Chapter 7 Bankruptcy Questions:

1. What is a Chapter 7 bankruptcy?
2. What are some of the advantages of a Chapter 7 bankruptcy?
3. What are the some of the disadvantages of a Chapter 7 bankruptcy?
4. Who is eligible to file for Chapter 7?
5. What is the role of an attorney in a Chapter 7 bankruptcy case?
6. How much does it cost to file Chapter 7?
7. What happens to the property that I turn over to the Trustee?
8. What happens if there is no money or property to turn over to the bankruptcy Trustee?
9. What happens if I have assets?
10. Is there a way that I can minimize the amount of non-exempt assets that I will have to turn over to the bankruptcy trustee?
11. What debts are not discharged in a Chapter 7 bankruptcy?
12. Must my employer be told I am filing a Chapter 7 bankruptcy?
13. How does filing a Chapter 7 bankruptcy affect my credit rating?
14. How often can I file a Chapter 7?
15. Can I file a Chapter 7 bankruptcy myself?
16. I’m being sued by a credit card company. Can bankruptcy help me?

Chapter 7 Bankruptcy Answers:

Question #1: What is a Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a part of the United States Bankruptcy Code which allows individuals to discharge certain debts, and to offer debtors protection from creditor harassment under the protection of a federal court. A person filing under Chapter 7 is referred to in the Code as a “Debtor,” i.e., one who owes a debt. In exchange for the discharge of debts, the Debtor must turn over to the Trustee all of his or her “non-exempt” property for distribution to the creditors. Certain property owned by the Debtor may be exempt meaning that the Debtor may be able to keep certain property, despite filing for bankruptcy. A Philadelphia bankruptcy attorney from Arjont Group can help you through the process of filing a Chapter 7 bankruptcy in Philadelphia and the Delaware Valley.

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Question #2: What are some the advantages of a Chapter 7 bankruptcy?

• There is no minimum or maximum debt requirement. A Debtor is can not file Chapter 13 bankruptcy if his or her debt exceeds $1,081,400 in secured debt and/or $360,475 in unsecured debt. Unlike Chapter 13 bankruptcy, Chapter 7 bankruptcy permits you to file for and have discharged any amount of debt. Not all debts are dischargeable though (See section below: What debts are not discharged in a Chapter 7 bankruptcy?).
• Unpaid balances that remain after your non-exempt assets have been liquidated and distributed are discharged.
• You keep any wages you earn or property you acquire, except for inheritances and lottery winnings (received within 6 months), after the bankruptcy filing date.
• Most cases are discharged and over in about three – six months.

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Question #3: What are some of the disadvantages of a Chapter 7 bankruptcy?

• Your non-exempt property will be collected and sold by the Trustee.
• It only temporarily stops a foreclosure proceeding.
• Anyone who cosigned a loan for you may be liable for the debt unless they also file for bankruptcy protection.
• You can only file once every eight years.
• You cannot strip an unsecured second mortgage or HELOC on your residence.
• You cannot make up arrearages (missed payments) on your home or vehicle.
• You cannot cram down (reduce to fair market value) on your car or reduce the interest rate.

These are only some of the disadvantages of Chapter 7 bankruptcy. Please consult with a Philadelphia bankruptcy attorney for your particular circumstances.

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Question #4: Who is eligible to file Chapter 7?
To qualify for relief under Chapter 7 bankruptcy:

• The debtor may be an individual, a partnership, or a corporation or other business entity.
• Subject to the Means Test, relief is available under Chapter 7 bankruptcy irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent.
• An individual cannot file under Chapter 7 bankruptcy or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
• Within 180 days before filing, the debtor must have received credit counseling from an approved credit counseling agency either in an individual or group briefing.
• The debtor may not have received a discharge in a Chapter 7 bankruptcy in the previous eight years, or Chapter 13 bankruptcy in the previous four years.

