The goal in Chapter 13 is to use future income to pay all or a portion of one’s debts through a court approved and administered Chapter 13 repayment plan.  The judge assigned to the case must confirm the plan.  During the confirmation process the creditors are permitted to have some input.  However, once the plan is confirmed, the creditors are obligated by its terms.  See 11 U.S.C. § 1327(a).

Chapter 13 plans typically last either three or five years, with five years being the statutory maximum.  See 11 U.S.C. § 1322(d)(1)(C) and (d)(2)(C).  Each month during the pendency of the plan the debtor sends a plan payment to the Chapter 13 Trustee assigned to the case.  The Trustee in turn sends payments to the creditors according to the terms of the confirmed plan.  At the end of the plan any remaining scheduled unsecured dischargeable debt is discharged.

One attractive feature of Chapter 13 for the debtor wanting to keep collateral securing a debt is the chance to catch up on the payments.  For example, the debtor can use the plan to pay off a mortgage arrearage over the life of the plan, rather than having to immediately become current as in a Chapter 7 bankruptcy.

Another benefit is that the debtor does not have to surrender any nonexempt assets:  the debtor gets to keep everything.  Why?  The short answer is because in the plan the debtor makes monthly payments to pay creditors.  However, as we shall see, the value of the debtor’s nonexempt assets provides a starting point for the size of the monthly plan payments.

How much are the monthly payments?  In order to answer that question we need a little background.  In particular, we must observe that a Chapter 13 plan must satisfy three basic criteria.  These three criteria contain the essence of 11 U.S.C. § 1322.
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A fellow attorney recently asked me this question because the Trustee kept continuing his Chapter 7 client’s meeting of creditors under 11 U.S.C. § 341(a).  What’s a work here?

By the way, you may wonder if fellow attorneys really are asking me these questions that I answer in the blog.  The answer is, yes.  Most of the questions I have dealt with in previous posts were posed to me directly by fellow attorneys.  However, a few of the questions I’ve blogged about were originally posed on a list serve of which I am a member, and I happened to be the one who answered them.  You are the beneficiaries of those answers.

I.          Abandonment Of Assets

A.        The Bankruptcy Code’s Provision

The Bankruptcy Code has an entire section dealing with abandonment of assets by a bankruptcy trustee.  (This is not the same as dealing with abandonment issues, which require the services of a competent, licensed psychiatrist to resolve.)  That section is 11 U.S.C. § 554.  The portions that are relevant to answering my colleague’s question are §§ 554(b) and (c):
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A fellow attorney recently asked me this question because she had a client who failed to attend the reaffirmation hearing.  As a result, the judge disapproved the reaffirmation agreement.  She wondered if the creditor could now repossess the car.  The short answer is: Yes.  What’s going on here?

I.          To Reaffirm Or Not To Reaffirm,

The popular wisdom says that an individual or a married couple can file for bankruptcy under either chapter 7 to discharge debts without paying them, or chapter 13 to pay back some of the debts through a court-administered, multi-year, partial debt repayment plan, while a business files under chapter 7 if it is going out of business, or chapter 11 if it needs to reorganize.  There is some truth to this wisdom, but it fails to take into consideration the personal chapter 11 bankruptcy.  This post looks briefly at just a few characteristics of personal chapter 11 bankruptcy.
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In bankruptcy you can protect your retirement accounts if they are ERISA-qualified:  things like 401(k)s, 403(b)s, and pension plans, or IRAs (IRAs are not ERISA-qualified, but they are still protected due to the U.S. Supreme Court opinion in Rousey v. Jacoway, 544 U.S. 320 (2005).  By this I mean that they are protected from the depredations of bankruptcy trustees, and hence from the claims of creditors, because they can be exempted using the appropriate exemption table.  In a previous blog I discussed the exemption process in great detail.  As long as you hire a high-quality attorney you should be able to keep all of your retirement.  In sum, if you file for bankruptcy protection your retirement accounts will not be in jeopardy – at least not because of your bankruptcy.

But what about the underlying solvency of your retirement accounts?  How sure are you about the stability of the accounts themselves?  Is your retirement plan one of the many that invest in municipal, state, and federal bonds?  If so, do you know how safe these investment vehicles are?
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