Tag Archive: Chapter 13


Well, I am terrible about boasting my own achievements – except maybe to my husband – but that is what we joined up with fellow bankruptcy attorney Kaveh Mostafavi for… he seems to be quite adept at making me look simply brilliant.¬† So, since this does deal with an important legal issue in the context of Chapter 13 Bankruptcy – please check out his summary of my recent win for one of our clients here: The OTHER Mostafavi, Marco & Wimmer Bankruptcy Blog

 

Enjoy the read and visit http://www.mmwazlaw.com or http://www.drbankruptcyaz.com to learn more about Kaveh ūüôā

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Anyone who files for bankruptcy relief has to attend a Section 341 Meeting of Creditors (or Creditors Meeting).  This is a requirement under the bankruptcy code, and a debtor will not receive his discharge if he fails to appear at the date and time set for his creditors meeting.  Instead, his case will be dismissed, and the debtor has to re-file and face the consequences associated with that.

Now, the creditors meeting sounds like a pretty scary concept. For one, you have to go to the bankruptcy court for it.¬† Two, it’s called the ‘creditors meeting’!! Your creditors are the reason why you are here in the first place, and many of you have had just about enough of them.¬† All in all, though, ¬†it is not that scary, and 9 out of 10 of my clients walk out of their creditors meeting going “that was it?”.¬†

As I said, the code mandates that a creditors meeting takes place. This process is virtually the same for Chapter 7 debtors as well as Chapter 13 debtors.   The court schedules the date and time of your creditors meeting after your petition has been filed and a trustee has been assigned to your case.  This date can only be changed in extraordinary circumstances, and I typically recommend not changing it, as delaying your creditors meeting inevitably means a delay of your discharge.  The date is approximately 30 days after your petition has been filed.  As your attorney, I get notified via email within about 24 Р48 hours of the exact time and date.  Within a few days after that, the official Notice of Creditors Meeting is sent not only to you, but to all of your creditors as well. 

In Arizona, the appointments are set in half-hour increments, and each half-hour portion of the day is assigned to a number of different cases filed in the same Chapter.  This of course means that (a) your creditors meeting is neither private nor confidential, but (b) all the other folks there are there for the same reason you are: To avail yourself of the relief granted to you by the bankruptcy code. 

While the creditors meeting may take place in the actual court building, it is not held in the court room, and the judge will not be there.  Instead, the trustee assigned to your case runs the show.  On your appointed time, you will enter the room along with your attorney, and all the other debtors assigned for the same time slot. The trustee will call your name and you are then required to provide him with a photo id as well as proof of your social security number (i.e. your social security card).

The trustee then swears you in.¬† The law requires that the trustee asks you a number of questions under oath.¬† This is important, because even if you have to discuss something that may cause your case to hiccup a bit with the trustee, doing so is really the only option that you have: Perjury – or lying under oath – is a crime – and whatever the hiccup, it’s not worth it.¬†¬†The standard questions the trustee asks are always pretty much the same.¬† A few examples include:

  • Have you assisted in the preparation of the petition and schedules filed in your case?
  • Is all the information true and accurate?¬†
  • How long have you lived in Arizona?
  • Have you ever filed for bankruptcy before?

You know, standard stuff – things your attorney can talk to you about before the creditors meeting ever takes place, if only to calm your nerves.¬† Once that portion of the questioning is done, the trustee then has the chance to ask you any other questions he may have about the information contained in your schedules. These questions are typically related to your assets, such as ‘how did you come up with the value for that grandfather clock’ or ‘what is your interest in the XYZ partnership exactly, and what kind of returns are you expecting’.¬† These questions are a little harder to predict, as they are based on your specific case, but a good attorney will know how to issue spot your petition and give you an idea of what kind of questions might be expected, if any.

Now, about the creditors…. it is called a creditors meeting after all.¬† The bottom line on that is they have the right to appear and question you under oath, but they hardly ever do.¬† I have only had one instance of a creditor showing up, and that was coordinate the surrender of my clients vehicle.¬† Now, I am not saying they never show up – it happens and it can happen to you.¬† In the event that it does, just remember to stay calm, TRUTHFULLY answer all of their questions (as you are still under oath) and don’t forget to breathe.¬†

Remember, no matter how scary, stressful or frustrating this feels right now, you will likely be relieved when the meeting is over, and wonder why you were so worried in the first place.

Chapter 13 bankruptcies are a true to form reorganization, and the debtor is in a repayment plan for 3 – 5 years while in a Chapter 13.¬† During that time, the debtor continues to pay his regular monthly mortgage payment for the first mortgage.¬† If the debtor was behind on the mortgage at the time the petition was filed, a portion of¬†his or her plan payment goes towards catching up the mortgage.¬† This is what makes it possible for you to ‘save your home’ with bankruptcy – you get the chance to catch up your mortgage over a 5 year period while in Chapter 13.¬† The trick is, your plan payment must be¬†high enough to actually pay off the full arrearage, and all other items that must get paid through the plan (car loans, tax debts etc.).

The ability to save your home is only one of the neat things you can accomplish with a Chapter 13. The second neatest thing, in my opinion, is the fact that the Chapter 13 process allows you to strip your second mortgage from the house.  If you remember from my previous post on 2nd mortgages and Chapter 7 Рa mortgage is really a two-part instrument.  The mortgage is both secured by your house (and the bank can proceed against the house by way of a sale) and it is a personal liability (meaning the bank can pursue you personally by way of a lawsuit). 

If your house is worth LESS than what you owe on the FIRST mortgage, the bankruptcy code allows you to strip the lien¬†from the house…. in effect, once all is said¬†and done, the bank can no longer ‘proceed against the house’ because they no longer has a security¬†interest in it.¬† The personal liability on the second mortgage becomes a regular unsecured debt – like a credit card, for example, and whatever does not get paid through the plan (and trust me, usually the unsecured creditors don’t end up getting much), is discharged at the end of the plan.

To illustrate, if you have a 200K first with a 10K arrearage on the date of filing, and a 150K second, but your house is only worth 150K, then the Chapter 13 allows you to bring your first mortgage current, and remove the second lien altogether.  The greatest challenge for most people is that you must complete the plan, in order for the order removing the second mortgage from your house to take effect. 

In the grand scheme of things, however, living on a budget and making regular monthly payments to the trustee based to repay some of your debts, is not a bad tradeoff for saving your home and ridding yourself of the second mortgage. For a free consultation about this issue with an Arizona attorney, call us today at 480-275-4894.   Want to find out more about us before making the call Рpay us a visit at www.marcowimmerlaw.com. We look forward to hearing from you!