What Happens AFTER You File Bankruptcy?
Once your petition is filed, a few important things will happen. Below is an information sheet we give clients who have filed bankruptcy with us:
1. You will start to get mail from the bankruptcy court, with important information and notices. The notice for the small conference you have to attend will be one of those notices. It is important to open and read all the mail from the bankruptcy court and to contact us if you have any questions. Note that every single piece of mail you get from the bankruptcy court will also be emailed to us immediately. So we will have gotten that notice usually 5 days prior to you getting it in the mail.
2. Automatic Stay: Once you file bankruptcy, the automatic stay kicks in. This prevents creditors from contacting you or taking any action to collect a debt. It stops lawsuits, foreclosures, sheriff sales, IRS action (including IRS wage attachments) and collection calls. If you are facing imminent collection action, such as a sheriff sale, we will contact that creditor immediately with the bankruptcy notice and contact the sheriff’s office. However, your credit card companies will get notice in the mail that you filed. They will continue to call you until they get official notice - but if you provide them with your bankruptcy petition number when they call you, they must stop calling you even if they have not received the notice in the mail. If a creditor continues to call, you must take down that creditors name and phone number and contact us with that information.
2. Payments for Secured Debts: Your car loan company, or mortgage company, may no longer allow you to pay online through their websites and may even send you a letter with a special address for you to send your payments. This is not uncommon and nothing to be worried about it. However - and this is important - if you are keeping your house and/or your car, you MUST continue to make your regular mortgage/car payments. If a payment is sent back by either of these creditors right after you file bankruptcy, don't panic, but don't spend the money either. Give us a call and we will fix it, and you will be able to send in your payment.
3. Security Deposits: If you discharge a utility bill, it is common these days for a utility company to require a security deposit from you for future services. This is possible even if you have not listed a utility company as a creditor on your petition. Usually this deposit is less than $500 and you will be given time to pay it over a 2 month cycle - but that really depends on the utitlity company and what your average monthly bill was prior to filing bankruptcy. Usually, after a year of timely payments, the utility company will return the deposit to you.
4. Reaffirmation Agreements: Car companies always wants debtors to “reaffirm” their car loans. Other secured creditors, such a jewelry or furniture companies, may also request reaffirmation. However, reaffirmation agreements are complex and if we do get one sent to us from one of your secured creditors, we will forward it to you with a detailed explanation about your options and we can discuss it at that point in time. Note that you are not required to reaffirm your mortgage to keep your house. Please see our separate information sheet about reaffirmation agreement.
5. Adding Creditors: You can add creditors right up to the discharge in a Chapter 7 bankruptcy and in a Chapter 13 you can add creditors until your Plan is confirmed, but under certain circumstances you may be able to add them after your Plan is confirmed. Please note that we would prefer you not wait until the last minute to add creditors. There is a $26 fee to add creditors each time you do it and you will have to make that payment in advance or within 5 days of us adding the creditors. If you do not make the payment within that time, the Court will “kick out” your amendment and those creditors will not be added.
SPECIAL INSTRUCTIONS FOR CHAPTER 13 DEBTORS
Your plan payments must be made within 30 days of the date you are filing. You will get a notice from the Trustee as to where you should send your payments. You will also get a coupon booklet which will have a BLANK space where the dollar amount of the payment should be. You will WRITE IN the plan payment amount that we discussed when we filed your bankruptcy.
If you have a mortgage or car payment that you are making because you are keeping the house and/or car, you MUST continue to make your regular mortgage/ car payments and should make the first payment within 30 days of your petition being filed if you were not making them and fell behind and are using the Chapter 13 to catch on the arrears. If you are giving up your house or car you should not make those payments.
However, if you do plan on keeping your house or car, and you fail to make the regular mortgage/car payments on time, the mortgage company/car financing company will file a motion to lift the automatic stay with the bankruptcy court and they will move forward with collection activity of the collateral; they CANNOT come after you personally for the outstanding debt or any deficiency but they can file a foreclosure action or repossess the car. They must ask the bankruptcy court for permission to do this and you have 21 days to object when they file their petition to proceed with collection efforts.
Please keep in mind that just because you are a in a Chapter 13 it does not mean you have to stay in a Chapter 13 if your circumstances change. If your income decreases significantly you may be entitled to have your payment decreased or you may even qualify for a conversion to a Chapter 7. If your circumstances change, or if you are having difficulty making your payment, please contact us - that’s why we are here.
If you do not make your Chapter 13 payment to the trustee on time, or if you fail to make it, the Trustee will file a motion to dismiss with the Court. We can sometimes amend your Plan and roll that additional amount into the Plan. Please keep in mind there is an additional fee of $500 for doing this if we are amending your Plan. Also, rolling in past due payments will obviously increase your overall payment for the rest of your Chapter 13. Finally, the Trustee ALWAYS requires a wage attachment if you fail to pay and have to amend your Plan or otherwise catch up on a past due amount.