CHAPTER 13 – MEMORANDUM
The purpose of this memo is to bring your attention certain matters and information that are of importance to you. If you have questions, be sure to ask us. We are here to help.
Chapter 13: Any inheritance, property or lottery winnings you acquire during the entire length of your plan becomes part of this bankruptcy estate. You must report this to our office immediately and will more than likely be turned over to the trustee. Bonus income becomes part of the plan and is to be reported and paid in as well.
Failure to notify/report any after acquired funds or property could result in the dismissal of your case, or if you have already received a discharge, the revoking of that discharge. This is extremely important and you agree to comply with this requirement.
TFS PAYMENTS – required for your first payment
Do not set up your TFS account until at least 5 days after your case is filed. It takes a few days to get your case information to the TFS site. Your first payment is due no later than 30 days after your case is filed. In Cincinnati, tfs is the preferred method of payment. In Dayton and most of the rest of Ohio, Payroll Deduction is the normal manner of making your payments. If you have no payroll, i.e., you are retired, on disability, or if there is other good reason not to pay via payroll deduction you should discuss this with your attorney BEFORE the case is filed. A motion to approve TFS may be required to be filed in court.
CRAMING DOWN VALUE OF VEHICLE IN YOUR CHAPTER 13
This is only possible if you have purchased your vehicle more than 910 days before your case is filed.
We typically will use the trade-in value from the NADA vehicle valuation guide to determine the value we have placed on your vehicle(s) that we intend to cram down. We often get objections to valuation from creditors. We generally will negotiate a value we can all agree on.
Also, you do not receive the title to your auto until the case is over and the discharge is issued.
CHANGES DURING YOUR CHAPTER 13 PLAN
You must get court permission if any of the following apply to you:
- Incur any new debt more than $1000
Example: Need a loan for a vehicle or financing new furnace
- Sell or give away any asset worth more than $1000.
Example: Giving a vehicle to your child
- Retain any insurance proceeds for any reason
Example: Car repairs, home repairs
- Hire a lawyer -Court must be aware and approve your lawyer
- Settle a lawsuit
Court must approve terms of your settlement BEFORE you agree.
- Getting a divorce
Please call us if any of these issues ever apply to you. Do not spend any money you may have received before discussing it with our office.
You must keep our office updated on the following as we do not know unless you tell us:
- Income tax refund amounts
- Changes in your employer
- Significant changes in income, whether an increase or a decrease
DISCHARGED DEBT IS NOT TAXABLE
Any debt discharged through a bankruptcy proceeding is NOT taxable. Many creditors will still send out 1099 forms even though you have discharged their debt in a bankruptcy. You need to file a form 982 to alert the irs to the discharged debt. We are not tax preparation advisors, so you’ll need to consult whoever assists you with taxes or do this yourself. If you don’t, the IRS may audit your return and assess tax based on 1099c income. If you are paying taxes in ch 13 you WILL receive a bill for the interest which accrues on the taxes during the plan. So even when you pay your taxes in the plan, you will get a bill after the plan is over for the interest which accrued during the plan.
.
When you have a co-debtor or someone who is co-signed on a debt you have, they are not protected or receive any discharge from your case for the debt. If you file Chapter 13, a co-debtor stay automatically goes into effect prohibiting creditors from collecting consumer debt from co-debtors. In order to maintain this protection, your Chapter 13 plan must provide for payment of the entire debt and interest. If you file a chapter 13 that provides for less than 100% payment to the unsecured creditors – most plans do NOT pay 100% to these creditors, then the creditor can obtain relief from the stay and pursue the co-debtor
(Child Support and Alimony)
In order to receive your discharge, you MUST be current on your Domestic Support Obligation. That means that if you have any arrearage, you must be making your current payment, as well as some type of additional payment that includes this arrearage. If you are not current on this type of an arrangement, YOU WILL NOT RECEIVE A DISCHARGE.
If you have any questions about the dischargability of any of these obligations, discuss this with the attorney before your case is filed.
NOTE: Pursuant to Bankruptcy Rules, the obligee of your Domestic Support Obligation WILL RECEIVE NOTICE OF YOUR FILING. The Trustee is required to send out a notice to this person(s) and unfortunately, this is required by Federal Law. We are notifying you about this now in the event this causes you concern.
By retaining the firm, you acknowledge that you understand the limitations on the discharge of marital debts and obligations, and have had an opportunity to discuss the matter with the attorney and you are electing to proceed with a chapter 7 filing.
payments for MORTGAGE ON YOUR hoME
If you currently have your house payments automatically deducted from your bank account, this may STOP after the filing of your bankruptcy even if you will be making the payment yourself throughout the course of your Chapter 13 plan. Creditors are typically very concerned about violating the automatic stay that goes into place once your case is filed, and for that reason, may stop automatically deducting your regular, monthly payments.
You are advised that when your house payment is coming due after your case filed, you must monitor your account to see if the payment comes out. If it does not come out automatically, you MUST STILL MAKE THE PAYMENT. While you are in the bankruptcy, you may need to continue to make the regular payment via mail, or bringing the check directly to your bank, as you must remain current on these mortgage payments. After your bankruptcy is completed, most banks will allow you to sign up for the automatic deductions again.
You must be current by contract and not pay in the grace period in order to qualify for having your mortgage paid outside the plan and in some courts in Ohio this is not an option.
IMPORTANT – FAILURE TO MAKE YOUR HOUSE PAYMENT CAN RESULT IN DISMISSAL OF YOUR CASE! The requirement that you make your house payment – even if it is not made through the chapter 13 plan, is still part of the Court Order for your Chapter 13, and failure to make the payment, on time, each month, can result in dismissal of your case. If you are going to be late or miss a house payment, you must contact our office immediately.
This is also true for making payments online, which some banks may also stop during the pendency of your bankruptcy case. Again, this may resume upon the completion of your case.
Your bankruptcy schedules must list all education or student loans.
You are advised that the bankruptcy does not discharge student loans or educational loans.
While in bankruptcy the creditor is not permitted to attempt to collect the debt, but the debt will not be discharged, and interest will continue to accrue.
While you are in your chapter 13, you are not permitted to make payments to the creditor directly. The payments must be made through the trustee’s office, as part of your plan. Whatever portion of the debt that is not paid in the chapter 13 will not be discharged and you will be required to pay it after the bankruptcy is over.
In the event you are surrendering a property subject to condominium or homeowner association fees, you are advised that only those fees arising before you file your petition may be discharged. If you continue to live, or have the right to continue to live, in the condominium, any new fees incurred during that time are your responsibility and are not discharged. Basically, you are still responsible so long as you legally own the property.
For example, if you are permitting your condo to be surrendered to the bank and allow a foreclosure, then you will be responsible for all condo fees until you no longer have a right to live in the condo. This could be months, as foreclosure sales often do take months. You will continue to be responsible for and can be sued for, fees that arise after your bankruptcy.
By retaining the firm and signing our retaining agreement, you also agree to review this memorandum, and ask any questions you may have before your case is filed.
