced are all subject to Bankruptcy Court approval. Should the client not be able to pay the attorney fees requested in full in advance of filing the case, the attorney and the Client can agree to put some or all of the retainer fee in the Plan. Also, should the court award the Attorney additional fees beyond those paid initially prior to filing the case, then in that event, those fees will likewise be put into the Plan and paid over to the Attorney by the Trustee over the Term of the Plan as ordered by the court as an Administrative Expense “Priority” (see remarks on creditor groups above). Clients also have to pay a court filing fee and generally bears the cost of obtaining any and all appraisals needed to value correctly real property and items of personal property which have collector value.
Finally, it must be understood by the Client that the Trustee does earn and receive compensation for acting as the disbursing agent for the court and the Petitioner. This compensation is known as the Trustee Commission and it is a percentage of the total amount of the money paid to the Creditors as the Plan is approved by the Court. The commission comes off the top of the money contributed by the Client prior to the funds being disbursed to the holders of allowed Claims which will be paid by the Debtor’s Plan. The percentage rate for the commission earned varies but cannot exceed ten (10) percent (%).
Respectfully prepared distributed by Attorney Charles A. Maglieri of Advanced Bankruptcy Legal Services of Bloomfield.