TABLE OF CONTENTS
Description
Page #
Important Information About Your Chapter 13 Case
Your Case Number
Your Attorney
Your Name & Address
Your Trustee
Plan Length
6
Business Chapter 13
Payments
Payroll Deduction Orders
7
ACH Payments
Direct Payments
8
Obligation to Pay
Adjustments of Payments
9
Failure to Pay
“Bounced” Checks
Dismissal
10
Paying more then Required
Contact by Creditors
Balance Due Creditors
11
Claims of Creditors
Claim Types
Late/Unfiled Claims
Creditors Not Listed
12
Credit Cards and Post-Petition Debts
Obtaining Credit Without Permission
Co-Signers and Co-Makers
13
Selling Property
Credit Rating
Income Tax Information
IRS and Income Tax Returns and Refunds
14
Six-Month Report of Plan Activity
Discharge
Request for Dismissal by You
15
Contact by Creditor After Completion of a Chapter 13
One Final Word
16
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TABLE OF CONTENTS continued...
Description
Page #
Chapter 13 FAQs (Frequently Asked Questions)
Do you need to know if I move?
What if I have legal questions?
Will my creditors continue to call?
How will my house payment be handled?
18
I am thinking about refinancing my mortgage, what do I do?
Is my car payment included in my plan?
Will my co-signers be protected by my Chapter 13 plan?
May I buy any property while I’m in the plan?
May I sell any property while I’m in the plan?
19
May I continue making contributions to my 401(k)?
May I pay off my plan early?
What happens to any debts that are not paid in full?
What about debts paid in full after completion of the plan?
How long will my bankruptcy filing be reflected in my credit report?
Is there life after debt?
20
Helpful Information
Consumer Protection
~ Agencies
~ Consumer Rights
22
National Do NOT CALL List & OPT-OUT Information
23
Getting Your Credit Report
24
Annual Credit Report Request Form
25
Dangers of Co-Signing
Rent-To-Own
26
Payday Loans = Costly Cash
27
Glossary
30
Appendix
Notice of Chapter 13 Bankruptcy Case
39
Payment Order
42
ACH Information
44
Claims Register
47
Inquiry Report
51
Six Month Report
59
Final Report
62
Order of Discharge
66
3
NOTES
4
IMPORTANT INFORMATION
ABOUT YOUR CHAPTER 13 CASE
5
Important Information about
Your Chapter 13 Case
INTRODUCTION: Chapter 13 is one method under the Bankruptcy Code to get protection from your
creditors, providing that you pay them back as much as you are able to. It allows you to keep most
or all of your property during the time you are paying creditors back. It also may let you modify some
contract payments, interest rates and lengths of obligation. Creditors can take action against you
only with court supervision. Chapter 13 has gained widespread acceptance across the country as
an attractive alternative to a “straight bankruptcy” (under Chapter 7 of the Bankruptcy Code).
YOUR CASE NUMBER: When your Chapter 13 petition was filed, the Bankruptcy Court gave the
case a number. This number is very important.
You will need your case number whenever you call or write to the Trustee’s Office and
whenever you make a payment to the Trustee.
YOUR ATTORNEY: Under the rules of the Bankruptcy Court, your attorney must continue to
represent you for as long as your case is active or until the Judge permits your attorney to withdraw
from your case. If you ever have a legal question (concerning your case, a creditor, your rights or
your options) ask your attorney first. You should reach a clear agreement with your attorney about
the fee. In many cases, your attorney will be paid their legal fee through your Chapter 13 plan.
Be sure that you and your attorney have fully discussed whether additional legal services during
your plan will cost you more money or whether the initial fee will cover all legal services.
Remember that all legal fees must be reviewed and approved by the Bankruptcy Judge. You may
change attorneys during the life of your plan, but please let the Trustee know the name and address
of your new attorney.
YOUR NAME & ADDRESS: The Trustee must have your current name and mailing address for as
long as you are in Chapter 13. All notices, letters, checks, etc. will be mailed to the address which
you put on your petition unless you or your attorney tell us to send them somewhere else. Any
changes in name, address or employment must be reported to the Trustee’s Office immediately.
If you ever move or change your mailing address, you must inform your attorney and the Trustee
of your new address. You must also notify the Trustee of any name changes.
YOUR TRUSTEE AND HOW TO CONTACT HIS OFFICE: Thomas W. McDonald, Jr. has been the
Chapter 13 Trustee in the Northern Division of the Eastern District of Michigan for over 20 years.
Mr. McDonald’s professional staff are at your disposal for answering any procedural questions
concerning your plan. You can reach the office at (989) 792-6766 between the hours of 8:00 a.m. to
5:00 p.m Monday through Friday. You will not need to talk to the Trustee personally. The staff
understands the policies and guidelines in Chapter 13 and is well qualified to discuss any problems
or questions that may arise. However, the Trustee’s staff cannot give legal advice.
You should direct all legal questions to your attorney.
PLAN LENGTH: Upon entering a Chapter 13 plan, it is difficult to determine the exact duration of
your plan. It is very rare for a plan to last the exact number of months in the original projection. A
creditor may file a claim for a larger than anticipated amount, interest rates may change, a forgotten
creditor may need to be added or there could be additional attorney fees, any of which could add to
the length of your plan.
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PLAN LENGTH continued…
Although the length of your plan is influenced by many factors that may change during the course of
your plan, no plan is allowed to exceed sixty (60) months. If this situation occurs, the Trustee may
file a Motion to Dismiss. Both you and your attorney will receive a copy of that Motion. Failure to
respond to that Motion will result in the dismissal of your case.
READ YOUR MAIL
Open any mail you receive from the Trustee’s Office on the day that you receive it
BUSINESS CHAPTER 13: Debtors who file as small businesses are subject to the same requirements, restraints, and jurisdiction as debtors filing as individuals. Since self-employed persons have
no employer, it is necessary for them to make payments directly to the Trustee’s Office in the form of
ACH (electronic bank transfer), a cashier’s check, personal check or money order.
Small business persons are required to file quarterly reports and summaries of their
business operations with the Trustee and the Court.
PAYMENTS: There are three forms of payments accepted: employer deduction, ACH (automatic
electronic withdrawal from bank account) and direct payment (cashier’s check, personal check or
money order).
PAYROLL DEDUCTION ORDERS: The most common method of payment and the method
usually requested by the Trustee’s Office. A Payroll Deduction is simply a way to more easily
fund your plan. Your employer will be sent paperwork, including a Court Order to begin the
process. *See example page 42* This order tells your employer to deduct your plan payment
from your paycheck and send it to the Chapter 13 Trustee. This order prohibits your employer
from honoring any garnishments while you are under Chapter 13, including back taxes. The
only exceptions are ongoing child support, domestic support orders and other special circumstances provided in the order. It is important that both you and your employer understand that a
payroll deduction order is NOT a garnishment. A garnishment or attachment can only come
from someone to whom you owe money. You do not owe the Court or the Trustee any money.
You voluntarily filed and gave the Court exclusive jurisdiction over your future pay while you are
under Chapter 13. The Trustee is just carrying out their duty to administer the plan.
It may be helpful if you speak to someone in your payroll department to make sure they understand that:
• This court order stops garnishments
• This deduction should not be listed as a garnishment or Friend of Court payment
Most employers understand that you are making a serious effort to repay your debts, and think
more highly of an employee who seeks to repay his debts than of one who avoids repaying his
debts. If your employer does not honor a wage attachment, tell your attorney so that
appropriate action can be taken. If your employer has any questions, he or she may call our
office for an explanation.
Note: It may take several weeks for your payroll deduction to become effective. In the meantime, be sure to make your regular payments directly to the Trustee. The Judge’s willingness to
approve your plan will depend on the good faith effort you demonstrate by your payment record
prior to the confirmation hearing. If your employer fails to make a payroll deduction, you must
tell your attorney that the deduction was not made and you must send the needed plan payment
to the Trustee by personal check, money order, or cashier’s check.
If there is a problem with the employer because of filing Chapter 13: Occasionally, we find
situations in which a credit union or company representative exerts a form of pressure on an employee who owes them money to the extent that the employee feels his/her job may be in jeopardy due to the filing of a Chapter 13 Plan. Such tactics are illegal in that they are an attempt to
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PAYMENTS ~ PAYROLL DEDUCTION ORDERS continued…
obtain creditor preference. Any such actions need to be immediately reported to your attorney.
Most employers have been very cooperative in assisting with payroll deductions for employees
involved in Chapter 13.
If jobs are changed: If you change jobs you should immediately notify your attorney and the
Trustee’s Office. This notification is important. A new pay order must be prepared for your employer. Remember, if there is a delay between the time the payments through your old employer
cease and payments through your new employer begin, you are responsible for making direct
payments to the Trustee’s lockbox.
