Why Is Confirmation So Important In A Chapter 13 Bankruptcy?

Family Standing in Front of White House

When you initially file a Chapter 13 bankruptcy your Trustee and creditors get a copy of a proposed plan.  This tells the creditors how they are classified in the plan and how much you are estimating that they will be paid for the duration of the bankruptcy.   Both the bankruptcy Trustee and the creditors have the option of reviewing the plan and either accepting or objecting to the plan terms.

Once you file your bankruptcy, your attorney is required to mail a copy of your proposed Chapter 13 plan to all of your creditors within 5 days from the date the case is filed.  This gives everyone who is listed in the plan a chance to review how they will receive payment and whether or not they agree with the plan.  If they do not agree with the plan, they have the right to file an Objection with the court stating their reasoning.  At the 341 Creditor?s hearing (roughly a month after the case is filed), the Trustee will review your plan and have your attorney make any necessary amendments, if he agrees to the plan at that point, he will recommend confirmation.

Confirmation sets your plan in stone and is essentially put in place for your protection.  Once your plan is confirmed, there is no changing it unless a Motion and Order is filed with the court.  This prevents an unsecured creditor from coming up years later stating that they do not agree with the proposed payment.

The Dangers of Facebook to Your Bankruptcy

Laptop KeyboardIf you’re reading this blog post the chances are good that you have a Facebook profile or account. If so, you’re not alone. Recent statistics reported by The Blog Herald indicate that there are now over 500 million Facebook users. Of those 500 million users, half of those users log in to their Facebook account every day. The average Facebook user has 130 friends and there are a staggering 30 billion pieces of content added each month. To fully understand that amount 30 billion looks like this when written out: 30,000,000,000.

So Why Does Facebook Matter to Your Bankruptcy?

Facebook is a window into your personal life. A bankruptcy Trustee, after filing bankruptcy, has the right and ability to look into that window.

When you file a bankruptcy you are required to disclose your assets and other important acts within certain time periods. If you fail to disclose the required information in your bankruptcy petition then you are committing a federal crime of perjury. You could face jail time and be fined large sums of money. Do I have your attention yet?

More and more bankruptcy Trustees are looking up debtors’ (people who file bankruptcy) social media accounts. It is so quick and easy to pull up information on social medias, it has become a logical part of the due diligence research that a Trustee’s office will complete.

Death Of A Bankruptcy Case Via Facebook

Let’s look at a common example. Husband and wife Donnie and Debra Debtors file a bankruptcy together. They fill out their bankruptcy petition and file it with the court. However, they chose not to list down some of their assets because they don’t want the courts to take it because they hope to give it to their children some day. Specifically, they don’t list down a 1957 Chevrolet Bel Air that has be restored and a whole life insurance policy with a substantial cash surrender value. Donnie and Debra show up to the creditors’ meeting and quickly realize they have some real problems.

Tom Trustee, who represents the people Donnie and Debra owe money to, has started paying a part time high school student to go online and after school and look up different debtors who have filed bankruptcy and see if they are showing assets that aren’t listed in their bankruptcy petition. Well, low and behold, the 16 year old high school student searching on Facebook has found some important information for the bankruptcy Trustee. Donnie and Debra have posted pictures on Facebook showing their newly restored 1957 Chevrolet Bel Air winning as “Best in Show” at a recent car show located in Charlotte, NC. In addition to that, Debra responded to one of her friend’s posts asking how to pay for college tuition by explaining that she and Donnie are withdrawing the cash surrender value from their whole life insurance policy to pay for their daughter’s freshman year in college.

Tom Trustee asks Donnie and Debra if they need to add anything else to their bankruptcy petition and they explain that it is accurate and complete. At that time, Tom Trustee begins to ask them about the assets not listed down in their bankruptcy petition, the car and whole life insurance policy. Stunned, Donnie and Debra first try to deny they have those assets but then the Trustee presents them with pictures printed off of their Facebook page. They eventually admit their failure to properly disclose assets.

Several weeks later Donnie and Debra are indicted and face federal charges of fraud and a fine of $150,000 by the federal government – money they don’t have because the Trustee seized both their “Best in Show” car and whole life insurance policy. Because Donnie and Debra didn’t tell their attorney about the assets they didn’t realize they could have protected both assets. The whole life insurance could have been fully protected because their children were the beneficiaries and the vehicle could have been exempted using a combination of their motor vehicle exemptions and “wild card” exemptions.

The Lessons To Be Learned

There are two important take-aways from this example. First, and most important, you should fully disclose your assets and be completely honest and forthcoming in your bankruptcy petition. The consequences of not doing so are not worth the perceived benefit. Second, tell your bankruptcy attorney about everything. Keep no secrets. If they would have discussed the concerns they had about their assets with their experienced bankruptcy attorney they would have known they could have protected their assets.

The Bottom Line: The purpose of this post is not to tell you to take hidden assets down but, instead, to encourage you to list the assets you have and discuss those assets with your bankruptcy attorney. Facebook and other social media sites are now used to confirm that you are being forthcoming within your bankruptcy petition.

What You Need to Know Before Your Chapter 13 Phone Interview

If you file a Chapter 13 bankruptcy in the Middle District of North Carolina (Greensboro, Winston-Salem and surrounding areas), you will be required to have a phone interview with the Chapter 13 Trustee’s office.

