July 15, 2020

Tennessee Chapter 13 Debtors Lead Nation in Repayments to Creditors

Debt burdenThe Chattanooga Free Press reports that Chapter 13 debtors in Tennessee pay more back to creditors than much larger states like Texas, California or New York.   As of September 30, 2008, Tennesseans had paid back over $558 million in active Chapter 13 cases.  Texas Chapter 13 filers were second on the list, paying back $528 million, with Georgia third at $412 million.

Unlike most states, Tennessee debtors file a higher percentage of Chapter 13 cases.  Here, 56% of debtors in 2008 filed Chapter 13, whereas in other states the percentage is much lower.  In California, for example, Chapter 13 amounted to only 19% of cases filed – with 81% of California debtors filing Chapter 7.

Chapter 13, of course, is the repayment plan type of bankruptcy, whereas Chapter 7 permits debtors to wipe out debt.

What does this mean to you?  The trustees and judges in Tennessee bankruptcy courts prefer repayment plans as opposed to debt elimination.  These bankruptcy officials also will try to push you to pay back as much as they can get you to pay.

An experienced consumer bankruptcy lawyer working on your behalf will identify and pursue a form of debt relief that is most advantageous to you.   A good bankruptcy lawyer will serve as your advocate and fight for Chapter 7 relief where appropriate, or create a payment plan that is liveable for you.

Should I be Concerned if I Receive an “Objection to Confirmation?”

What is an “objection to confirmation” in a Chapter 13 case and should you be concerned about it?  As you know, a Chapter 13 bankruptcy functions as a court sanctioned repayment plan.  Under the law, you – the debtor – must propose this repayment plan to the court.

Clark and Washington’s job is to evaluate your financial circumstances and to prepare this repayment plan.  As your attorneys, we have both a desire and an obligation to represent you zealously.  We know that five years (the typical term of a Chapter 13 plan) is a very long time and we also know that you will face unexpected emergencies and cash crises during your plan.

Your creditors and Chapter 13 trustee are not particularly concerned about what might happen over the next five years.  They want every dime of “disposable” income and will push for the highest possible Chapter 13 plan payment.

The Chapter 13 plan we prepare in your case, therefore, will satisfy the requirements of the Bankruptcy Code, but it will also reflect what we consider a realistic approach to the next five years.  Not surprisingly, your Chapter 13 trustee may not agree with our assessment of what constitutes your “best efforts” and the trustee or creditors may file a document called an “objection to confirmation.”

By law, you must be served by mail with this objection to confirmation.   Objections to confirmation are filed in 98% of the Chapter 13 cases filed in Tennessee bankruptcy courts.  Every week we get frantic calls from clients who have received an objection and are certain that their case has been dismissed.  This is NOT the case.

An objection to confirmation does not mean that your case has been dismissed.

Instead, an objection to confirmation means that the trustee or creditor wants a change in your plan.  Most likely they will want more money from you each month.  Usually, we can negotiate a compromise to satisfy the objection and get your case approved or “confirmed” by the judge.  Sometimes we have to argue the objections – click to read a recent blog post about one of Clark and Washington’s successes in defeating an objection to confirmation.

Look at objections to confirmation as a normal part of the Chapter 13 process.  As your attorneys, we will be with you every step of the way and we will advise you regarding the best way to deal with objections to confirmation.

Military Officer Could Lose Career if Financial Troubles are Revealed – What are his Options?

Our office recently received the following question from a reader of our blog:

I am now in a full-time Air Force Reserve, with 27 years total military service time.   I will be discharged if the Air Force finds out about my financial problems.  My wife and I are carrying over $200,000 in credit card debt .  Our cash flow is negative $7,000 per month and our only remaining asset is around $60,000 stocks.  What can we do?

Our firm’s answer:  First, I think that you need to find an experienced and knowledgeable bankruptcy lawyer.  I recently filed a Chapter 13 case for a military reserve officer who was in a similar mess.  We structured the Chapter 13 as a direct pay, meaning that we did not set up a payroll deduction with the Air Force.  That case is proceeding along nicely and I expect it to be confirmed next month.