Calculating amount of deductions: The following table can be used to calculate the amount of
monies that will be deducted from your pay. It is important to note that deductions will always
be taken in equal installments from EACH PAYCHECK, never in one lump sum.
~ If you are paid Bi-Weekly: Multiply the amount of your monthly payment times 12 months per
year. Then divide the total by 26 payments per year. This will equal your bi-weekly payment.
FOR EXAMPLE: If your monthly payment is $800.00, multiply that payment times 12 months ($800.00 X 12 =
$9600.00) and then divide the total amount by 26 payments per year ($9600.00 ÷ 26 = $369.23). Your bi-weekly
payments are $369.23.
~ If you are paid Semi-Monthly: Multiply the amount of your monthly payment times 12 months
per year. Then divide the total by 24 payments per year. This will equal your semi-monthly payment.
FOR EXAMPLE: If your monthly payment is $800.00, multiply that payment times 12 months ($800.00 X 12 =
$9600.00) and then divide the total amount by 24 payments per year ($9600.00 ÷ 24 = $400.00). Your semimonthly payments are $400.00.
~ If you are paid Weekly: Multiply the amount of your monthly payments times 12 months per
year. Then divide the total by 52 pay periods. This will equal your weekly payment.
FOR EXAMPLE: If your monthly payment is $800.00, multiply that payment times 12 months ($800.00 X 12 =
$9600.00) and then divide the total amount by 52 payments per year ($9600.00 ÷ 52 = $184.61). Your weekly
payments are $184.61.
ACH PAYMENTS: In some cases the Chapter 13 plan payments can automatically be
deducted directly from your bank account. To start automatic ACH payments you must sign a
permission form, attach a voided check showing your bank account information, and choose
from the options given to deduct money from your account. Automatic ACH payments can be
stopped at anytime if you submit your request in writing. All ACH contact should be done with
the Trustee’s Office, not the Memphis PO Box. The automatic ACH permission form is available
either from your attorney or the Chapter 13 Trustee’s Office and should be returned to the
Saginaw Office. *See example page 44*
DIRECT PAYMENTS: If you are unable to do payment through payroll deduction or ACH the
Court may allow you to send in your payments on your own. It is your responsibility to get your
payment in to the payment address by your scheduled payment date.
Payments must be in the form of a Money Order,
Cashier’s Check or Personal Check
8
PAYMENTS ~ DIRECT PAYMENTS continued…
Please make all payments
Payable to Chapter 13 Trustee:
Thomas W. McDonald, Jr.
Chapter 13 Trustee
P.O. Box 613286
Memphis, TN 3810138101-3286
This is a special lockbox address for payments only. Payments sent to any other address will
result in serious delays. This address is for payments only, any correspondence sent to this address may not reach the intended recipient in a timely manner.
● your NAME
Each payment must include:
● your ADDRESS
● your Chapter 13 CASE NUMBER
Do not mail cash or bring payments directly to the Trustee’s Office.
OBLIGATION TO PAY: Even though the Court will usually order your employer to deduct plan
payments and send them to the Trustee, you must remember that you have the obligation to
make sure payments are made. The law requires that your payments start no later than 30 days
after your petition is filed. The Trustee’s Office expects you to begin making payments if the payroll
deduction is delayed. The sooner you start making payments, the greater chance you have of successfully completing your plan. The Trustee does not have the capability to use payment coupon
books or to send monthly statements. Therefore, you must keep your own record of payments.
It is a good idea for you to keep your pay stubs to prove that the payroll deductions have taken
place, or copies of money orders to show you made the payment.
This way, if there is ever any discrepancy in your payment history, you will have complete records
showing the deductions that were made. Bring all pay stubs and copies of cancelled checks or
money order receipts to court hearings. Please remember, if you ever receive a regular paycheck in
which the Trustee’s payment was not withheld, you should immediately mail the payment yourself. It
is your responsibility to pay the plan payments, even when you are not working. If you become unemployed, you can amend your plan or take other necessary action. Talk to your attorney about
your options.
ADJUSTMENTS OF PAYMENTS: It is extremely important for you to let your attorney know if
something interrupts your pay and makes it impossible for you to make payments to the Trustee. In
some cases, adjustments may be made on payments to prevent undue hardship. Whether or not
you will be able to adjust your plan payments will depend on how long your plan has been running
and on the kinds of creditors you have.
If you require a permanent payment adjustment, please contact your
attorney to review and revise your plan.
If a payment is missed: The plan will not work if payments are not received. If you have an
interruption in employment, please contact the Trustee’s Office immediately. Keeping the
Trustee informed can possibly avoid the filing of a motion to dismiss your case.
If you are laid off, on strike or on sick leave: Payments are still due, even if you are on vacation,
sick, on strike or laid off. Please contact the Trustee’s Office immediately and make
arrangements to pay something directly until you return to work, even if it is not a full payment.
Remember to keep records of the payments made and upon your return to work, remit direct
payments in addition to your regular payments to cure the default.
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ADJUSTMENTS OF PAYMENTS continued…
If a bonus check is received and a deduction has been taken for Chapter 13: Read your plan
and payment order. If the money was supposed to go to you, notify the Trustee’s Office immediately so that the funds may be returned to you. PLEASE NOTE: If your payments are delinquent
at the time we receive the payment, you should contact your attorney to discuss your options.
FAILURE TO PAY: If the Trustee’s Office fails to receive payments on your Chapter 13 plan, either
the Trustee or a creditor may seek to have your case dismissed. If something happens to your job,
you become disabled, you get laid off or you are otherwise made incapable of continuing your current payments, consult your attorney at once. Your attorney should be able to counsel you on the
best way to protect yourself during such time. The Trustee’s role as administrator of Chapter 13
cases requires them to protect the interests of both debtors and creditors alike. Thus,
Whenever you are substantially behind in payments under the plan,
the Trustee will review the case for dismissal.
When the Trustee seeks to have your case dismissed, you will be advised in writing. You should
then contact your attorney immediately to discuss your options.
Your plan requires you to send your Chapter 13 payments to the Trustee no matter what happens
to your job, unless the Judge allows you to stop or reduce payments.
“BOUNCED” CHECKS: A creditor may hold a check which you wrote that was not honored by your
bank. This is called an NSF check for “Non Sufficient Funds”. Because the bank did not honor the
check, the creditor remains unpaid. After you have filed a Chapter 13, the creditor has two options
for obtaining the money you owe.
The holder of the “bounced” check may join the plan as a creditor or prosecute
the transaction as a crime, but they may not do both.
The creditor must file a claim to collect money through the Chapter 13. However, writing a bad
check is a criminal offense and the creditor may decide to prosecute.
The automatic Restraining Order in your Chapter 13 case does not stop criminal prosecution,
domestic support obligation proceeding, or certain eviction proceedings.
If the creditor did decide to prosecute, the debt would become a fine and you would handle the fine
directly, outside of Chapter 13.
DISMISSAL: A case may be dismissed either voluntarily, meaning that you decide to stop your
participation in the plan, or involuntarily, meaning the Court has terminated your plan, usually
because of failure to maintain timely payments. You have the right to exercise a voluntary dismissal
at any time by notifying your attorney.
Fixed and timely Chapter 13 plan payments are a requirement of the Court and it is your responsibility to maintain those payments. A deficiency in plan payments could result in the involuntary
dismissal of your case. Either the Trustee or a creditor may file a Motion to Dismiss with the Court
and you and your attorney will be notified of the action.
If your income is reduced, hindering your ability to continue in the plan, contact your attorney
immediately. He or she may be able to modify your plan to lower your payments. The Trustee’s
Office has no authority to let you miss a payment or to allow you to pay less than the required
amount. Only the Court can do so in response to a motion filed by your attorney. If your attorney
files such a motion, do not change or stop payments until you receive a signed order from the Court
allowing you to do so. Be aware that this could take up to 30 days.
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DISMISSAL continued...
In the event of a dismissal, either voluntary or involuntary, all creditor stays will be lifted and
creditors can resume recovery procedures on accounts and may add any interest and penalties
that were waived under your Chapter 13 plan.
*IT IS IMPORTANT FOR YOU TO IMMEDIATELY OPEN ANY MAIL YOU RECEIVE FROM YOUR
ATTORNEY, THE COURT, OR THE TRUSTEE’S OFFICE.*
PAYING MORE THAN REQUIRED: If your plan requires you to repay creditors 100%, paying
the Trustee more than what your plan requires you to pay may decrease the amount of time it will
take your plan to complete. Paying a little extra may reduce administrative expenses for the Trustee
and cause the payroll deduction to stop a little sooner. There are several ways to pay more than is
required into your plan.
