FAQ - Questions About Chapter 13

• What's the difference between Chapter 13 and Chapter 7?
• How much information do you need from me before you file my petition?
  
• How long will this process take?
  
• How much will this cost?
• How long will my payment plan be?
• What will happen with my student loan? Will it be discharged?
  
• Can my creditors still try to collect against me by taking me to court?
  
• Can my creditors call me?
  
• What happens at the section 341 meeting (the meeting of creditors)?
  

Chapter 7 is known as “straight” or “liquidation” bankruptcy. In it, the trustee will take possession of all nonexempt property and liquidate it (convert it to cash) for the benefit of your creditors. In Chapter 13, you propose a payment plan to your creditors, the trustee, and the Court, which must approve the plan by confirmation. At the end of the liquidation process, if there is one, or at the end of the payment plan (occasionally sooner in special circumstances of hardship), you receive a discharge which releases you from personal liability for most debts (but not all). For more information about the discharge, see this page of the FAQ.

How much information do you need from me to file my petition?

Like most consumer bankruptcy attorneys, I utilize a lengthy 20+ page form questionnaire to gather information about your financial affairs prior to drafting your petition and schedule. (Some attorneys also utilize a web-based system; I have not thus far been suitably assured of my clients’ confidentiality rights being properly safeguarded in such programs and have therefore elected to stick with the traditional paper-based model. However, I am continuing to look into the technology and may implement it in 2007.) This questionnaire seems far-reaching and invasive; believe me, I know it can feel impossible at first. But gathering this information is critical to the success of your bankruptcy case. It is required by law, and it has the added bonus of making many debtors feel more empowered over their finances. It will probably take a few days to complete the questionnaire; for some people, it could take weeks, depending on the type of records they’ve maintained.

How long will this process take?

It could take about six months to achieve confirmation (even longer if creditors object and the court requires modification of the Chapter 13 plan), and beyond that your payment plan will last anywhere from three to five years (but usually in South Carolina 4-5 years).

How much will this cost?

My fees for Chapter 13 start at $2,500 per case. Additional services (such as adversary proceedings, or unexpected court appearances) are billed at either a quoted flat rate (given to you prior to my undertaking the specific service) or an hourly rate of $175. In addition, you will have to pay a filing fee which is set by the Judicial Conference; as of December 2006, the filing fee for Chapter 13 is $274. Finally, you will have expenses for the required credit counseling course, the required debtor financial management education course, and the costs for any necessary appraisals or other professional services necessary for the filing of the petition.

How long will my payment plan be?

Although the Bankruptcy Code calls for a three- to five-year period for payment plans under Chapter 13, in most cases South Carolina debtors will have a four- to five-year payment plan.

What will happen with my student loan? Will it be discharged?

The vast majority of student loans will not be discharged in either Chapter 7 or Chapter 13. To receive a discharge on student loans, a debtor must show extreme circumstances that create a significant hardship. This is a test that is very difficult for debtors to meet in practice. However, with other debts discharged, many debtors find making those monthly student loan payments much easier.

Can my creditors still try to collect against me by taking me to court?

Creditors of all sorts are prohibited from most forms of collection efforts by what is known as the automatic stay. This is a statutory prohibition that prevents court cases that may be pending elsewhere from continuing without specific relief from the bankruptcy court. It also prevents new cases from being filed. However, you should be aware that creditors may and do seek relief from the automatic stay regularly, and in some circumstances, it is granted.

Can my creditors call me?

Once you are represented by counsel (regardless of whether you have filed for bankruptcy yet or not), your creditors must communicate with you through your attorney. Failure to do so could lead to a violation of the Fair Debt Collection Practices Act. If you have filed your case when the contact occurs, it would also constitute a violation of the automatic stay, for which penalties could be sought and imposed by the Bankruptcy Court.

What happens at the section 341 meeting (the meeting of creditors)?

Many debtors are intimidated by the thought of sitting down “on the record” and testifying as to their financial affairs in front of the trustee and their creditors. However, it is usually not a confrontational affair, assuming your petition and schedules list all of your property and neither omit nor misrepresent any material facts. It is important, however, that you be familiar with those documents, and your supporting documents, prior to the meeting. The 341 meeting is not a court appearance, per se, but it is important nevertheless. Your truthful testimony is necessary; anything else can lead to a dismissal of your case, a denial of your discharge, or worse – even including criminal prosecution and penalties.

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The Law Office of Sheryl Sisk Schelin is a debt relief agency under the laws of the United States, including the Bankruptcy Code, and assists its clients by helping them to file for relief under the Bankruptcy Code, among other solutions, and as appropriate to their individual needs.