Lately, many of my clients have been completing their Chapter 13 Bankruptcy Plans and getting Discharge Orders. This is a HUGE accomplishment! Chapter 13 is a 3 to 5 year Court-supervised plan where individuals pay their debt back in whole or in part. Creditors are paid through a Chapter 13 Trustee in a certain order based on the US Bankruptcy Code requirements.
Why is the completion of a Chapter 13 case such a big deal? An American Bankruptcy Study in 2019 of Chapter 13 Bankruptcy filings showed that only 40% of Bankruptcy cases were discharged (completed successfully). And, when people filed Pro-se (without a lawyer) only 1.4% of those succeeded.
My clients have a much higher success rate. How do my clients succeed and finish their Chapter 13 cases?
First of all, they make the monthly payments to the Trustee on time! Sounds obvious, right? It’s not always easy for people to remember to pay, and to come up with the money each month. But, when I set up a Plan, I develop a budget with the clients that is as realistic as possible, so that they have a good chance of success. And, people are able to pay the trustee electronically, which is easier than getting money orders and mailing them each month. (The trustees don’t take personal checks!)
Second, they make their other monthly payments on time! Most people who are in Chapter 13 have home mortgages, and are required to make mortgage payments each month as well. They make their mortgage payments, keep track of them, and keep copies of the payments as well. They need to keep copies of the payments because, if the lender petitions the court stating that they fell behind in their payments, they can prove that they made the payments. Again, organization, and keeping copies of their payments (also cashiers’ checks or money orders) is extremely important!
Third, they keep in touch with me, their attorney, regularly! This is probably the most likely predictor of success! If clients have trouble making payments, have a major life event, such as an injury, a move, or a divorce, they need to contact me as soon as they can! These things affect how they can make payments, and what they can afford to do! Also, if people want to sell a house or car, or purchase a car, they need to get court permission during the whole plan! They need to check with me first! They will know my motto, if it is anything financial, call me!!
Fourth, they complete all of the other requirements too! After the case is filed, clients have to complete a Financial Management course, send us their Federal income tax returns each year, and sign other documents too! These requirements can really trip people up!
Once they finish their Plan payments and complete all of their requirements, they get a Discharge Order saying they completed their whole Plan successfully! Many times, I think that, for all the client has accomplished, the Discharge Order is suitable for framing!
I set up a Chapter 13 Plan that will be successful if my clients follow through and do everything they need to do! If the clients put their mind to it, they can be successful!
Daniel J. Winter