Teresa Arnold at Topeka 13 Trustee

BANKRUPTCY 101--Q & A

QUESTIONS AND ANSWERS ABOUT BANKRUPTCY
1. What is Chapter 13 Bankruptcy?
2. Who determines how much my Chapter 13 payments will be?
3. Will I be able to keep all of my property?
4. Who can file a Chapter 13 Bankruptcy?
5. How long will a Chapter 13 Plan last?
6. What are the most common reasons for a Chapter 7 Bankruptcy?
7. Can I stop the Bill Collectors from calling?
8. How long after I file will my creditors stop calling?
9. I am married; does my spouse also have to file Bankruptcy?
10. Will I lose my job?
11. Can I go to jail if I file Bankruptcy?
12. Will my employer find out about my Bankruptcy?
13. What happens to my real property and other assets?
14. Can I keep my home and personal property?
15. Can I keep my car after Bankruptcy?
16. Can I keep my credit cards after Bankruptcy?
17. Will Bankruptcy stop a wage garnishment?
18. Will Bankruptcy stop a foreclosure?
19. Will Bankruptcy stop an eviction action?
20. Will Bankruptcy stop a judgment?
21. Will Bankruptcy remove a lien?
22. I am divorced. Will Bankruptcy wipe out my obligation to pay joint debts?
23. I am a co-signer for a debt. How does Bankruptcy affect my obligation?
24. Who notifies my creditors and bill collectors that I have filed Bankruptcy?
25. Do I have to fill out forms?
26. Do I have to go to Court?
27. What happens after I file my Bankruptcy?



1. What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a debt repayment proceeding. The debtor turns over a specified portion of his/her future earnings to the Chapter 13 trustee, who then distributes dividends (payments) to creditors who have filed bona fide claims. The method of determining the dividend distribution is determined by a Chapter 13 Plan which is filed with the Bankruptcy Court by the Debtor. The debtor receives a discharge of all dischargeable debts after the Plan is completed and all payments under the Plan have been made. It is important that the debtor comply with all provisions of the plan and comply with all orders of the court. It is also necessary that the debtor pay all domestic support obligations, including maintenance and child support, before he or she may receive a discharge. Keep in mind that the debtor must complete the debtor education course before the final payment is made to the Trustee.
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2. Who determines how much my Chapter 13 payments will be?
The amount of the Chapter 13 payments are based upon income, monthly living expenses, and the amount of total debts. The Court will allow debtors to keep and spend so much of the income as is necessary to maintain a reasonable standard of living. Only disposable income over and above normal and reasonable living expenses will be used to repay debt. What is paid is determined by income, expenses and what debts and property are being retained. The attorney will assist the debtor in this process. 
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3. Will I be able to keep all of my property?
POSSIBLY BUT DO NOT SPEND ANY INCOME TAX REFUNDS WITHOUT DIRECTION FROM THE TRUSTEE'S OFFICE OR A COURT ORDER CONSULT WITH THE ATTORNEY! It may be a crime to spend money or dispose of property that is property of the bankruptcy estate. Additionally, the attorney may have an interest in the tax refund or other property. Generally, by filing a Chapter 13 Plan, one may arrange for the repayment of debts and for the repayment of liens of liens. Sometimes, a debtor may want to surrender a particular asset in order to get rid of a debt, or, sometimes, get rid of a car, TV or appliance which does not work anyway by giving it back to a creditor in full or partial satisfaction of a debt.  For your information, Bankruptcy exemptions are covered by Federal or state non-bankruptcy law and vary from state to state. How long you have lived in Kansas may determine what state's exemptions apply  Some states have elected to use the Federal Exemptions found in 11 U.S.C. §522 while others have opted to use their individual state's exemption statutes.  Top of Page

4. Who can file a Chapter 13 Bankruptcy?
One must reside or have a domicile, a place of business, or property in the United States; one must not have had a bankruptcy filing dismissed for cause within the last 180 days; you must have a regular income; and your total debts cannot exceed certain amounts. These numbers change and the current limits can be obtained from your attorney.
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5. How long will a Chapter 13 Plan last?
Chapter 13 Plans are for up to 36 months long [or sixty (60) months where the debtor is making his/her best efforts, as may be determined by the "means test.". After that time, the Debtor is discharged from his dischargeable debts.
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6. What are the most common causes of Chapter 13 Bankruptcy?