If you ever wish to increase your plan payments, contact your attorney. If you wish to
make a single extra payment, you may do so by sending a
money order, personal check, or cashier’s check to the payment address.
If you wish to complete your plan payments before the confirmed length of your plan has run, you
must contact your attorney. PLEASE NOTE the minimum plan term is 36 months and the maximum
is 60 months.
CONTACT BY CREDITORS: The creditors that you listed on your Chapter 13 petition may be
under an automatic Restraining Order, also called the “automatic stay”. The automatic stay prohibits
your creditors from contacting you or your employer.
If you get notices in the mail from your creditors, send them to your attorney.
Late notices from creditors need not cause you any great concern. If you receive a more personal,
direct contact from a creditor however, (such as a telephone call, a personal letter, a summons or a
visit in person) you should not discuss the debt but immediately tell them that you are under Chapter
13, give them your case number, the name of your attorney and get their name.
You should not discuss the payment of any debts with creditors in any manner. Be sure to tell your
attorney the name of the person who contacted you, so that they can follow up on the contact.
By the same token, you should not contact your creditors regarding payment of debt.
BALANCE DUE CREDITORS: Payments to the Trustee are used to pay your attorney, Trustee
fees and your creditors. Trustee disbursements are sent out the first of each month. Creditors fall
into three basic categories: secured, priority and unsecured. Generally, the Trustee makes monthly
payments to the secured and priority creditors first. After these creditors are paid in full, your payments are then divided among unsecured creditors. Unsecured creditors may not receive payments
for many months or even years.
As noted, your creditors cannot deal directly with you. Likewise, you cannot deal directly with them
regarding payment of their debt. You cannot favor one creditor over another or make payments “on
the side”. All creditors scheduled in your plan must be paid through the plan, under the terms of the
law and not because of personal preference.
If you have an immediate reason to know how much money you still owe to one creditor or to all
creditors at any time during your plan, you may request in writing from the Trustee’s Office a copy of
the accounting of your case or check your case on the internet. (See inside the front cover of this
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BALANCE DUE CREDITORS continued...
handbook) However, the Trustee automatically mails you and your attorney a copy of your case
report twice a year. (See the section titled “Six Month Report of Plan Activity” on page 15)
CLAIMS OF CREDITORS: The creditors which you list on your Chapter 13 petition are given an
opportunity to file a claim for payment. They are allowed 90 days from the Meeting of Creditors to
file their claim and governmental units are allowed 180 days from your petition filing date.
After you have been under Chapter 13 for about seven months the Trustee’s Office will send you a
complete list of every creditor who has filed a claim in your case and the amount of money they
claim to be owed. This list is called a Claims Register. You should read and examine this list of
creditors very carefully.
If a creditor is listed incorrectly or any amount claimed seems incorrect, you should contact your
attorney at once. Unless your attorney objects to a claim, we will pay the amount the creditor
requests rather than the amount listed on your petition.
petition.
If there is a creditor you want paid through your plan and that creditor has not filed a claim, contact
your attorney promptly about filing a claim for the creditor. Remember that this includes all relatives
and friends to whom you owe money.
If a creditor does not file a claim within the time allowed, but you want that creditor paid in your
Chapter 13 case, you need to have your attorney file a claim for that creditor.
CLAIM TYPES: There are four basic types: 1) administrative, 2) secured, 3) priority, 4) unsecured.
Generally, we pay domestic support order claims, alimony, and child support administrative costs
first, then the Trustee’s fee and any attorney fees to be paid through the plan. Next, we pay all
creditors with liens on your property (secured claims). Then we pay any taxes that you owe
(priority claims) and all remaining creditors (unsecured claims).
Confirmed plans often require that the Trustee begin paying priority and unsecured creditors only
after administrative and secured claims are paid. For this reason, it could be several months before
the first payment is made on priority and unsecured claims.
You may decide, however, that you want priority and/or unsecured creditors to also receive
payments simultaneously with secured creditors. If you choose this option,
please discuss it with your attorney.
Remember: secured claims may accumulate interest under Chapter 13, but unsecured creditors are
not allowed to accrue interest after the date when you filed your petition (except for unusual
circumstances). Thus, it often is more advantageous for you to pay off the debts accumulating
interest first, rather than paying creditors that do not accrue interest.
LATE/UNFILED CLAIMS: As noted above, most creditors generally have 90 days from initial 341
date (governmental units have 180 days from date of filing for Chapter 13) to file a claim. Creditors
might not be entitled to payment if they file their claim after that date or do not file a claim at all.
If you complete your plan, most claims (except non-dischargeable claims such as some taxes, student loans or domestic support) that are late or not filed will be discharged upon the completion of
your plan. However, speak with your attorney if you have questions regarding certain unfiled or late
claims.
CREDITORS NOT LISTED: Not listing all Creditors when you file for Chapter 13 can cause a lot of
problems. There are two kinds of creditors who are absent from the original list: 1) those creditors
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CREDITORS NOT LISTED continued...
whom you owed money before filing but forgot to list in your petition (unlisted creditors), and 2) those
creditors who leant you money after you filed (post-petition creditors).
If you discover an unlisted creditor after filing, you must let your attorney know the
details of the debt immediately.
Your attorney can include this unlisted creditor in your plan to protect you from collection
procedures. Time is very important in terms of protecting you, so do not delay if you discover one.
Post-petition creditors are rare because you are not allowed to accumulate a debt over $1,500 while
under Chapter 13 unless you have gotten Court permission to do so. Contact your attorney if you
have a need to borrow money over $1,500 — see provisions below. Occasionally unusual or
emergency situations may arise.
PostPost-petition debts should be brought to the attention of your attorney so that a
review of your plan can be made.
If extra debts are added to your original plan, the Trustee may request that your plan payments be
adjusted to handle the addition.
CREDIT CARDS AND POST-PETITION DEBTS: Once your plan is confirmed, you are prohibited
from incurring over $1,500 of debt without court authority.
This means that you cannot: charge anything that costs more than $1,500, run up a bill over
$1,500, sign an installment note for over $1,500 or use a credit card over $1,500.
If you ever feel that it is important for you to buy something in installments that costs
more than $1,500 you must obtain the Judge’s permission to do so.
The Judge will generally grant you permission if: you are paying regularly into your plan, there is a
good reason to incur the debt, and your ability to make plan payments is not threatened by the
additional debt. Remember: you must first contact your attorney if you need to incur
additional debts. Your attorney will need to file a request with the court requesting the court to
allow you to incur the debt.
OBTAINING CREDIT WITHOUT PERMISSION: Obtaining credit without permission of the Court is
a violation of the Court’s rules and is, therefore, subject to reversal by the Court.
Any credit purchase you make without the approval of the Court might be illegal.
The goods may have to be returned to the original owner and you probably would lose any
payment you made on the purchase.
You would also place your plan in serious jeopardy if you obtained credit without approval and your
case may even be dismissed.
CO-SIGNERS AND CO-MAKERS: A co-signer, co-maker or guarantor on any of your consumer
debts is generally protected from contact by the creditor as long as you remain under Chapter 13.
This automatic protection applies only in Chapter 13 cases. If the co-signer, co-maker, or guarantor
has given collateral for the loan, the creditor must request a hearing before the Judge in order to reclaim the property. However, this co-debtor protection will only protect co-signers, co-makers, and
guarantors for the amount of debt which your plan proposes to pay.
If your plan is not scheduled to pay the creditor in full, the creditor may obtain permission to collect the percentage of the debt that your plan is not going to pay from the coco-debtor.
13
SELLING PROPERTY: You cannot dispose of any of your property, including land, without Court
approval while you are under Chapter 13. If the Court allows you to sell any of your property for a
profit, the Court will decide where the profit will go. Some or all of it may have to be applied to your
Chapter 13 debts. See your attorney for exact details.
If you sell your property without permission from the Judge, the transaction may be revoked and
your case could be dismissed. This includes rere-financing your home or other property.
CREDIT RATING: Your credit rating during and after completion of Chapter 13 will be, as it always
has been, the personal opinion of any credit grantor who looks at your record. A credit rating is not
a rank or a number; it is a record of all your past credit performances. This record is made available
to credit grantors who make up their own minds, using their own standards, whether or not they will
grant credit to you. Lawsuits, collections, attachments or garnishments, straight bankruptcies
(Chapter 7) and Chapter 13 bankruptcies are all indications of credit problems. However, after a
number of years of operations and a number of successfully paid-in-full Chapter 13 cases, we find
that many credit grantors look with respect upon those who have paid their debts in full under the
Chapter 13 plan. Of course, any credit record that has been blemished by a problem must be
gradually rebuilt. The Trustee does not provide any information to the credit reporting agencies
before or after your Chapter 13.