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Question #5: What is the role of an attorney in a Chapter 7 consumer bankruptcy case?
The Debtor’s attorney will normally do the following things in a Chapter 7 consumer case:

• Analyze the amount and character of the debts owed by the Debtor to determine whether bankruptcy is the best remedy for the Debtor’s financial problems.
• Assist the Debtor in preparing his or her estate for bankruptcy, so that a minimum amount of property will later have to be turned over to the Trustee.
• Advise the Debtor in determining exempt and non-exempt property and debts that are dischargeable. Review the Debtor’s history of payments and transfers to determine possible exposure with regard to preferences.
• Assemble the information and data necessary to prepare the bankruptcy schedules and statements for filing.
• Prepare the proper petitions, schedules, and statements for filing with the bankruptcy court.
• File the required certificates regarding the debtor education courses with the court.
• File the bankruptcy petitions, schedules, and statements with the court and obtain the necessary injunctions and restraining orders.
• Attend the Meeting of Creditors with the Debtor.
• Prepare and file amended schedules as required by the court.
• Address issues related to redemption, surrender or reaffirmation.
• Respond to inquiries from your creditors and the bankruptcy Trustee.

Your Philadelphia bankruptcy attorney from Arjont Group will discuss this in detail with you at your initial consultation.

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Question #6: How much does it cost to file a Chapter 7 bankruptcy?
Attorneys’ fees are charged in addition to the fees required by the court(currently $299). It is impossible to quote an exact fee without first reviewing the Debtor’s individual situation. Each case is unique so we need to meet with you to discuss your particular situation. Please call your Philadelphia bankruptcy lawyer today at (215) 279-8940.

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Question #7: What happens to the property that I turn over to the Trustee?
A public auction may be held and your property converted into cash, which is then distributed to those creditors who filed claims (Proof of Claim) against the bankruptcy estate. You, your family and friends have a right to bid at this auction. The expenses of administering your estate will also be paid from these funds. The Trustee assigned to your case will be responsible for paying their attorneys or other professionals.

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Question #8: What happens if there is no money or property to turn over to the bankruptcy Trustee?
Most Chapter 7 bankruptcies are what are called a no-asset cases. This means that the debtor keeps all of his or her assets. No-asset means that you have no money or property of a value in excess of the exemptions allowed by law. Generally, the Trustee will file a no asset report shortly after the Meeting of Creditors. After the section 341 Meeting of Creditors the Trustee and the court will decide whether or not your case is a no-asset case. Most commonly a discharge will be entered approximately 120 days after the case was originally filed, unless a creditor files an objection to the discharge. If this happens, the Trustee will request an extension of time or the debtor can ask for more time. The case will probably be closed shortly after the discharge. A proper review of the case before filing is key in protecting assets. This is one of the most important reason for contacting your Philadelphia bankruptcy lawyer before you transfer, sell or gift your assets.

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Question #9: What happens if I have assets?
If your case involves assets, the bankruptcy Trustee will begin to collect all of your property to which the Trustee is entitled by law. This will often begin shortly after a petition is filed. Those assets must be protected until the Trustee arranges to pick them up. A notice will be sent to all the creditors notifying them of a possible distribution. The creditors will file a Proof of Claim. The Trustee will examine the proof of claims and object to those the Trustee deems to be improper. All claims not objected to by the Trustee, the debtor, or another creditor will be approved by the court and the creditors will receive a pro-rata share of whatever the Trustee has collected. The fees for the auctioneer, trustee and their attorney are paid out of the funds they collected, not by the Debtor.  It is often possible to work out buy-back arrangements with the trustee where you make payment(s) to the Trustee in exchange for keeping certain property. This is why it’s important to select an attorney that has a good working relationship with the Trustee.

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Question #10: Can I minimize the non-exempt assets that I will have to turn over to the bankruptcy trustee?
Discuss this with your Philadelphia bankruptcy attorney before you pay money or transfer any assets since not all such transactions are permitted under the Bankruptcy laws. The Bankruptcy reform of 2005 added several complicated hoops to planning for a bankruptcy. Paying down mortgages buying or transferring assets, paying friends or a relative money may all be means for the Trustee and your creditors to attack your assets. Please review the Do’s and Dont’s of Bankruptcy for more information. You should always consult with a Philadelphia bankruptcy attorney in exemption planning.

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Question #11: What debts are not discharged in a Chapter 7 bankruptcy?
If the Court grants the bankruptcy discharge, in most circumstances, all of your debts will be discharged except the following. (This is an outline of the types of debts that are not discharged.) Consult with a Philadelphia bankruptcy attorney regarding your particular circumstances.