You will need to call the Trustee’s office to schedule your phone interview. Be sure to call in on the date and time it is scheduled for – if you do not call for your phone interview, the Court can dismiss your bankruptcy case!

Submit the Necessary Documents

TelephoneAnother important note: the Trustee’s office cannot do the phone interview with you if they have not received all of the necessary documentation from you beforehand. It is important to submit all of the documents they have requested before the interview!

Review Your Bankruptcy Paperwork

The night before your phone interview, sit down with the copy of your bankruptcy petition you were given after your signing appointment. Remember: you came to our office for your signing appointment, we reviewed the petition together, and then we gave you a copy of the paperwork after the appointment was done.

During your phone interview, the staff from the Trustee’s office will be looking at the same paperwork that you have a copy of. You need to review it the night before just to refresh your memory on everything we reviewed together.

We Want Their Support, Be Nice!

The purpose of the phone interview is to review the file and ask you any clarification questions the court may have. Remember, our office has had a lot of interaction with you – we’ve asked you a lot of questions, received a lot of paperwork from you, and spent a lot of time with you. The only information the Trustee’s office has is the petition that was filed with the Court and the paperwork you submitted to them. It is important to be patient on the phone during the interview. They are asking questions so they have accurate information about your case. If you get frustrated or impatient, it will not help your case!

Ask Us Your Questions, Not the Chapter 13 Trustee’s Office

Finally, be sure to keep a note pad near you during the interview. If you think of any questions during the phone interview, jot them down and call our office afterwards to talk to us about your questions.

What Is A Rule 2004 Examination In A Bankruptcy?

The Rule 2004 Examination is adapted from the civil “discovery” process in a case.  It allows debtors, bankruptcy Trustees and any other party in interest in a bankruptcy case to examine “any entity” (meaning whatever part of the bankruptcy and its dealings that they choose) as long as the examination relates to, according to Rule 2004 (b) under Section 343 of the Bankruptcy Code,  “acts, conducts, or property, or to the liabilities and financial conditions of the debtor, or to any matter which may affect the administration of the debtor’s estate, or to the debtor’s right to discharge”.

Bankruptcy Research | North Carolina Bankruptcy Information

A creditor may request the Rule 2004 examination or a representative on behalf of the creditor(s) may request permission to complete the Rule 2004 examination. The Rule 2004 examination is the Bankruptcy Code’s form of a deposition.

A deposition is an opportunity for creditors or other interested to ask questions under oath. The answers to those questions can be used as evidence against the Debtor in an adversary proceeding or in an objection the discharge of debts. The Rule 2004 examination typically last a couple of hours but could be longer or shorter depending upon the complexity of the situation and the amount of questions a creditor has.

As an advocate for debtors, we cannot stress, to the highest degree, how important it is to make sure that you disclose everything to your bankruptcy attorney.  In conjunction with your attorney you should be completely honest on your bankruptcy paperwork. An experienced bankruptcy lawyer can usually take steps to help you avoid a Rule 2004 examination or can help defend your deposition during a Rule 2004 examination.

What Happens If I Die During My Bankruptcy?

Bankruptcy Questions AnsweredShould you die in a bankruptcy, depending on what type of bankruptcy you file, your death can impact the bankruptcy in different ways.

If you were to have filed a Chapter 13 bankruptcy, then many times your estate will make the payments for the bankruptcy on your behalf and the case will continue as normal if the judge will allow it.  Just as any normal Chapter 13 bankruptcy, your case will be dismissed or “kicked out” due to non payment, so if your estate were to fall behind, the same repercussions will apply. If that were to happen, the deceased’s estate would be responsible for their remaining debts.

If you have filed a Chapter 7 bankruptcy, most of the time the case continues as if you were alive.  Rule 1016 of the US Bankruptcy Code states, “Death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code.  In the event that the estate shall be administered and the case concluded in the same manner, as far as possible, as though the death or incompetency had not occurred.”

Beware though, as any matter or the law, there are loopholes and technicalities.  You technically must show up to your 341 Creditors meeting and if you have passed away, obviously you cannot attend, and therefore if the judge in your case wanted to, they could dismiss your case since you did not show up.  If there is a life insurance policy involved in your estate the trustee has right to take it and your family may lose out on the funds.  If you are in poor health, it may be a good idea to discuss the possibility and what may happen should you pass away during your bankruptcy.

Can A Person Incarcerated File Bankruptcy?

Thumb Tack IconA person who is incarcerated can, in fact, file for bankruptcy. However, there are some extra steps that will have to be taken.

Since a person who is in prison obviously cannot leave, they must file a power of attorney so that a friend or family member can meet with the bankruptcy lawyer who is intending to file the bankruptcy.  This would have to be done as soon as the incarcerated person decides that a lawyer needs to become involved. This is because the lawyer will need power of attorney information from the very beginning of the meetings in order to discuss anything with the friend or family member.

One of the things that is required when filing bankruptcy is the debtor has to take the credit counseling course and financial management course. Since a person who is incarcerated most likely will not have regular access to the internet, a motion must be filed by the attorney to waive the requirement to take these courses.

There is also one other motion the attorney will most likely have to file. Since the incarcerated person will not be able to attend the 341 Creditor’s Meeting, a motion will have to be filed stating the reason that the debtor cannot attend.

All of this information is based on the debtor being in the Western District and Middle Districts of North Carolina. Most likely some of these steps will be the same in different districts, but be sure to check with your attorney because there very well could be different requirements.