While most people believe that when they file for bankruptcy their payment plan is set in stone, this is not always the case. When you file for Chapter 13 bankruptcy, the amount you pay each month may vary each month.
For example, payments change greatly if you have an adjustable mortgage, your energy bills are different every month, and/or if you need to surrender or purchase a home or a vehicle. All these scenarios will cause your Chapter 13 budget to be affected. Because your budget is constantly changing, your plan may be adjusted accordingly.
Under section 1329 of the Bankruptcy Code, the trustee, the debtor, or one of the unsecured creditors can ask for a change in the payment plan anytime during your Chapter 13 bankruptcy case. The amount that your budget needs to change before your plan is adjusted depends on who reviews your plan. While all bankruptcy courts follow the Bankruptcy Code, states and districts enforce it differently. Typically, if you have a change of 10% in your budget for three or more months, your plan may be adjusted. If your expenses increase, it may be determined that you owe your creditors less money. If your income increases, it may be determined that you owe your creditors more money.
I strongly recommend speaking with an attorney to understand your Chapter 13 payment plan and how it can fluctuate throughout the duration of your case. Because the Bankruptcy Code is enforced differently depending on location, an attorney can clarify how it will be enforced in your case. Also, make sure that you notify your attorney of changes in your budget throughout the duration of your case, because you can get in trouble for concealing such changes.
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Sometimes debtors file for Chapter 13 bankruptcy but then realize that they should have filed for Chapter 7.
When you file for Chapter 13 bankruptcy, you will be repaying all or a portion of your debt by making installments to the Chapter 13 Trustee that have been outlined in the payment plan and approved by the bankruptcy court. The Trustee is then responsible for paying the creditors that you owed. Sometimes debtors that have filed for Chapter 13 realize that they are unable to make their plan payments, or cannot make car or mortgage payments once the plan has begun.
If this is the case, as long as your bankruptcy case has not been converted before, it is your legal right to try and convert from a Chapter 13 to a Chapter 7 bankruptcy. Here are several things you will need to do in order to convert to a Chapter 7 bankruptcy.
You will need to take the “Means Test” again, which the court will use to determine if you qualify for Chapter 7 bankruptcy by evaluating your financial information such as your income, debts, and expenses. If you pass the means test you will need to then file a “Notice of Conversion,” which costs a fee, with the bankruptcy court. The Trustee will then be in charge of determining if you are eligible to convert to Chapter 7 bankruptcy.
Because bankruptcy laws are very complex and constantly changing, I recommend speaking with an experienced bankruptcy attorney to assist you through the Chapter 13 to Chapter 7 conversion process.
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If you are in the United States military you don’t need to worry about bankruptcy! The government created the SCRA, short for the Servicemembers’ Civil Relief Act, to provide protection against bankruptcy for members of the military. The SCRA ensures that military members are not distracted by financial troubles such as bankruptcy and can focus on their military responsibilities.
Here are some ways the SCRA protects you from bankruptcy while you are serving in active duty in the military:
- All bankruptcy proceedings are frozen, eviction is prevented, and the court cannot enter into a judgment while members of the military are serving in active duty.
- Actions such as reducing interest rates on loans and debts that accumulated before active duty can be taken to assist the service person.
- If military reasons prevent a service person on active duty from appearing in court, an attorney can be appointed for the service person to protect them against default judgments such as bankruptcy proceedings.
- It is possible for court proceedings to be halted if the defendant is a member of the military and is not able to appear in court.
Even if a court proceeding started before you were serving in the military, the SCRA protections apply to any court proceedings taking place, including bankruptcy, once you begin to serve. Typically 90 days after you have been discharged from the military, SCRA protections end. However, you can be released from an agreement, such as a lease, without any consequences if you were stationed after the agreement was made.
There are several factors that determine SCRA protections and I recommend speaking with an experienced attorney if you are experiencing financial troubles.
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If your vehicle or other property has been repossessed, it may be possible to get your property back when you file for bankruptcy. If you are timely and have a good attorney, the creditors can potentially be forced to return the property to you.
Examples of ‘other property’ that can be repossessed include jewelry, furniture, electronics, home appliances, and cash. Here we will focus on your repossessed vehicle, however, which is the most common property repossessed, and how to get it back.
It is very important to act quickly to get your repossessed vehicle back because the law states you must file for bankruptcy within 90 days of the repossession in order to retrieve the vehicle. However, you should act right away – because the creditor can resell your vehicle and it is then extremely difficult to get back.
When you file for bankruptcy, the bankruptcy court can look at any payments and property transfers within the past 90 days and determine if they may hinder the repayment of creditors. Any payments or property transfers within 90 days before you filed for bankruptcy can be seen as a preferential transfer and can be reclaimed. When your vehicle is repossessed, the creditor is acquiring equity on it. Because of this, the vehicle can be seen as a preferential transfer and the creditor can be forced to return the vehicle to you.
Fortunately in this situation the law works in your favor, but the court must still be persuaded that the vehicle is rightfully yours and order the creditor to return it. Your attorney must file a bankruptcy petition and argue that the repossession of your vehicle is a preferential transfer.
If you are in this situation, speak with an experienced attorney to learn more about how to get your repossessed property back. The attorneys here at Clark and Washington have many years’ experience in helping debtors reclaim their repossessed vehicles, so we know how to use the law to your advantage.
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