• Taxes due and payable within the last three years or taxes not assessed because of fraud.
• Debts for obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive, as determined by the Court.
• Debts not listed in your bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim.
• Debts for fraud, embezzlement or larceny, as determined by the Court.
• Debts for domestic support obligations (alimony, maintenance or support).
• Debts for intentional injuries, as determined by the Court.
• Debts for most fines and penalties payable to governmental units.
• Debts for student loans, unless not discharging the debt would impose an undue hardship. Undue hardship must be pled in an adversary proceeding to the Court and the judge or jury will decide based on the Debtor’s unique situation.
• Most debts that were or could have been listed in a prior bankruptcy case in which you either waived your discharge or your discharge was denied.
• Debts that are owed to a single creditor for a total of more than $500 for the purchase of luxury goods incurred in the 90 days before filing the petition for bankruptcy. The 90 day period may be longer, depending on the history of paying, what the money was used for and your intent at the time of incurring the debt.
• Cash advances that total more than $750 that arose from the extensions of consumer credit under an open-end credit account incurred by in the 70 days before the bankruptcy was filed, regardless of the number of creditors involved.
• Debt for personal injury judgments against the Debtor resulting from car accidents in which the Debtor was a driving after imbibing.
• Post-petition home owners association fees.
• Monies owed to a 401(k), pension, profit-sharing, stock bonus or such other plan.

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Question #12: Must my employer be told I am filing a Chapter 7 bankruptcy?
Generally, no. The bankruptcy Trustee will request that you provide copies of several documents (tax returns, bank statements, etc). One of these items will be copies of some of your pay stubs (or payment advices) before filing. If you refuse to provide this information then the Trustee may send a form to your employer seeking information about your wages. Your employer will usually not be contacted so long as you comply with the Trustee’s request.

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Question #13: How does filing a Chapter 7 bankruptcy affect my credit rating?
The filing of a bankruptcy may means that your credit rating will probably drastically decrease, and will remain on your credit report for up to ten years. Depending on your situation, it may not take long after your discharge to substantially raise that rating. Several financial institutions openly solicit business from recent debtors, apparently because they know that the debtor cannot file another Chapter 7 for at least eight years.

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Question #14: How often can I file a Chapter 7?
Debtors cannot receive another Chapter 7 discharge for eight years after the filing of the first bankruptcy.  If the Debtor commits fraud, or fails to perform as required by law, the case can be dismissed or discharge, if previously granted, can be revoked.

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Question #15: Can I file a Chapter 7 bankruptcy myself?
Yes.  However, navigating the bankruptcy codes, particularly the 2005 Bankruptcy reform, can be very difficult.  An unsophisticated debtor may receive a discharge, but unnecessarily give up property that he or she could have preserved.  Worse, a debtor can make an innocent mistake that results in dismissal of the case.  Philadelphia attorneys from Arjont Group can assist in  bankruptcy filings and  protect the debtor’s interests. Call your Philadelphia bankruptcy lawyer to discuss your situation at (215) 279-8940.

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Question #16: I’m being sued by a credit card company.  Can bankruptcy help me?
Yes, Credit card debts are unsecured debts and are generally dischargeable in bankruptcy. It is important to contact a bankruptcy attorney immediately upon receiving a complaint because there are deadlines for answering the complaint, and the time frame in which the credit cards can get a default judgment against you. Once a default judgment is entered, they can move to garnish your wages or place a lien on your property. Contact a Philadelphia bankruptcy attorney from Arjont Group if you need assistance.

Chapter 13 Bankruptcy Answers:

Question #1: What is a Chapter 13 bankruptcy?
A Chapter 13 bankruptcy enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the plan is approved, the Debtor makes payments to the Trustee who then distributes the payment to the creditors. When approved by the court, the plan binds all creditors to accept its terms as payment in full of their claim. At the end of the plan, you resume normal payments to secured creditors such as your mortgage lender, and the remaining unsecured debts (e.g. credit cards) are discharged. A Philadelphia Chapter 13 bankruptcy attorney from Arjont Group will provide you with a thorough analysis of how a Chapter 13 bankruptcy applies to your circumstances.

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Question #2: What are some of the advantages of a Chapter 13 bankruptcy?
Chapter 13 offers individuals a number of advantages over liquidation under Chapter 7 bankruptcy.