The most common reasons for consumer bankruptcy are (a) loss of a job or long-term layoffs; (b) loss of overtime hours; (c) lengthy illnesses and large medical expenses; (d) death or disability of a spouse; (e) separation, divorce and marital problems; (f) seriously over extended credit; and (g) large unexpected expenses.
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7. Can I stop the bill collectors from calling?
YES.  One of the major benefits of filing for protection under Chapter 13 is that creditor actions are stayed (stopped). This means that debt collection efforts and foreclosure is halted immediately. Chapter 13 also protects co-debtors or cosigners from collection activity while you are making your Chapter 13 payments, in most instances, where the debt is being repaid in full with the contract rate of interest. For repeat filers, the stay may not be in effect as to certain property. This issue must be discussed with bankruptcy counsel.
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8. How long after I file will the creditors stop calling?
Once a creditor or bill collector becomes aware of the bankruptcy protection, the creditor immediately stop all efforts to collect the debt. When your bankruptcy is filed, the court will mail a notice to all of the creditors listed in your schedules. This usually takes a week to ten days. You will receive a copy of the same notice which goes out to creditors. If this is not soon enough to stop a garnishment or repossession, then you should have your attorney inform the creditor immediately. There are some child support and maintenance exceptions that should be discussed with counsel if these type of debts are at issue. If a creditor continues to use collection tactics once informed of the bankruptcy, they may be liable for court sanctions and attorney fees for this conduct.
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9. I am married; does my spouse also have to file bankruptcy?
No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file.  Ask your lawyer.
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10. Will I Lose my job?
No. Bankruptcy laws prohibits discrimination based upon a debtor filing for protection under the bankruptcy laws.
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11. Can I go to jail if I file bankruptcy?
ABSOLUTELY NOT. There are no debtors prisons in the United States. Bankruptcy laws may be created by the Congress as allowed by the U. S. Constitution in Article I, Sec. 8, cl.4.
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12. Will my employer find out about my bankruptcy?
Under normal circumstances, unless your employer is a creditor, your employer will not know that you have filed bankruptcy. However, there is a growing trend in Bankruptcy Courts to require wage withholding to fund the Chapter 13 Plan. This means that your employer may receive an order from the Bankruptcy Court to deduct your Chapter 13 payment from your check and send it directly to the Chapter 13 trustee. Consult your attorney about local procedure. Additionally, the best indicator of whether a Chapter 13 will work is whether there is an employer pay order in place.
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13. What happens to my real property and other assets?
Once the Chapter 13 bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. However, one is generally permitted to retain property successfully claimed as exempt and property that one is paying for through the plan. This can be a complicated area and should be discussed with the attorney.  If you are behind on your mortgage payments, you generally will be required to make your mortgage payments and to cure the arrearage through the Chapter 13 Trustee.
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14. Can I keep my home and personal property?
YES. One of the main reasons for filing a Chapter 13 bankruptcy is to keep your home. Usually, if you are behind on your house payments, your Chapter 13 Plan will provide that you begin making your current monthly payments and not get any further behind. Any payments you are behind on will be paid to the mortgage company through the Chapter 13 trustee. Just because the house is exempt does not mean mortgage payments don't have to be made.
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15. Can I keep my car after Bankruptcy?
YES. If your car is mortgaged to a creditor as security for a loan, you will be expected to pay an amount to the creditor at least equal to the value of the automobile at the time you file your Chapter 13 Plan. Any amount due to the creditor over the value of the car will be paid as an unsecured debt..If your car was purchased within 910 days of the date of the filing of your bankruptcy, you may need to repay the entire debt. The interest rate will be the "Till Rate", which is currently Prime plus 1.5 %.
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16. Can I keep my credit cards after bankruptcy?
Generally, NOT. This may be why there is financial trouble in the first instance. Any new debt must generally be approved by the bankruptcy court. Operating on a cash basis is usually the objective.
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17. Will Bankruptcy stop a wage garnishment?
Yes.
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18. Will Bankruptcy stop a foreclosure?
Yes. A home is an asset usually secured by a mortgage. While a Chapter 13 will stop a foreclosure, unless one begins making current payments, a creditor will be successful in obtaining permission from the Court to institute a new foreclosure proceeding or resuming a pending one. Assuming you can make your monthly payments after you file a Chapter 13 Plan, you can catch up your arrearages under Chapter 13 and avoid foreclosure of your home.
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19. Will Bankruptcy stop an eviction action?