INCOME TAX INFORMATION: The Trustee’s Office is not in a position to advise you on how to file
your income tax return, or the amount of interest paid to creditors. We will, upon written request,
provide you with a copy of a report which will include the names of creditors that received money, or
you can check your case on the internet. (See inside the front cover of this handbook for instruction)
We will automatically send you reports twice each year, but you may wish to know if any additional
creditors were paid during the latter part of the year. Normally creditors to whom we paid interest
will send you a statement of how much interest was paid to them on your behalf. Unfortunately,
the expenses of your Chapter 13 plan are not deductible for Federal Income Tax purposes.
IRS AND INCOME TAX RETURNS AND REFUNDS: A different office of the Internal Revenue Service, called Insolvency Special Procedures Section, processes Federal tax returns filed by Chapter
13 debtors. The IRS does this to help them avoid accidentally issuing notices in violation of the
automatic restraining order. However, it often results in tax refunds being delayed. To be certain
that you receive any refund in a timely manner, you should file your tax returns each year as early as
you possibly can. If you owe any taxes for prior years, the refund may be kept by the IRS. If this
happens, discuss it with your attorney immediately.
Pursuant to 11 U.S.C. Section 521 (f)(4)(B) you MUST submit to the Trustee’s Office a copy of your
Federal and State Tax Returns every year you are in the Chapter 13 Plan. The copies must show
your adjusted gross income and the amount of refund to be received or amount owed.
Be sure to retain originals and send a copy to the Saginaw office — the copy you send to the
Trustee’s Office will be destroyed and not returned.
Also, your plan might include paying tax refunds into your plan. Ask your attorney for which tax
years you are to pay your refunds into your plan. If the IRS keeps your refund to apply to other
taxes you owe, or another creditor (for example, Friend of the Court), you may still be responsible for
paying the refund amount to the Trustee — contact your attorney!
If your plan includes all or a portion of your tax refunds to be paid to the Trustee, and if you receive your refund directly from the IRS or State Government, you are responsible for making the
refund payment to the Trustee yourself. Failure to do so could result in the
Trustee filing a motion to dismiss your case with the court.
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IRS AND INCOME TAX RETURNS AND REFUNDS continued…
Send the amount you are obligated to pay into your plan in a personal check, cashier’s check or
money order to the Trustee’s Office, Thomas W. McDonald, Jr., U.S. Bankruptcy Trustee, 3144
Davenport Avenue, Saginaw, MI 48602. Include your name and case number and clearly mark the
tax year the amount covers (“20_ _ income tax refund”). If you are not sure regarding your tax
refund obligation, contact your attorney.
Any post-petition taxes owed to the IRS must be paid directly. Failure to do so could lead to the dismissal of your case.
SIX MONTH REPORT OF PLAN ACTIVITY: Every April and October you will receive from the
Trustee a Six-Month Report of Receipts and Disbursements, which includes all the financial activity
on your case during the previous six months. This report will summarize all payments the Trustee
has received from you, as well as all payments the Trustee has made to creditors on your behalf. If
you have any questions regarding this report, please contact your attorney. *See example page 59*
You can review your case anytime on the internet at www.13network.com.
(See inside the front cover of this handbook for instruction)
DISCHARGE: The Trustee compiles a monthly list of cases that appear ready for discharge (i.e. all
plan terms have been successfully completed). A review of the Court’s records is performed to
ensure that the Trustee has paid all claims filed by creditors. If you are required to pay a domestic
support obligation, you must certify that all amounts due have been paid before you can receive a
discharge order.
When it appears that your case is completed, the Trustee’s Office will send a “Notice of Plan
Completion” to you, your attorney, your creditors, and the Court. The Court, not the Trustee’s Office,
will issue a Discharge Order approximately 30 days after receiving the “Notice of Plan completion”.
The discharge means that your case has been closed because it has been completed and all
creditors have been paid according to the “Order Confirming Plan”. The discharge also may act as
an injunction against your creditors, prohibiting them from taking unauthorized action against you
after your case has ended. After all creditor disbursement checks have cleared the Trustee Office’s
bank, a “Trustee Final Report” will be issued, listing the amount paid to each creditor. These are
very important documents that you should keep in a safe place indefinitely.
Before you can receive a discharge order you must complete an instructional course concerning
personal financial management approved by the United States Trustee.
Please contact your attorney for information on how to enroll for this course.
Please consult your attorney to be sure that all requirements have been
satisfied to receive your discharge order.
REQUEST FOR DISMISSAL BY YOU: Federal bankruptcy law allows you to request that your
Chapter 13 case be dismissed at any time. No one can force you to remain under a Chapter 13
plan.
If you desire to dismiss your case, contact your attorney. Understand, however, that a dismissal
will reactivate all: unpaid or disputed debts, interest, finance charges, late filed charges which the
Court did not recognize and debts to creditors who did not file their claims, and if you
rere-file you may not have the benefit of the automatic stay.
You will be forced to deal with these creditors on their own terms, not yours or the Court’s. The
request for dismissal of your plan must be in writing. We urge you to give careful consideration
to such a decision, and discuss it with your attorney.
15
REQUEST FOR DISMISSAL BY YOU continued…
If you voluntarily dismiss your case after a Motion for Relief from the Automatic Stay has been filed
by a creditor, you may be barred from filing another Chapter 13 case for 180 days.
CONTACT BY CREDITOR AFTER COMPLETION OF A CHAPTER 13: When a creditor has had
their claim paid by Chapter 13, they may send the paid-in-full statement to you. If the creditor fails to
do this, it is not necessarily a problem; the official Court records show that your plan is completely
paid and would overrule most claims the creditor might make for additional money. If you receive
any request for additional money after your plan is completed, contact your attorney!
ONE FINAL WORD: Complying with a Chapter 13 plan is not easy. You may have to make a
substantial sacrifice to meet the obligations of your plan and to live within your Chapter 13 budget.
Success is not impossible, however. Many families have already successfully completed their
Chapter 13 plans. They have the satisfaction of knowing that they have resolved their debt
problems without filing straight bankruptcy and that they have paid most, if not all, of their obligations
to their creditors. Good Luck!
16
Chapter 13 FAQs
(Frequently Asked Questions)
17
Chapter 13 FAQs
(Frequently Asked Questions)
Do you need to know if I move?
YES. The Trustee must have your current address at all times in order to mail important documents
throughout the life of your plan. Any time you change your address, you must notify the Trustee’s
Office, the Court and your attorney. All correspondence should be mailed to our physical office
address at:
Chapter 13 Trustee Office
3144 Davenport Avenue
Saginaw, Michigan 48602
This address is for correspondence only. Never send a payment to the physical address.
What if I have legal questions?
The Trustee and his staff cannot give legal advice. Any and all legal questions concerning your
case, a creditor, your rights, your options, or changes in your situation should be directed to your
attorney. Your attorney must continue to represent you as long as your case is active or until the
Judge permits him or her to withdraw from your case. In most cases, your attorney’s legal fees will
be paid through your plan payments.
Will my creditors continue to call?
All the creditors listed in your Chapter 13 Plan have been sent a notice advising them of the filing of
your plan. They are subject to an Automatic Stay Order that prohibits them from contacting you. In
the event that you are contacted, do not discuss the debt with them, but instead, give them your
Chapter 13 case number and the name of your attorney. Get the name of the person contacting you
and report it to your attorney immediately.
It is important to note that an automatic stay does not prohibit contact initiated by you. You might
need to contact a creditor to obtain information on interest paid on a particular debt. This would
most likely be needed for filing your tax returns. You might also want to contact MORTGAGE
HOLDERS at the beginning of your case and on a YEARLY basis to determine that the monthly
payments and escrow balances are correct. This is important to ensure that when you complete
your Chapter 13 Plan you will be current as to the mortgage payments and escrow account.
How will my house payment be handled?
If you were behind in your mortgage payments at the time you filed your bankruptcy, your mortgage
payments must be made through the Trustee’s Office. This means that you will include your
mortgage payment amount in the monthly plan payment you send to our office and that our office
will then make the payment to your mortgage holder. All arrearages, up to the date of filing, are
included as a secured debt also to be paid through the plan.
If no mortgage delinquency existed at the time you filed your petition, you have the option of making
your payments directly to your mortgage holder. If you choose to exercise this option, you are
responsible for making your regular monthly payments to the mortgage company. It is vital that you
do so in a timely manner. If something unforeseen happens and you are unable to make a payment,
contact your attorney immediately.