• Lien stripping your second mortgage or home equity line of credit: If you have a home with a second mortgage or home equity line of credit (HELOC), and the fair market value of the home is less than the first mortgage (underwater), you may be able to “strip” off that second mortgage or HELOC.  This is because that second loan is no longer secured where the fair market value is less than the first mortgage.  The first mortgage has a senior lien and priority over the second mortgage and HELOC that have a junior lien.  For example, assume you bought your home in 2004 for $400,000.  You then took out a $100,000 HELOC in 2006.  The current fair market value has dropped to $250,000 and you are now underwater.  Chapter 13 may permit you to strip the HELOC and it will be re-categorized as an unsecured creditor. Therefore, after the completion of the payment plan, the HELOC will be discharged along with your other unsecured creditors.
• Foreclosure: Chapter 13 offers individuals an opportunity to save their homes from foreclosure. Individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over the time of the plan.  Debtors must still make all mortgage payments that come due during the Chapter 13 plan on time.
• Potentially lower payments: Individuals can reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan.  Doing this may lower the Debtor’s payments.
• Consolidation: Payments made under the plan is essentially a consolidation loan under which the individual makes the plan payments to an appointed Trustee who then distributes payments to creditors.  Debtors will have no direct contact with creditors while under Chapter 13 protection.
• Delinquent Taxes: Chapter 13 can be used as a weapon against overdue taxes because:
  • Realistic payment schedule: Payment of tax debts through the plan is based on financial reality: monthly payments reflect what is actually available in the Debtor’s budget after current living expenses, as opposed to arbitrary national standards.
  • Old taxes and all penalties discharged: Non priority taxes and all penalties are relegated to the same status as other unsecured debts and may be paid pennies on the dollar.
  • Tax liens frozen: Future appreciation of assets subject to tax liens is put beyond the reach of the lien, since the value of the secured lien claim is fixed with respect to the value of the property upon the filing of the case.
  • Other creditors discharged: Non tax creditors are stayed from collection action during the case, thereby protecting the Debtor’s cash flow for payments into the plan.
  • Discharge is unconditional: All tax liability that is discharged at the completion of the case is gone forever; in contrast to offers in compromise, there is no condition on the discharge tied to future tax filing.
  • No added tax consequences. Discharge of debt in bankruptcy does not trigger cancellation of debt income.

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Question #3: What are the some of the disadvantages of a Chapter 13 bankruptcy?

• Committed to payments: Even though you make lower payments spread out over a set period of time, the Debtor is committed to payments for three to five years.
• Debt ceiling: If you have too much debt, you can not file under Chapter 13.  A Debtor can not have more than $1,010,650 in secured debt and/or $336,900 in unsecured debt.
• Paying unsecured debt: If you qualify for Chapter 13 bankruptcy, and have enough disposable income left over after paying secured debtors, you will likely pay unsecured creditors such as credit cards and medical bills over the three to five year period more than you would in Chapter 7 bankruptcy.  Chapter 7 permits you to eliminate the debt upon the discharge and walk away with a more immediate “fresh start”.

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Question #4: Who is eligible to file for Chapter 13?
In order to file for a Chapter 13 you must:

• Before filing, complete the class of credit counseling for consumers.
• Have sufficient regular income to meet monthly living expenses allowed by the Chapter 13 Trustee and IRS to make a plan payment. Commissions and other irregular payment schemes may count as regular income so check with your Philadelphia bankruptcy attorney.
• Have less than $1,010,650 in secured debt and $336,900 in unsecured debt.
• Not be a corporation, partnership, stockbroker, or commodity broker.
• Received credit counseling from an approved credit counseling agency, either in an individual or group briefing, within 180 days before filing,.
• Not have received a discharge in a Chapter 7, 11 in the previous eight years, or another Chapter 13 in the previous four years.

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Question #5: What is the role of an attorney in a Chapter 13 bankruptcy case?
The debtor’s attorney may do the following things in a Chapter 13 consumer case:

• Analyze the amount and character of the debts owed to determine whether bankruptcy is the best remedy for the Debtor’s financial problems.
• Assist in preparing the estate for bankruptcy.
• Review the  history of payments and transfers to determine possible exposure for possible preference payments.
• Assemble the information and data necessary to prepare the bankruptcy schedules and statements.
• Assist the debtor in understanding his or her duties in a Chapter 13.
• Draft the Chapter 13 Plan, based on the Debtor’s situation, the law and the practical solutions available.
• Prepare proper motions, and/or adversarial proceedings.
• Prepare the petitions, schedules, and statements for filing with the bankruptcy court.
• File the bankruptcy petitions, schedules, and statements with the court.
• Address issues related to redemption, surrender or reaffirmation.
• File and notice the Chapter 13 Plan.
• Attend the Section 341 Meeting of Creditors with the debtor.
• Address issues raised by the bankruptcy Trustee and creditors related to the Chapter 13 Plan and other documents filed with the Court.
• Attend Chapter 13 Plan Confirmation hearings.
• Address modifications of the Chapter 13 Plan, as circumstances change during the life of the Chapter 13 Plan.
• Prepare and file amended schedules as required by the Debtor’s change of circumstances and the court.

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Question #6: How much does it cost to file Chapter 13?
The court’s filing fee is $274.00 for a Chapter 13, whether you are filing bankruptcy individually or jointly with your spouse. In addition to the court filing fee there are also two classes each individual must take. Pre- and post- bankruptcy filing credit and budget classes. The cost for the two classes combined is less than $100.00.

Attorneys’ fees are charged in addition to the fees required by the court. It is impossible to quote exact fees without first reviewing your situation. A Philadelphia bankruptcy lawyer from Arjont Group will assess the facts of your situation and provide you with quote of fees and expenses.

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Question #7: How does the Chapter 13 Plan of Reorganization work?
After a Means Test is performed to evaluate the Debtor’s prospects for qualifying for a Chapter 13 bankruptcy, the plan must meet two other tests:

• Best interest of creditors test:  The plan must give unsecured creditors at least as much on their claim as they would have received if the debtor filed Chapter 7; and
• Best efforts test:  All projected disposable income (the amount left after payment of allowed expenses) must be paid into the plan for the “applicable commitment period” which could be 3 to 5 years.

The plan must also provide for payment in full of priority claims and generally provide for payment of the value of secured claims on cars, etc., in full over the life of the plan.  Bankruptcy reform in 2005 changed the amount necessary to pay on vehicles that were purchased in the 2 1/2 years prior to filing, or other personal property purchased within the year prior to filing.  Debts such as home mortgages, that exceed the length of the Plan, do no need to be paid in full in the life of the plan, though the plan may cure any defaults on long term debt (arrearages).

Payments can be the same over the life of the plan, or they can start low and increase at intervals, or they can vary as needed.  Plan payments must reflect a change in income.  Therefore, if the Debtor receives a raise and does not have any allowed increased in expenses, then the additional monies from the raise must be paid to the Trustee for distribution to the unsecured creditors.

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Question #8:  When do I start to make payments, and how often through the plan?
Debtors must make the first payment on the plan within 30 days of the filing of the plan and each month thereafter. Even if nothing else is doen on the petition the first payment is due. Often payments begin before the first meeting of creditors (the section 341 meeting) and continue while objections to confirmation are pending.  Payments must be made in certified funds, such as money orders or cashier’s checks, or by voluntary wage deduction.

If you stop making plan payments, the Trustee will ask the Court to dismiss your case.

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Question #9: Why is a Chapter 13 plan three years or five years in length?
It depends on the Debtor’s income.  If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period for cause.  Otherwise, the plan will be for five years.

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Question #10: Can creditors or the Trustee object to the plan?
Yes, but creditors’ objections are limited to the value of the secured item or the dollar amount scheduled to be paid through the plan. Creditors and Trustee’s can object only if they contend the plan does not meet the best interests of creditors test and the best efforts test, or if they contend the debtor has not proposed the plan in good faith.

The Trustee can raise any objection that a creditor could raise.  Under the Bankruptcy reform of  2005 the creditors may have more grounds for objection (required payments, prior discharges, etc.)

Objections to confirmation are usually resolved by negotiation between your Philadelphia bankruptcy attorney and the objecting party, usually by some sort of compromise.  If the parties cannot reach a compromise, the judge will decide the question.

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Question #11: Why would I amend the plan before confirmation?
The plan must meet the tests for plan confirmation. Sometimes, the amount of money to be paid into a plan must be increased, such as where the claims that are actually filed and allowed are greater than estimated at the beginning of the case.

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Question #12: What is the effect of confirming the plan?
Once the plan is confirmed, it binds all the parties: the creditors must accept the payments provided; the values given in the plan for the secured portion of claims are fixed; and the debtor’s payments over the life of the plan are fixed, unless the debtor’s circumstances change and the plan is modified.

