November 20, 2017

Chapter 13 Trustees Looking to Squeeze Every Last Dime from Debtors

Over the past couple of years I have noted an unsettling trend in my Chapter 13 casesTrustees in the Northern District of Georgia are scrutinizing budgets line by line and are objecting to budget items in an attempt to force debtors to increase their trustee payments.

I am even receiving objections to the total amount of expenses claimed.  In a recent case, for example, the trustee filed a supplemental objection a week before confirmation which asserted that the debtor’s total claimed monthly expenses were too high.  When I called, he pointed out four or five specific line items and I obtained and presented supporting documentation from my client.

My client advises me that he is literally having difficulty buying food and the trustee acknowledged that our claimed expenses were legitimate but he would not back off his objection because the total payout to unsecured creditors was less than 50 cents on the dollar.  There is no resolution yet, but we agreed to reset the confirmation until after the date that all claims are due – presumably some of the unsecured creditors will not file claims, meaning that the ones who do will receive a higher payout. [Read more…]

You are Responsible for Your Chapter 13 Trustee Payments

I have probably written about this subject before, but I am going to raise it again because it creates so many unnecessary problems and it arises month after month and year after year.

If you are a Chapter 13 debtor, you and you alone are responsible for making your trustee payments.


Pre-confirmation

In the Northern District of Georgia, all Chapter 13 cases must be funded by payroll deduction. An employer deduction order (“EDO”) should be filed in your case at the time your case is filed. Until the money starts coming out of your check, however, do not assume that your employer knows what to do or knows how to do it right. Further, you should assume that your employer may need 1 to 3 payroll cycles to implement the payroll deduction. Until the money starts coming out, you have to make the payments directly.

I cannot tell you how many confirmation hearings have been held up because a Chapter 13 debtor was one or two bi-weekly payments behind. In fact, I advise my clients to send in the first one or two bi-weekly or semi-monthly payments under the assumption that the employer will not withhold accurately the first time.

The pre-confirmation period in a Chapter 13 functions as a kind of probation period for your Chapter 13. If we drafted an “aggressive” plan, there is a good chance that we may have to amend the plan and increase the payment to the trustee. If this happens, your attorney will file an amended EDO. But guess what. Some payroll office employees don’t recognize that the amended EDO is different than what they received 4 weeks previously. When you plan is amended to increase the payment you need to verify that the correct amount is being withheld.

Post-confirmation

Five years is a long time. And during that five years you may experience an interruption in your employment causing an interruption in your pay and therefore an interruption in payment received by the trustee. Do not ignore this interruption and hope that no one will notice. The trustee uses a computer program to track payments. If you fall behind, the lapse will eventually trigger a trustee Motion to Dismiss. If that Motion to Dismiss occurs in year three, leaving you, for example 22 months left in your plan, any delinquency needs to be cured in that 22 months. This may require a substantial increase in your monthly payment or a large lump sum.

Your First Meeting With a Bankruptcy Lawyer – What Do You Bring?

One of the consequences of the new bankruptcy law has to do with the increased obligation on the part of both the lawyer and our clients to provide extensive documentation to the trustee and the courts.  Since much of this documentary information is mandatory, your filing will be delayed if we do not produce it at the time of filing.

The information you will need to have on hand will vary based on where you file.  In the Northern District of Georgia, which includes Atlanta, Newnan, Rome and Gainesville, we have a number of local rules that call for specific documents.

By contrast, there are different local rules for filings not in the northern district.

The Bankruptcy Court for the Middle District of Georgia is the appropriate venue for debtors in Macon, Columbus, Athens and surrounding towns.  The Southern District includes Savannah, Waycross, Augusta, Statesboro and Dublin.  Pursuant to the Bankruptcy Code, you are required to file bankruptcy in the district where you have lived for the greater part of 180 days (i.e. 3 months and 1 day).   There are special calculations that we would do if you have moved several times in a short period of time.

In addition, the new Code limits your bankruptcy protection if you move from one State into another State.  If you now live in Georgia but moved from out of State within the last two to three years, make sure to make your lawyer aware of your move.  Even if you have been in Georgia for a year or longer, laws from your previous state may apply in your case as Congress has attempted to stop people from “venue shopping.”

Page optimized by WP Minify WordPress Plugin