18
How will my house payment be handled? continued…
Whether your mortgage payment is paid through the Trustee’s Office or by you directly, you must
maintain adequate insurance on your home if it is not included in your mortgage payment. If you
are making your mortgage payments directly, please note that failure to make those payments on
time could result in losing your home to foreclosure.
Please be advised that if your mortgage payments are being made through the Trustee’s Office, you
will resume making direct monthly mortgage payments after your plan is completed.
***TIP: Many insurance companies give a lower rate if you have both your homeowners insurance
and your car insurance with the same company.
I am thinking about refinancing my mortgage, what do I do?
Contact your attorney. He or she can help you determine if this is in your best interest. Your
attorney will need to know the terms of the new loan (i.e. interest rate and monthly payment). If you
and your attorney decide it is in your best interest to refinance your attorney will request a payoff
from this office and prepare the appropriate paperwork for filing with the Court.
Is my car payment included in my plan?
In most cases, your vehicle(s) will be included in your plan. It is extremely important for you to
maintain adequate insurance on your vehicle.
Please note that the Trustee’s Office does not hold titles to any vehicles. If you have any problem
obtaining a car title after your vehicle has been paid through the plan, you need to contact your
attorney.
Will my co-signers be protected by my Chapter 13 plan?
A co-signer, co-maker or guarantor (co-debtor) on any of your personal debts is generally protected
by a “Co-debtor Stay” which extends to them the same protection from creditors as you have. If that
person has given collateral for the loan, the creditor must request the court for relief from the
automatic stay in order to proceed against the property. The co-debtor stay will only provide
protection for the amount of the debt your plan proposes to pay. If your plan is not scheduled to pay
the co-signed debt in full, a creditor may obtain permission to collect the unpaid portion of the debt
from your co-signer, co-maker or guarantor. Your discharge on a debt is personal to you and does
not necessarily affect a co-signer’s obligations.
If you have any questions about whether or not any co-signer on a debt is protected under the terms
of your plan, make sure you talk to your attorney about their treatment in the plan.
May I buy any property while I’m in the plan?
All of your disposable income is considered part of your bankruptcy estate and must be committed to
the plan for the term of the plan. You cannot buy any major purchase without first obtaining the
Trustee’s permission. This includes refinancing. Your attorney must submit the appropriate
paperwork asking the Trustee to consider your request.
May I sell any of my property while I’m in the plan?
All of your property is considered part of your bankruptcy estate. You cannot sell any major part of
that estate, including, but not limited to, your home, car, land, fine art or jewelry without the
permission of the Court. Your attorney must submit the appropriate paper work asking the Court to
consider your request to sell property.
19
May I continue making contributions to my 401(k)?
Generally, you can make 401(k) contributions or loan repayments while you are in the plan. If you
have any questions, please talk to your attorney.
May I pay off my plan early?
If you want to pay your plan off early, you must first contact your attorney. Depending upon the
circumstances of your case it may not be in your best interest to pay off the case early. Your
attorney can discuss your options with you. If you and your attorney determine that paying off your
case is in your best interest, your attorney will contact the Trustee’s Office to obtain a payoff amount
for your case. Before you are given a payoff, your entire file must be reviewed. This can be a
lengthy process so your patience is greatly appreciated. Your request WILL be processed as
quickly as possible.
All cases are subject to a final review and approval of the Court. Be aware that this could take as
long as two months to receive.
What happens to any debts that are not paid in full?
If your unsecured creditors did not receive the entire amount originally owed to them, all remaining
balances will be “discharged” or legally forgiven upon the completion of your plan. Creditors cannot
resume collection activity on these debts.
Unique debts contained in your plan that cannot be discharged such as student loans, child support
obligations, certain taxes, and fines created as a result of your causing injury while under the
influence of drugs or alcohol. You will be responsible for any balances due on debts of these types
after the completion of your plan. Consult with your attorney if you have specific questions about a
particular debt.
What about debts paid in full after completion of the plan?
When a creditor has been paid in full through the plan, the creditor may, upon your request, send the
“paid in full” statement to you. Court records will officially show your plan was paid in full according
to its terms and will overrule any claim the creditor might make for additional money from you.
Should you receive a request for additional money after your plan completes, review the matter with
your attorney.
How long will my bankruptcy filing be reflected in my credit report?
Your Chapter 13 bankruptcy will be reflected on your credit report for ten years after any court
judgments.
Is there life after debt?
ABSOLUTELY! Completing a Chapter 13 plan is an accomplishment of which you will be proud, and
rightfully so. This Trusteeship strongly believes in providing learning opportunities for you while it
serves as a channel for your debt repayment.
20
Helpful Information
The following pages contain information that
might be useful during your Chapter 13 Plan
and after it is completed as well...
21
Consumer Protection
Agencies to contact if you want to report unfair advertising practices:
Better Business Bureau — 1-800-759-2400 — www.detroit.bbb.org
Chamber of Commerce — 1-800-748-0266 — www.michamber.com (to find your local
chamber contact information)
Federal Trade Commission — 1-877-382-4357 — www.ftc.gov — will assist in any
unfair advertising scheme
US Post Office — call your local branch office — www.usps.com — if you feel you
have been swindled through mail order
Food & Drug Administration — 1-888-463-6332— www.fda.gov — for problems
dealing with food, drugs, cosmetics
Federal Communications Commission — 1-888-225-5322 — www.fcc.gov — any
problem with radio or TV ads, misleading or deceptive advertising
Legal Aid Society — www.michiganLegalAid.org — may provide organized help for
persons who cannot afford to obtain legal assistance
Police — call your local station — to report con-artists or crooks going door-to-door in
your neighborhood
State Attorney General — 1-517-373-1110 — www.michigan.gov/ag — for products
made, sold or advertised within your state
To learn more about different Consumer Rights:
The Fair Credit Billing Act (FCBA) specifies your rights concerning the correct
accounting and billing of accounts.
The Fair Debt Collections Practices Act (FDCPA) specifies your rights concerning the
collection of debts by debt collectors.
Under the Fair Credit Reporting Act (FCRA), credit bureaus must accurately report
information they supply to third party lenders.
The Truth in Lending Act (TILA) requires disclosure in credit billing of the many
additional fees and points that arise in loan/lease agreements.
22
National DO NOT CALL List
1-888-382-1222
or
www.donotcall.gov
To OPT-OUT of pre-approved
credit offers
1-888-567-8688
or
www.optoutprescreen.com
23
Getting Your Credit Report
There are three major credit reporting agencies: Equifax, Experian,
and TransUnion. Not all creditors report to the same bureaus so each of
your reports may contain different information. You can order a free copy
of your credit report from each bureau once a year. The free report will
not include your credit score, which you can purchase for a small fee.
To obtain your yearly free credit report using a computer, go to
www.annualcreditreport.com. This is the only official website set up to
implement the requirements of the federal law which mandates that
everyone is entitled to one free annual credit report from each national
bureau. Be careful to correctly type in the web address because several
imposter sites have arisen and you do not want to disclose important
identifying information to a con artist or end up paying for a report which
should be free. If you are asked for a credit card or checking account
number, it means you are being charged for the report. Remember, a copy
of the credit report is free once a year from each bureau so be careful
which website you go to. But, keep in mind that your free credit report will
not contain your credit score. If you need your credit score, you will have
to pay a fee of approximately $6.00.
You can also obtain your yearly free credit report by calling:
1-877-322-8228
or
order by mail using a copy of the form on the following page and send to:
Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
24
25
Dangers of Co-Signing
Co-Signing is not a good idea — either to co-sign for someone or have someone co-sign for you. When you co-sign, you are borrowing the money even though
you don’t actually receive the money or the benefit of it. The creditor has the right to
receive and demand payment from you when the other party fails to make payments.
Someone needs a co-signer when a trained loan officer has determined the
borrower is not financially able to handle the debt. If you co-sign for them, it does not
change their financial condition but it puts you and your paycheck on the line. The
bank or loan company has a legal right to go after you for payment and they will not
hesitate to do so. Usually, the loan is in serious default before the lender even notifies
you, and when they do contact you, they want immediate payment.
For your own protection or the protection of your friends and relatives, make
sure before co-signing that you have the ability to pay the entire loan because it may
become your responsibility.
Rent-To-Own
Rent-to-own dealers rent furniture, appliances, and home electronics, typically
without a down payment or credit check. Rent-to-own agreements allow shoppers to
rent new or used items by the week or month and return the merchandise at any time
without further obligation. Most service and repairs are performed at no additional
cost but you must read the contract to be sure.
The weekly or monthly rental charges seem small but many shoppers do not
realize the high cost of a rent-to-own agreement. Rent-to-own transactions are not
specifically regulated by federal laws which govern other credit transactions, so it is
likely that shoppers are not informed of the costs of rent-to-own purchases.