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Question #13: Must my Employer be told I am filing for Bankruptcy?
Usually not.  Two issues may involve you employer.  First, the bankruptcy Trustee will request that you provide copies of certain documents (tax returns, bank statements, etc).  One of these items will be copies of some of your pay stubs (or payment advices) before filing.  If you fail to provide this information then the Trustee may send a form to your employer seeking information about your wages. Second, the foundation of a Chapter 13 is the monthly Plan payment made to the Bankruptcy Trustee.  In some cases a wage assignment of those Plan payments may be required by the Court, the Trustee or the debtor’s circumstances.  Each situation is unique.  The law prohibits your employer using the mere filing of a bankruptcy to deny you employment.

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Question #14: Are there exemptions in Chapter 13?
In Chapter 13, the Debtor selects exemptions just as in Chapter 7, although in the typical Chapter 13, the Debtor keeps all of his or her property, exempt or not.  Exemptions in 13 are used to determine whether the plan complies with the requirement that a Chapter 13 plan must provide creditors at least the equivalent of what creditors would have gotten had the debtor filed Chapter 7.  To apply the test the Trustee calculates what real or personal property would be available for liquidation to pay creditors after the exemptions are deducted from the assets if the case were a Chapter 7.

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Question #15: What is the role of the Trustee in Chapter 13?
The Trustee acts as the disbursing agent for the payments made into the plan. The Trustee also reviews the plan and challenges those plans that don’t meet the tests for confirmable plans set out in the Bankruptcy Code.  The 2005 Bankruptcy reform did not settle what a confirmable plan is.  If the Trustee and the debtor can not agree on the terms of the Chapter 13 plan, a judge will decide if the plan can be confirmed.

Once the plan is confirmed the trustee pays creditors from the payments made by the debtor. The 2005 Bankruptcy reform permits the Trustee to make what are called adequate protection payments before the Plan is confirmed.  Generally, all debts existing at the beginning of the case must be paid through the trustee; mortgage payments and some leases are among the exceptions.

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Question #16: What do I file if I am self-employed and in a Chapter 13?
Every debtor who is self-employed or operating a business must file a monthly financial report known as a “Business Operating Statement” with the Court.  The term “self-employed” includes a person who operates a business, whether full or part time, or with another person.  A person who is an independent contractor, subcontractor, works on a contract labor basis, or any other work where taxes are not deducted from the pay received, is deemed self-employed for the purpose of filing the operating statement.

The first Business Operating Statement must be filed for the actual month in which the Debtor filed his or her Chapter 13 case.  Then, on or before the 15th day of each succeeding month a new Business Operating Statement must be filed.  These statements are filed with the Bankruptcy Court, with a copy to your attorney and the Trustee.  The Business Operating Statement is a cash-based report.  Make sure to account for all expenses and income.  See your Philadelphia bankruptcy attorney if you have any questions.

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Question #17: What can jeopardize my Chapter 13 plan?
The restrictions on a Debtor in Chapter 13 bankruptcy:

• Make all plan payments on time.
• Keep mortgage payments current, and car payments – if the car is being paid outside of the plan.
• Take the required personal financial management class early in your Chapter 13 Plan period.
• If you owe child support or alimony or maintenance you cannot fall behind on any payments.  At least by the end of the plan period all such payments must be current.  The Debtor must file a certificate that these obligations are current or the Court will not enter a discharge.
• Do not fall behind on new tax obligations during the plan period.
• Any new debt requires prior court approval.
• Debtors must maintain adequate insurance on any asset that is collateral for a debt.
• Inform the Trustee with information about changes in income.
• Provide the Trustee with copies of annual tax returns.

The Debtor can move or change jobs, but must make sure to report any income changes to their attorney and the Trustee. Court approval is necessary before obtaining new loans; incorporating a business that is an asset of the estate; or refinancing, selling or purchasing a home. Getting that approval can take 30-45 days.

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Question #18: What happens if I lose my job or cannot make my payments during the Plan?
There are times that the Debtor may be unable to pay the monthly Plan payments.  This failure must be as a result of serious, short term changes in the Debtor’s income or some unusual, but necessary, expense.  A moratorium can be filed with the Court and served on all the creditors.  There may be a hearing, and the Trustee will need to approve the moratorium.  Even with a moratorium, the entire length of the Plan cannot exceed 60 months.