While there is no guarantee that your commanding officer will not find out, Chapter 13 trustees do not regulalry contact employers.  In my case, the military  has not been made aware of my client’s filing.  An experienced lawyer in the district where you would file can give you more specific advice.

You also need to find out if Chapter 13 is an option at all.  It may not be, but you need to find out for certain to either eliminate the option or keep it available.

You also should ask whether there is any way to protect your stock.  Every state has "exemption laws" that protect certain assets.  You don’t say where you live so I can’t comment about what you might be able to protect, but it would be a shame to use up an asset that is fully or partially protected prior to filing a bankruptcy.

If you do nothing, at some point you are going to get sued and all bets are off.  While bankruptcy is always a last resort, it can give you the power to eliminate or reduce debts and to cancel contracts.

Make sure to find a lawyer with specific experience in Chapter 13, because I think that is the type of bankruptcy you would most likely want to consider. 

Best of luck to you.

What Are The Credit Counseling Course Requirements in Bankruptcy

At Clark and Washington, we get a lot of questions about the credit counseling and financial management course requirements set out in the bankruptcy laws.  When are these courses required?  How much do they cost?  Why are there two courses?  How long do the courses take?

Here is a brief overview of the credit and financial management courses that you are required to take as part of your bankruptcy filing:

Pre-Bankruptcy Credit Counseling

Before you file, you must complete a "credit counseling" course.  This counseling requirement applies whether you are filing Chapter 7 or Chapter 13.  The certification certificate that you receive upon completion of this course is part of our standard filing paperwork.  Pre-filing credit counselors must be Trustee approved.  Here is what will be covered:

  • the counselor will evaluate your financial situation
  • the counselor will provide information about consumer debts (i.e., credit cards and consumer loans) and will discuss alternatives to bankruptcy
  • the counselor will discuss budgeting and help you evaluate whether you have enough in your budget to pursue a debt workout rather than bankruptcy
  • if requested, the counselor will refer you to a debt management agency for the creation of a personal debt management plan
  • the counselor will attempt to offer a long term view of your financial activities and habits

Generally the credit counseling courses last anywhere from 60 to 90 minutes and can be done in person, on the web or via telephone.  Most of the credit counseling agencies we have seen offer this counseling for between $35 and $50 per person.  If you cannot afford to pay the counselor’s fee, you may request a fee waiver from the counselor’s office. All fees and payment should be discussed and agreed to prior to the session.

Pre-Discharge Financial management Course

If you successfully complete your bankruptcy, your judge will issue an official court document called an "order of discharge."  This discharge order formally terminates your obligation to pay the debts that were included in your case.  Before you can get this discharge order, however, you must complete a course called the Financial Management Education course.   As is the case with pre-bankruptcy credit counseling, the financial managment counselor must be approved by the Trustee in your filing jurisdiction.   The purpose of the financial management course is to educate you about:

  • developing a budget and living within your means
  • developing better spending habits
  • learning about money management, including saving, budgeting and checkbook control
  • wise use of credit – what to avoid when accessing available credit

Generally financial management courses last about two hours and can be done in person, on the web or via telephone.   As is the case with credit counseling, the fee will be in the $35 to $50 range.

The financial management counseling company will fax or email a certificate to you and/or your lawyer.  This certificate must be filed with the clerk of court.  If you do not file this certificate prior to the time your case is closed, you will not receive a discharge.

Both course completion certifications together prove that the debtor has been educated by professionals to understand proper budgeting, money management and how to use credit without ending up in trouble. Of course these aren’t the only bankruptcy filing requirements, but these are two of the mandatory steps.  If you have any specific questions about pre-bankruptcy credit counseling or about pre-discharge financial management education, please call our office in Chattanooga, Nashville or Knoxville.