What’s a fair price for a $650.00 TV? Would you want to pay $1,633.45? That’s
what happens when you buy on a rent-to-own basis. Look at these examples to
compare costs of an identical TV purchased a variety of ways:
Method
Payment
Rental or Finance
Charges
Total Cost to Own
Rent-to-Own
$17.95/week for 91 weeks
$983.45
$1,633.45
$88.87
$66.83
$738.87
$716.83
0.00
$650.00
Installment Loan:
12% APR
$34.47/month for 21 months
8% APR
$33.42/month for 21 months
Cash
$650.00 one time payment
26
Rent-To-Own continued…
Because of the high cost of renting-to-own, the TV cost 2 1/2 times as much as
paying cash. Most financial experts agree that if you are planning to ultimately own
the item, you should carefully consider the wide range of purchase options available.
Payday Loans = Costly Cash
“I just need enough cash to tide me over until payday.”
“GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST.”
The ads are on the radio, television, the internet, even in the mail. They refer to
payday loans — which come at a very high price.
Check cashers, finance companies, and others are making small, short-term,
high-rate loans that go by a variety of names: payday loans, cash advance loans,
check advance loans, post-dated check loans or deferred deposit check loans.
Usually, a borrower writes a personal check payable to the lender for the
amount he or she wishes to borrow plus a fee. The company gives the borrower the
amount of the check minus the fee. Fees charged for payday loans are usually a
percentage of the face value of the check or a fee charged per amount borrowed —
say, for every $50 or $100 loaned. And, if you extend or “roll-over” the loan —say for
another two weeks— you will pay the fees for each extension.
Under the Truth in Lending Act, the cost of payday loans —like other types of
credit— must be disclosed. Among other information you must receive, in writing, the
finance charge (a dollar amount) and the annual percentage rate or APR (the cost of
credit on a yearly basis).
A cash advance loan secured by a personal check —such as a payday loan— is
very expensive credit. Let’s say you write a personal check for $115 to borrow $100
for up to 14 days. The check casher or payday lender agrees to hold the check until
your next payday. At that time, depending on the particular plan, the lender deposits
the check or you redeem the check by paying the $115 in cash or you roll-over the
check by paying a fee to extend the loan for another two weeks. In this example, the
cost of the initial loan is $15 finance charge and 391% APR. If you roll-over the loan
three times, the finance charge would climb to $60 to borrow $100.
27
NOTES
28
Glossary
29
341 Meeting- Also called a Meeting of Creditors. This is a tape recorded meeting between the
debtor, the trustee, the debtor’s attorney, and creditors at which the debtor is questioned under oath
about the debtor’s assets, liabilities, income, expenses, and the debtor’s proposed repayment plan.
Debtors are required by law to attend. They must provide a picture I.D. and social security number,
usually a driver’s license, before the hearing can take place. They may also be required to bring certain other information or documents. If so, they will be advised by their attorney.
Adversary Proceeding- A separate lawsuit filed in the bankruptcy court concerning a dispute which
arises in or is related to the bankruptcy case and involves opposing parties. A debtor who is served
with an adversary complaint should immediately contact his or her attorney. A written answer (a
legal document) must be filed promptly and served on the parties to the adversary proceeding to
avoid a default judgment.
Appeal- A request to a higher court to review a decision of the bankruptcy court. A notice of appeal
(a legal document) must be filed shortly after entry of a final order or judgment.
Assets- Real or personal property such as land, houses, vehicles, furniture, clothes, bank accounts,
retirement accounts, tax refunds, claims against others, etc.
Automatic Stay- An automatic court order requiring the halt of all collection activity on prebankruptcy debts. The automatic stay goes into effect upon the filing of the case.
Bankruptcy Estate- In Chapter 13, all assets belonging to the debtor at the time the bankruptcy
petition is filed along with income the debtor earns after filing the petition. (A spouse’s income or
property may be part of the bankruptcy estate, and some property, such as inheritances, divorce
settlements and life insurance due within 180 days of the petition date may also be part of the
bankruptcy estate.)
Bar Date- Deadline for an unsecured creditor to timely file a claim for payment from the bankruptcy
estate. It is 90 days after the first date set for the meeting of creditors. Governmental units such as
the IRS have 180 days from the petition date to file a claim. The debtor has 30 days longer to file a
claim for a creditor that has not filed a claim.
Base Plan- A Chapter 13 Plan indicating a certain amount of money to be disbursed to creditors
over a specified time period. Example: A 36 month plan with payments at $100 per month plus 2
months of good faith payments prior to confirmation would be $100 per month X 36 months + $200
good faith = Base plan total of $3800
Chapter 7- This chapter of the Bankruptcy Code permits debtors to request a discharge for a
surrender of or sale of all debtors’ non-exempt assets. A trustee is appointed to collect and sell all
the debtors’ non-exempt assets and distribute the net proceeds to creditors. The Chapter 7
discharge is more limited than the Chapter 13 discharge.
Chapter 11- This chapter permits a business or corporate debtor to reorganize and restructure their
debts. This chapter may be used by an individual debtor.
Chapter 12- This chapter may be used by family farmers to reorganize and restructure their debts.
Chapter 13- Chapter 13 allows an individual debtor (and spouse) to propose a plan to pay creditors.
Unless it proposes to pay 100%, a plan must last at least 36 months and may be no longer than five
years. The percentage of payback may range from 0% to 100%.
30
Glossary continued…
Co-Debtor- An individual who signs a note or contract with a debtor or guarantees a debtor’s debt.
Co-Debtor Stay- This is an automatic stay which protects persons who did not file bankruptcy but
who are liable on the same consumer debt along with the debtor. Joint cardholders or co-signers of
a debt are protected by the co-debtor stay, but only to the extent the debtor’s plan proposes to repay
the debt, including interest at the contracted rate. In order to protect the co-debtor, the co-signed
debt must be paid in full at the contract rate of interest. This co-debtor protection is available only in
Chapter 13 cases.
Collateral- Property pledged as security for the payment of a debt.
Confirmation- The official act of the bankruptcy court approving a Chapter 13 re-payment plan.
Conversion- Changing a bankruptcy case from one chapter to another.
Co-Signed Debt- Debt for which more than one person is legally responsible.
Court- The United States Bankruptcy Court in which a case is pending. Sometimes the bankruptcy
judge is called “the court.”
Cram Down- Also known as “lien stripping.” It is the process by which a creditor’s secured claim is
split into a secured and an unsecured amount with the secured portion equal to the value of the
collateral and the unsecured portion being the balance of the claim. The creditor ends up with two
separate claims that may be treated differently under the plan.
Credit Grantor- One who gives a loan or line of credit; also referred to as the creditor.
Cure Defaults- Bring bills that were past due current and up to date during the term of the plan.
Debt- Money that is owed to another.
Debtor- A person or entity who owes a debt. A person or entity who files a bankruptcy case.
Default- Not doing precisely all that is agreed to within a given time, such as not making a plan or
house payment.
Delinquent- Overdue, not paid on the agreed due date.
Deposition- The recorded testimony of a witness under oath taken some place other than the
courtroom. A similar procedure is known as a “2004 Examination.”
Discharge- Discharge of debts is one of a debtor’s goals in a bankruptcy filing. All of the debtor(s)’
dischargeable debts become legally non-collectible by any creditors, unless a specific debt is a
non-dischargeable debt or is determined to be non-dischargeable by the court, upon entry of a court
order called the discharge. A discharge order operates as a permanent court order prohibiting the
collection of any dischargeable pre-petition debt.
Discovery- The legal process by which one party gives needed information or documents to another
party prior to a trial or hearing through interrogatories, requests for the production of documents,
requests for admissions, and/or depositions.
31
Glossary continued…
Dismissal- An order ending the bankruptcy case before successful completion and discharge. This
order allows creditors to restart legal actions for collecting the debt involved in the bankruptcy.
Disposable Income- Money the debtor has available that is not required for reasonable living
expenses of the debtor or dependents of the debtor.
Escrow- An account held in trust or as security.
Estate- All that a person owns, including both inheritable and movable property that can be moved
or displaced, such as personal property.
Exemptions- Certain property belonging to a debtor not counted as part of the bankruptcy estate.
Under the Bankruptcy Code, the debtor is allowed to keep certain property in order to have a “fresh
start”. Each state is allowed to create its own exemptions. In some states, the debtor may have the
option to choose which exemptions will be followed, either the exemptions designated by the state in
which the debtor resides or the federal exemptions set forth in the Bankruptcy Code. An exemption
usually does not affect an agreed to lien. So, even though a debtor’s house or car may be exempt,
unless the lien is legally voided by the court, the debtor still must pay any debt secured by such lien
in order to keep the property.