Unless one can begin making your future rent payments on time, Chapter 13 will only stop an eviction for a while. Like a home mortgage payment, unless you can stay current from the date of filing a Chapter 13 forward, the owner will be entitled to possession of his property and at best one will be able to remain in the property until the owner can obtain an order from the Bankruptcy Court granting relief from the automatic stay and begin eviction proceedings in state court. If one can stay current, then you can catch up back rent through the Chapter 13 Plan.
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20. Will Bankruptcy stop a judgment?
Yes. Most civil judgments are stopped by bankruptcy.
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21. Will a Bankruptcy remove a lien?
Under some circumstances once the bankruptcy proceedings have started, a special motion can be filed to remove certain liens. It will take a bankruptcy court order to remove them. This is a complicated area of the bankruptcy law and an attorney should be consulted.
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22. I am divorced. Will Bankruptcy wipe-out my obligation to pay joint debts?
In come cases, YES. In October of 1994, Congress amended the Bankruptcy Code to provide, generally, that obligations arising out of a divorce or property settlement agreement are non-dischargeable. However, in a Chapter 13, one may be able to discharge certain property settlement obligations and restructure past due maintenance and child support
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23. I am a co-signer for a debt. How does Bankruptcy affect my obligation?
One generally must provide for payment under your Chapter 13 Plan. If the debt is primarily the debt of the person with whom it is cosigned, then one may either provide for payment by the debtor of the debt under your Chapter 13 Plan, or one may provide that the debt will be paid by the co-debtors. While debtor is in Chapter 13, the co-debtors is protected against collection efforts outside the Bankruptcy Court, unless the debt is not being paid in the bankruptcy.
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24. Who notifies the creditor and bill collection?
After your bankruptcy is filed, the Bankruptcy Court mails a notice to all the creditors listed in the schedules. This usually takes a week to ten days. If this is not soon enough, then it is appropriate to have the attorney inform the creditors immediately.
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25. Do I have to fill out forms?
YES, with the help of your attorney, fill out many forms concerning your assets, liabilities and current income. Much of this information will be used to determine what will be paid in the Chapter 13.  The schdules require a list ALL of all property and ALL of debts. At the initial First Meeting of Creditors, debtors are asked under oath whether they have listed all of your property and alldebts and you must be able to truthfully answer that you have.  After debtors and their attorneys prepare the bankruptcy petition and schedules, they are reviewed and signed (if filing jointly) both husband and wife will review them and, if they are correct, sign them. They will then be forwarded to the Court along with the necessary filing fees.
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26. Do I have to go to court?
Yes. Within about 30 to 45 days after you file the bankruptcy, you will have to attend a hearing presided over by the Trustee. This hearing is called the First Meeting of Creditors or Section 341 Meeting. At this hearing, the Trustee will ask questions of all debtors under oath regarding the content of the bankruptcy papers, assets, debts and other matters. After the Trustee is done, creditors will have an opportunity to ask questions regarding the location and condition of property, hazard insurance coverage and matters related to your financial affairs. Creditor appearances are not common. Debtor's attorney will assist in the proceeding   After this hearing debtors will normally not need to return to court unless a creditor files a motion or an adversary action. This is the exception. Generally, debtors will only need to appear in the Bankruptcy Court only once.
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27. What happens after I file my Bankruptcy?
Once the bankruptcy petition is filed, the Bankruptcy Court will issue an order requiring that you make the payments to the Chapter 13 Trustee which you proposed in your Plan. The Court will also set a date for you Section 341 meeting of creditors and for hearing on confirmation [approval] of your Plan. Once your Plan is confirmed (approved), you will be required to make the payments which you proposed to the Chapter 13 Trustee and, if appropriate, keep you home mortgage [or your rent] from getting any further behind. Here is a short list of things to know: SHOW UP FOR THE FIRST MEETING OF CREDITORS ON TIME. It is will be at U.S. Post Office, 424 S. Kansas in Topeka. BRING A PICTURE ID AND SOCIAL SECURITY CARD OR OTHER EVIDENCE OF SOCIAL SECURITY NUMBER. THE FIRST PLAN PAYMENT IS DUE WITHIN 30 DAYS OF THE DATE THE BANKRUPTCY IS FILED. PLAN PAYMENTS CAN BE MADE ONLY BY CHECK OR MONEY ORDER...NO CASH! THE LATEST FILED INCOME TAX RETURN MUST BE PROVIDED TO THE TRUSTEE SEVEN DAYS BEFORE THE 341 MEETING. Once you have completed all of your payments, the Court will issue a discharge to you which will relieve you from any further obligation on the debts which were covered by your Plan. Download the 341 letter and study it carefully. This will help you understand your duties in the bankruptcy