Your chapter 7 case is now a converted chapter 13. How did you get to this point? Normally you filed a chapter 7 case. After review the United States Trustee decided keeping your case a chapter 7 is presumed to be abusive. In English, please? After crunching the numbers on your means test someone decided you can pay at least $182.50 a month for 3 to 5 years on your credit cards and other unsecured debt.
Now what? Here are ten tips you need to do now to make your new chapter 13 case a success:
- Come to grips with the fact you now have to live on a budget.
- Schedule an appointment with your bankruptcy attorney immediately
- Gather all your statements for secured bills
- If you are not participating in your 410k do it NOW. 401K contributions will reduce both Schedule I income on the petition, and disposable income for the unsecured creditors on the means test. Plus, the money is yours for retirement.
- If your household income or number of household members changed tell your bankruptcy attorney.
- Do not send payments to you secured creditors. Send the money to your chapter 13 Trustee instead.
- Pay your mortgage and keep it current.
- Your attorney must file your plan within 10 days of the conversion order.
- All your tax returns must be filed. Unpaid taxes can be in your plan.
- You will be served with court documents. If you do not understand them call your attorney right away.
Your attorney needs to know the status of all your secured debts. This includes mortgages, car loans, jewelry accounts, you get the idea. You need to provide him with current balances, the amount you are behind on any of these bills, when you incurred the debt and the interest rate. All these things figure into you chapter 13 repayment plan.
When you first filed your case as a chapter 7 you were set to have your bills discharged, no payments. Now you will be in a converted chapter 13 with a payment plan. You need to own this fact. The plan has to be funded before it can be confirmed. “Confirmed”means approved by the court. You need to start making payments right away. Click here for the Cleveland Chapter 13 Trustee’s payment address. Once your plan is done, your attorney will tell you what to pay to the chapter 13 trustee and when. Until your wage order goes into effect.
In a converted chapter 13 case your tax refund is no longer your personal bonus from the government to go out and waste on things you don’t really need. It is income from the past year that was over withheld. Your historic refund amounts will be used to calculate your disposable income. You will be using the refund money to live on. The fun is over for a while. Change the withholding from your pay. Get the money in your paycheck so you can use it now.
In a chapter 7 case you get no benefit from contributing to your 401k. That is different in a converted chapter 13 case. You get an advantage for the actual 401k contributions as well as any 401k loan payments. If you are not in your 401k, or 403b, or Ohio Deferred Compensation. Get in them now and tell your bankruptcy lawyer.
Your bankruptcy lawyer is your best friend in this process. He needs to know if your income changes, or you add members to your household. Many of my chapter 13 clients have new babies, some are awarded custody or possession of grandchildren. Each of these events can change your monthly budget as well as your means test results. They could reduce your plan payment, or even warrant a re-conversion to chapter 7, Ending your payment plan.
An unplanned conversion from a chapter 7 case to a chapter 13 is no small event. With preparation, and taking the steps outlined here, you can make the change and get your chapter 13 plan off on the right foot. Do it right from the beginning.
Case converted from chapter 7? Share your good or bad experiences, or add more suggestions with a comment.