Fair Market Value- The price at which a seller is ready and willing to sell and a buyer is ready and
willing to buy on the open market and in a transaction where the parties are not related or not on
close terms and have roughly equal bargaining power.
Feasibility- Likelihood that all payments due under a debtor’s Chapter 13 plan will be paid. It is a
requirement for court approval (confirmation) of a plan.
Foreclosure- Takes away the debtor’s ownership rights in pledged or mortgaged property through
legal action which produces money to pay on the debt secured by the mortgage.
Fraud- A false statement of an important fact intentionally made by a debtor to a creditor who
justifiably relies on the statement and is harmed as a result.
Guarantor- Person who promises to repay a debt made by another.
Insolvency- The inability of the debtor to pay current bills as they become due or when a debtor’s
liabilities exceed the value of the debtor’s assets.
Interrogatories- Written questions that must by law be answered in writing under oath. The
answers can be used as evidence later in court. A fine may be charged by a court for willfully
refusing to answer timely.
Involuntary Chapter 7- A liquidation bankruptcy case filed by creditors against a debtor.
Joint Bankruptcy- A single bankruptcy case filed by a married couple.
Jurisdiction- Geographical region where a court is located. Also refers to power of the court to
issue legally binding orders.
Liability- A debt.
32
Glossary continued…
Lien- A creditor’s right to property of a debtor. i.e. Mortgage or security interest.
Liquidation- Selling assets for cash to use to pay creditors.
Luxuries- Items of property that provide pleasure or comfort but are not reasonably necessary to
support a debtor and a debtor’s dependents.
Matrix- List of names and addresses of each creditor arranged in a particular order on a page.
Meeting of Creditors- See 341 Meeting
Modification of a Plan- Changes to a plan filed in a Chapter 13 bankruptcy. Once a plan is
confirmed the plan may only be modified with the court’s approval after notice to affected parties.
Motion- A formal request to a court for an order to allow or require a specific action.
Necessities- Items of property or services that are required for living a normal life without being
excessive. For example, food, clothing, shelter, etc.
Non-dischargeable debt- Certain debts not covered by the debtor’s discharge, including IRS debt,
alimony, student loans, criminal fines and restitution, and debts for any drunk driving violations. If a
debt is non-dischargeable, legal collection activity can resume regarding the debt after the case is
over.
Objection to Claim- A pleading (a legal document) filed by the debtor, debtor’s attorney or trustee
that disagrees that the debt is owed or that the amount claimed is correct.
Offset- Crediting a debt owed by party “A” to party “B” against a debt owed by party “B” to party “A”.
An example is when the IRS keeps all or part of a debtor’s tax refund to pay certain taxes owed by
the debtor to the IRS.
Order- A formal ruling by a judge allowing / requiring a specific action or deciding a disputed matter.
Periodic- Occurring at regular times, usually monthly, quarterly, semi-annually or annually.
Perjury- Lying under oath. Perjury can be a false oath orally, such as during the meeting of creditors, or in writing in the schedules.
Petition- The two-page document filed with the bankruptcy court used to begin a bankruptcy case.
Other documents (such as schedules of assets, liabilities, income and expenses, statement of
financial affairs, statement of intention, etc.) are often attached or must be filed in the bankruptcy
court within 15 days, or some other time as permitted by a court order.
Petition Date- The date the bankruptcy petition is filed with the bankruptcy court clerk.
Post-Petition- Any event occurring after the petition date.
Post-Petition Debts- Any debt created after the filing of the petition in the bankruptcy court. Postpetition debts may not be dischargeable or protected by the automatic stay.
33
Glossary continued…
Pre-Petition Debts- Any debt which exists at the time of filing your bankruptcy petition.
Preference- A pre-petition payment to a creditor which allows the creditor to receive a greater
percentage of their debt than that received by similar creditors. The trustee may require the creditor
to give back certain preferential payments, so that the money can be divided equally among all
similar creditors.
Presiding Officer- The trustee or a representative of the trustee who conducts the 341 meeting.
Priority Debts- Unsecured debts that must be paid in full under a Chapter 13 plan. Such debts
include trustee fees, debtor attorney fees, certain income taxes, and alimony and child support.
Pro Per or Pro Se- A debtor filing bankruptcy without being represented by an attorney.
Property- See assets.
Pro Rata Basis- Divided proportionally.
Proof of Claim- A form used by creditors to file a claim in order to receive payment from the
bankruptcy estate. The debtor or trustee may file a proof of claim for a creditor who does not do so.
Relief from Stay- In certain situations, a creditor may obtain an order for relief from the automatic
stay to allow it to enforce its claims, pursue collections against a debtor, or conduct any other activity
that would otherwise violate the automatic stay. When an order for relief is granted by the court
(sometimes called “lifting” the stay), the automatic stay protection is canceled as to the particular
debt involved.
Restitution- An obligation to pay a debt usually ordered by a criminal court and usually payable to
the crime victim, resulting from a criminal conviction or plea bargain.
Sanction- A penalty, usually a money fine, against a party or their attorney for violating a bankruptcy
court order.
Schedules- Written information given by the debtor and filed with the bankruptcy court on the day of
filing of the bankruptcy petition or within 15 days thereafter. These forms provide financial
information about the debtor and must be completed under oath. These schedules include a list of
assets and liabilities, a schedule of income and expenses, and a statement of financial affairs.
Secured Creditor- A creditor who has a lien on property.
Sole Proprietorship- A business owned by an individual that is not a corporation or a partnership.
Solvency- The ability to pay all debts and just claims as they come due. Simply stated, debtor’s
assets are more than his liabilities. When a debtor’s Chapter 13 case is deemed solvent, debtor is
required to pay all his creditors a 100% dividend with interest.
Special Class- An unsecured claim or claims which the law allows to be treated differently than
other unsecured claims, for example, some co-signed debts.
Stay- See Automatic Stay
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Glossary continued…
Substantial Abuse- The court may dismiss a Chapter 7 bankruptcy case on the motion of a U.S.
Trustee or a U.S. Bankruptcy Administrator if the debts are mostly consumer debts and if the court
believes that the Chapter 7 petition represents an improper use of the Bankruptcy Code. (See
Section 707(b) of the Bankruptcy Code.) A factor considered is the debtor’s ability to repay a significant portion of their debts in a Chapter 13 case.
Subpoena- A formal document, usually issued by a court, requiring specific action, such as an
appearance at a particular time and date. Failure to obey a subpoena may result in a fine or other
punishment for contempt of court.
Summons- An order to file a written answer (a legal document) to a lawsuit or adversary proceeding
within a specified time.
Trustee (Chapter 7)- A person appointed to take charge of the non-exempt assets of a debtor and
sell them to pay creditors.
Trustee (Chapter 13)- A person appointed to collect payments from the debtor or debtor’s employer
and pay them to creditors during a 3 to 5 year period pursuant to a court approved (confirmed) plan.
U.S. Bankruptcy Administrator- A governmental entity that monitors the administration of
bankruptcy cases in certain states.
U.S. Trustee- A governmental entity that monitors the administration of bankruptcy cases in certain
states.
Unsecured Creditor- A creditor whose debt is not secured by property or collateral. This would
include credit card debts.
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NOTES
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Appendix
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APPENDIX 1
Notice of Chapter 13 Bankruptcy Case,
Meeting of Creditors & Deadlines
This form is mailed to you to notify you of the date and time for your 341
Hearing and Confirmation hearing as well as other important deadlines.
This form is also mailed to all of your creditors to inform them that you
have filed for Chapter 13 bankruptcy.
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APPENDIX 2
Payment Order
The Payment Order is signed by the Bankruptcy Judge and will be issued
to your employer. Your employer will then make your payment for you by
deducting equal amounts of money from EACH PAYCHECK and sending
that money to the Trustee’s lockbox. Note that your payment is deducted
in equal installments, not in one lump sum.
PLEASE NOTE THE FIRST FEW TIMES YOU SEE
YOUR PAYMENT DEDUCTED FROM YOUR
CHECK, YOU MAY WANT TO CONTACT OUR
OFFICE TO MAKE SURE THE EMPLOYER ACTUALLY SENT THE PAYMENT.
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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF MICHIGAN- NORTHERN DIVISION
In the Matter of:
CHAPTER 13 PROCEEDING
CASE NO: 10-XXXXX
HONORABLE: DANIEL S OPPERMAN
DEBTOR(S) NAME
Debtor(s).
/
Thomas W McDonald, Jr.
Chapter 13 Trustee
3144 Davenport
Saginaw Mi 48602
Telephone 989 792-6766
[email protected]
PAYMENT ORDER
{ X } Original
{ } Amendment No.
