I often wonder whether the lawyers who file more cases than me tell their clients any of these things.
- Filing for bankruptcy should be a last resort.
- A bankruptcy filing whether under Chapter 7 or Chapter 13 will go on your credit report for ten years.
- Unpaid debts will go off of your credit report seven years after they are first reported. If the only reason that you are filing is because of old debts, you may be better off just waiting for them to go off your credit report.
- The acronym Y.A.H.O.O. stands for “You always have other options”. Explore and consider your other options before filing any kind of bankruptcy.
- Other options include settling with your creditors or just not paying them.
- Your wages can only be garnished by one creditor at a time and they can only take one-fourth of your take home pay at the most until their debt is paid.
- Do you want to trade a garnishment by a creditor for a garnishment by a Chapter 13 trustee?
- Chapter 13 trustees take about 7% of every payment before they pay creditors. Some creditors may be paid without interest, but you are paying 7% to the trustee in place of the interest
- Bankruptcy lawyers receive about $3,000 from you payments. If the creditors are being paid in full, the attorney fee is an extra cost to you. If you are not paying your creditors in full, the unsecured creditors get less money because they are last in line to be paid.
- The trustee always has his hand out. If any extra money comes your way, be sure to tell me. The trustee may want some or all of it.
- All the trustee wants is money. He doesn’t want your cars, house, land, etc. All he wants is your money.
- The trustee just wants your money until all of your creditors are paid in full or until you make your last plan payment, whichever comes first. He will give back any money that he is not entitled to.
- The trustee has no tolerance for screw-ups. He has one hundred or more rules. If you comply with ninety-nine and don’t follow one he will file a motion to dismiss your case.
- If you are about to lose your house or cars and you can now make payments that you couldn’t make before, Chapter 13 may be your only option.
- Make your payments on time. Give the trustee your tax returns and refunds each year and call me if there are any changes in your circumstances.
One good thing about Chapter 13 bankruptcy is that the trustees never want to take your property.
Another good thing about Chapter 13 trustees is that when they run out of people to pay, they will stop taking money from you. The trustees are good at keeping track of money. You can get access to the records from your case to see how much you still need to pay and how much will need to be paid to pay all of your creditors in full.
One bad thing about Chapter 13 bankruptcy is that the trustee will want as much money as possible paid as quickly as possible. I have begun to tell clients that the trustee will always have his hand out seeking any additional money that comes their way.
It doesn’t matter to the Chapter 13 trustee if you have a plan that pays your creditors in full within 36 months. If he thinks that you can pay the creditors off faster, he will object to your plan. His thinking is that something might happen to disrupt your ability to pay so he should get the creditors paid as quickly as possible.
You can request a seventy-two month extension to pay your income tax from the IRS.
You can got to their website to get a form to ask for time to pay and file it when you file your tax return.
Click here for the form (PDF).
Taxes are never discharged in bankruptcy if the returns are not filed. Always file your returns, even if you can’t pay the taxes.
Attorneys have to disclose all payments received from clients. If you don’t think that you received credit for all the payments made to your attorney, you can contact the bar association or the U.S. Trustee’s office to register a complaint.
Southwest Louisiana Bar Association
1011 N Lakeshore Dr, Lake Charles, LA 70601
US Trustees Office
6305 Ivy Ln # 600, Greenbelt, MD 20770
Clients frequently tell me inaccurate information that they receive from other attorneys. If you have concerns about what another attorney tells you, by all means get a second opinion.
Call 337-494-1023 to schedule a free consultation.
Chapter 13 cases can be converted to Chapter 7 cases. If you are in a chapter 13 case, and have second thoughts about staying in it, you can ask your attorney, or a different attorney, about converting the case to a Chapter 7 case. Your Chapter 13 attorney might not want to help you convert the case because he often will lose his fee if the case is converted early into the case.
Car notes can also be paid outside of a Chapter 13 plan of reorganization. Often the client is better off paying for the car himself, outside of the bankruptcy Chapter 13 plan of reorganization. If your attorney tells you to stop paying your car note, on a car that you want to keep, ask him how you benefit by not continuing to pay for it yourself. If he can’t give you a good reason, call our office at 337-494-1023 for a free consultation
No. There are lots of reasons not to pay a house note through the bankruptcy court. The bankruptcy court charges a fee of 5% on regular home payments and 6.7% on past due payments. The payments to the mortgage company are delayed by at least three months in each case which mess up the amortization schedule. The plan of reorganization has to be amended if the payments change. There are lots of other reasons. Get a second opinion from a second attorney if the first attorney recommends that you pay your current house note through the bankruptcy court. Call our office at 337-494-1023 for a free consultation
Some local attorneys tell their clients to pay for their houses through their Chapter 13 plans rather than directly, even when the house payments are not in default. Chapter 13 debtors have the option to pay their house notes themselves and not through the bankruptcy court. The reason an attorney doesn’t recommend direct payment may be because the attorney can charge a higher fee if the house is in the plan.