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Question #19: Can I modify the confirmed Plan?
Plans can be changed if there is a change of income, through job loss or ill health. Plan payments can be lowered or the percentage paid to creditors changed if the debtor’s income or expenses in the future won’t fund the plan as originally confirmed. Note that if your income goes up the Chapter 13 plan will need to be changed to reflect that income.

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Question #20: Can I buy a house while in a Chapter 13 bankruptcy?
First, you must obtain advice from your Philadelphia attorney attorney, permission from the Trustee and the Court before buying a new home.  The longer the time after your plan is confirmed, the better interest rate you can get.  The U.S. Department of Housing and Urban development underwriting rules provide that the person in Chapter 13 bankruptcy can purchase a home and have FHA insurance.  The requirements are that the applicant must have completed one year of plan payments while under Chapter 13. The applicant must also obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow. See HUD Handbook 4155.1.

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Question #21: When are my dischargeable debts discharged in Chapter 13?
In a Chapter 13, the discharge is not entered by the Court until all your plan payments are made and the terms of the Plan completed in full.  If the debtor commits fraud, or fails to perform as required by law, the case can be dismissed or the discharge can be revoked.

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Question #22: What debts are not discharged in a Chapter 13 bankruptcy?
If your discharge in bankruptcy is granted, in most circumstances all of your debts will be discharged except the following list, which is intended to be only an outline of most debts that are not discharged.   The law governing Chapter 13 was dramatically affected by the 2005 Bankruptcy reform.

• Taxes due and payable within the last three years or taxes not assessed because of fraud.
• Taxes due based on fraudulent tax returns.
• Debts for obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive, as determined by the Court.
• Debts not listed on your bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim.
• Debts for fraud, embezzlement or larceny, as determined by the Court.
• Debts for domestic support obligations (alimony, maintenance or support).
• Interest on non-dischargeable debts.
• If the bankruptcy court so rules, debts for intentional injuries.
• Debts for most fines and penalties payable to governmental units.
• Debts for student loans, unless not discharging the debt would impose an undue hardship.  This undue hardship must be pled in an adversary proceeding before the Court and the judge or a jury will decide based on your unique situation.
• Most debts that were or could have been listed in a prior bankruptcy case in which you either waived your discharge or your discharge was denied.
• Debts that are owed to a single creditor for a total of more than $500 for the purchase of luxury goods incurred in the 90 days before filing the petition for bankruptcy.  The 90 day period may be longer, depending on your history of paying, what the money was used for and your intent at the time of incurring the debt.
• Cash advances that total more than $750 that arose from the extensions of consumer credit under an open-end credit account incurred by you in the 70 days before the bankruptcy was filed, regardless of the number of creditors involved.
• Debt for personal injury judgments against you resulting from car accidents in which you were driver under the influence.
• Post-petition home owners association fees.
• Money owed to a pension, profit-sharing, stock bonus or such other plan.

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Question #23: How does filing a Chapter 13 bankruptcy affect my credit rating?

The filing of a bankruptcy generally means that your credit rating will be reduced, and the bankruptcy will remain on your credit report for up to ten years.  A Chapter 13 is an open bankruptcy for 3 to 5 years.  During this period, your credit score can increase so long you keep your Plan payments and monthly mortgage payments current.

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Question #24: How often can I file a Chapter 13?

Only individuals, who have complied with the Bankruptcy laws and completed their Chapter 13 Plan, can receive a Chapter 13 bankruptcy discharge.  An individual cannot receive a discharge in the 13 if they received a discharge in 7 or 11 in the past eight years before filing the current case, or in a Chapter 13 bankruptcy in the last four years before filing the current case.

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Question #25: Can I file a Chapter 13 bankruptcy myself?


Yes.  However, navigating the bankruptcy codes, particularly the 2005 amendments, can be extremely difficult.  An unsophisticated debtor may have a plan confirmed, but unnecessarily pay excessive amounts to unsecured creditors.  Worse, a debtor can make an innocent mistake that results in dismissal of the case.  If you are not inclined to retain the Philadelphia bankruptcy law firm Arjont Group to assist you, we strongly recommend that seek the services of a Philadelphia bankruptcy lawyer to protect your interests.