The Debtor(s) herein above having filed a Petition for relief under Chapter 13 of the Bankruptcy Code:
IT IS HEREBY ORDERED that the Debtor(s) employer or payer:
NAME:
ADDRESS:
CITY:
STATE:
ZIP:
EMPLOYER NAME
EMPLOYER ADDRESS
EMPLOYER CITY
EMPLOYER STATE
EMPLOYER ZIP
shall forward to:
THOMAS W. McDONALD, JR.
Standing Chapter 13 Trustee Office
P.O. Box 613286
Memphis, Tennessee 38101-3286
The sum of: $488.00 [ ] Weekly
[ X ] Bi-Weekly
[ ] Twice per Month
[ ] Monthly
from debtor's future income, until the further Order of this Court and that it cease and desist from giving effect
to any prior or future garnishments or assignment of the Debtor(s) income except for orders for child support,
or alimony, current withholding taxes, union dues, and medical and other insurance premiums.
.
DATED:
_____________________________
Daniel S. Opperman
United States Bankruptcy Judge
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WHAT IS NEEDED TO START THE
ACH PROGRAM?
-ACH DEBIT FORM
-PAY ORDER
BEFORE AN ACH CAN TAKE EFFECT, WE WILL NEED BOTH AN
ACH DEBIT FORM AND PAY ORDER.
YOU WILL BE NOTIFIED BY MAIL WHEN YOUR ACH WILL START.
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Thomas W. McDonald, Jr.
Standing Chapter 13 Trustee
3144 Davenport
Saginaw, MI 48602
Telephone: (989) 792-6766
Fax: (989) 791-6565
Authorization for Preauthorized Variable Withdrawals (ACH Debits)
Debtor’s Name: ____________________________________ Case Number: _________________________
Phone # ______________________________ Address: ___________________________________________
City: ________________________________ State: _______________ Zip Code: _____________________
Attorney: __________________________________ Phone # _____________________________________
I (we) hereby authorize THE CHAPTER 13 TRUSTEE AT SAGINAW, MI to instruct my financial institution to make my Chapter 13 payments on the dates due from the account listed below.
Source of Deposits (Check One)
Payment to be taken on the 5th of each month
Payment to be taken on the 20th of each month
Payment to be taken on the 24th of each month
Payment to be taken each Friday, starting on the ______ of ______________ and continuing Weekly Bi-Weekly
Payment to be taken out Semi-Monthly on the 15th and the Last Business Day of Each Month
Amount of payment to be taken: $___________ (or amount as amended per order of Bankruptcy Court)
I (we) understand that the EXACT sum must be available for withdrawal. If the exact sum is not available, NONE of the funds will be transmitted to the Trustee. In addition, I (we) understand that if the funds are not available in the exact amount, a non-sufficient funds charge will be
charged against the account. Additionally, if funds are unavailable for withdrawal the ACH debit will NOT be resubmitted, and payment will
need to be mailed to the Trustee at:
Thomas W. McDonald, Jr.
Chapter 13 Trustee
P O Box 613286
Memphis, TN 38101 – 3286
***I (we) understand if the date for withdrawal falls on a weekend or holiday, the funds will be withdrawn on the next business day.***
It is agreed that these withdrawals may be made electronically and under the Rules of the Michigan Automated Clearing House Association.
The authority remains in effect until the Trustee has received written notification from you of termination in time to allow reasonable opportunity to act on it, or until the Trustee has sent me written notice of termination of this agreement. I (we) acknowledge receipt of a filed copy of
this Authorization.
I (we) will not revoke this Authorization for Preauthorized Variable Withdrawals in a way which would require a reversal of funds paid to
the Trustee.
Name of Institution:
___________________________________________________________________
Account Type (Check One):
Checking
Savings
Account Number: _____________________________________________
Transit Routing Number: ____________________________
Debtor(s) Signature: _____________________________________________________________ Date: ______________________
_____________________________________________________________ Date: ______________________
Please attach a Voided Check or Deposit Ticket to This Authorization
8/10
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UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF MICHIGAN- NORTHERN DIVISION
In the Matter of:
DEBTOR(S) NAME(S)
CHAPTER 13 PROCEEDING
CASE NO: 10-XXXXX
HONORABLE: DANIEL S OPPERMAN
Debtor(s).
/
ORDER EXCUSING ENTRY OF THIRD PARTY PAYMENT ORDER
AND ORDER TO DEBTOR TO REMIT PAYMENTS TO CHAPTER 13 TRUSTEE
BY ELECTRONIC TRANSFER OF FUNDS
The above named Debtor(s) having filed a petition for relief under Chapter 13 of the Bankruptcy Code,
and having sought to excuse entry of a third-party payment order as required by E.D. Mich. LBR 1007-1(c)(1)
(A) and requesting to remit payments to the Chapter 13 Trustee by electronic transfer of funds pursuant to E.D.
Mich. LBR 1007-1(c)(1)(B) from the debtor’s(s’) bank account for the following reasons: a substantial part of
the Debtor’s earnings consists of Social Security and ERISA-protected pensions, and further seeking entry to
this Order without notice inasmuch as the third-party payment order may be entered without notice, and the
consent of the Trustee having been obtained, and the Court being otherwise sufficiently advised in the
premises;
IT IS HEREBY ORDERED that entry of a third-party payment order pursuant to E.D. Mich. LBR
1007-1(c)(1)(A) is excused pursuant to E.D. Mich. LBR 9029-1(e) in the above-captioned matter, or in the
event a previous third-party payment order was entered, said Order is voided and held for naught until further
Order of the Court;
IT IS FURTHER ORDERED that within 10 days of the entry of this Order, the Debtor(s) shall
complete the approved Authorization for Preauthorized Variable Withdrawals (ACH Debits)
authorizing the Chapter 13 Trustee, Thomas W. McDonald, Jr., or his successor, to initiate debit and/or
credit entries to the bank account listed in the agreement in the amount of $1,354.75 per month until further
Order of the Court;
IT IS FURTHER ORDERED that these payments shall commence within thirty (30) days of
August 2, 20XX. Any attempt to terminate the ACH or challenge a withdrawal made pursuant to the ACH
shall be made only after obtaining permission of the Bankruptcy Court. Failure to seek prior authorization
to terminate the agreement or challenge a withdrawal under the agreement may constitute cause for dismissal pursuant to 11 USC § 1307 and may result in further sanctions, as determined by the court.
.
DATED:
_____________________________
Daniel S. Opperman
United States Bankruptcy Judge
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APPENDIX 3
Claims Register
The Claims Register is mailed to you by the Trustee’s Office after the
claims bar date. This report is to notify you of which creditors have filed
claims in your case and how much these claims are for. For this reason, it
is very important that you review this document as soon as you receive it.
If you owe on a mortgage or car payment and that debt is not listed,
please contact your attorney immediately.
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APPENDIX 4
Inquiry Report
Upon your request the Trustee’s Office will provide you with an Inquiry
Report. This report includes a list of all payments you have made into the
bankruptcy as well as all disbursements made to your creditors and
provides a detailed history of your case.
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APPENDIX 5
Six Month Report
Each April and October you will receive a copy of your Plan’s Six Month
Report. This report gives an accounting of the money you have paid into
the plan and how your creditors have been paid. It will show the balance
of all accounts being paid through your plan.
Review this document carefully and make sure that the Trustee’s Office
has accounted for all the payments you have made into the plan.
If there is something that you do not agree with or something that you
think is wrong please contact your attorney immediately.
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APPENDIX 6
Final Report and Account
The Final Report and Account must be submitted to the Court for auditing
before your case can be closed. Auditing usually takes four to six weeks
after which you will receive a copy summarizing all money transactions,
receipts, claims filed, and amounts of disbursements.
This is a very important document that you should
keep in a safe place indefinitely. It serves as a type of “receipt” listing
everyone that has been paid through your plan.
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APPENDIX 7
Order of Discharge
Once your final report is filed with the Court, you will receive an Order of
Discharge from the Bankruptcy Clerk if no objections are filed. This
document operates as a permanent Court Order prohibiting the collection
of any dischargeable pre-petition debt.
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REMEMBER THIS...
Start Making Plan Payments Immediately!
Payments should commence with the first income you receive after filing your plan,
but no later tan 30 days after your petition is filed.
Send NO Money to the Trustee’s Office!
We do not accept payments in the Trustee’s Office. Do not bring or mail payments to our
office. All payments must be mailed to our bank lockbox.
Be sure to write your case number on your check or money order, as well as your name,
before mailing any payment to the Trustee’s bank lockbox.
Keep in Touch with Your Attorney!
The Trustee’s Office does not give legal advice.
You must call your attorney if you feel any changes are needed to your plan.
This and other types of legal advice can only be provided by your attorney.
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