If you’ve filed a Chapter 13 bankruptcy case, there are certain aspects of the case you should be aware of in daily life. The one key point to keep in mind while your Chapter 13 case is active is that the Court will closely monitor your budget and financial situation.
Sales and Transfers of Property
Just about any sale or transfer of property has to be approved by the Court beforehand. And don’t forget, the Court describes “property” as any real estate or personal property. So any vehicles, boats, motorcycles, or any “big ticket” item has to be approved by the Court. Further, in most cases the Court will require any profit made from the sale to be paid into the Chapter 13 case. Part of the purpose behind filing a Chapter 13 case, as opposed to a Chapter 7, is that you keep the property you have.
Purchases Using Credit
In addition to sales of large items, any purchase that would require the use of credit must also be approved by the Court beforehand. Any financed vehicle purchases, refinances of existing loans, or new loans must be reviewed by the Court to determine if you have a valid reason for the use of credit and if you can afford the credit without jeopardizing your Chapter 13 case or your current household budget. Local jurisdictions may have additional requirements, so you should consult with your attorney before attempting to use any credit.
Changing Your Monthly Payment
Finally, your Chapter 13 payment plan was confirmed at the beginning of the case. At that time the Court reviewed your budget and approved your Chapter 13 payments based on that household budget. If you’re going to ask the Court to change your monthly payment, then you’ll need to show proof that you’ve had some material change of circumstances to justify the change in your monthly payments.
So, What’s the Advantage?
With all of these restrictions, you may be wondering “Why am I even in this case at all?!”. Don’t lose sight of all the benefits the Chapter 13 is providing. So long as you follow the Court’s payment plan, you’ll stay protected by the Automatic Stay. This prevents any creditors from attempting to collect money from you directly. I know it is a common urban myth that as long as you’re making payments on a debt then that creditor cannot sue you, but this is just a myth. Even if you’re trying to work with your creditors, they can simply choose to sue you and attempt to garnish your income. The bankruptcy case prevents your creditors from ganging up on you and trying to collect all of their debts simultaneously. It also forces your creditors to accept payments, which are often much less than the minimum payments creditors would demand outside of a bankruptcy case.
Determining whether the “pros” outweigh the “cons” of a Chapter 13 can be a complicated process. Before filing any case, I recommend that your first step should be a consultation with an experienced bankruptcy attorney. At Bond & Botes, our attorneys have years of experience advising people on their options in bankruptcy. Each of our conveniently located offices provides free initial consultations with our attorneys. Please contact us today to make an appointment to discuss your financial situation.