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Jonathan and Hilda are married with two young children. Hilda is a stay-at-home mother. They had always managed their money wisely until disaster struck: Jonathan's employer, a large corporation, merged with its competitor, and Jonathan was downsized out of a job. He was out of work for several months, during which time he and Hilda relied heavily on their credit cards. He found a job with a small start-up company for less pay and with fewer benefits than his prior job. Jonathan and Hilda tried hard to catch up on their bills but couldn't and, in fact, got much further behind. After a year, Jonathan was out of work again when the company went belly up. He found work again fairly quickly, but during the six weeks he was unemployed he and Hilda again charged necessities on their credit cards. With interest charges mounting, Jonathan and Hilda now owe over $30,000 on five credit cards.
Long-time friends David and Charlotte first dreamed of opening a business together when they met in their graphic arts class in college. Two years ago, their dream came true when they started Dalotte Designs. They borrowed money from friends and relatives and took cash advances on their credit cards to purchase the equipment and inventory they needed to get started. Business was good for a while, but their dream turned into a nightmare when their primary client, the local university, decided to do all its design work in-house. Although David and Charlotte found new clients, none provided them with enough work to keep their business going. While Charlotte's relatives forgave her the debts she owed them and even gave her money to pay off her other debts, David wasn't so lucky. He owes friends, relatives, credit card companies, and half of the business's creditors over $25,000.
When Carly divorced, she agreed to take less than 50% of the marital property in exchange for her husband, Miles, agreeing to pay most of the marital debts. Miles has since defaulted on the accounts, and the creditors are pursuing her. Carly has kept them away for several months, but a few are threatening to sue her and garnish her wages. Her credit is damaged, and the account balances keep rising because of finance charges and late fees. In total, the creditors and collection agencies claim she owes $17,000 because of Miles's defaults.
Larry owes doctors and hospitals $82,000 for the unsuccessful experimental treatment his now-deceased wife received while battling a rare illness. Neither Larry's nor his wife's health insurance would cover the procedure. Larry has tried mightily to negotiate the amount down to something he can afford, but the collection agencies now trying to collect the debts won't budge. In fact, they are making life miserable for Larry and his eight-year-old daughter.
Even if your situation isn't identical to Jonathan and Hilda's, David's, Carly's, or Larry's, you probably can see some similarities between their stories and your own. You have more debt than you can handle. Your debt mushroomed because of circumstances beyond your control -- job loss, divorce, business failure, illness, accident, death, or unreasonable creditors. You feel overwhelmed and are considering your options. Maybe a friend, relative, or even a lawyer suggested bankruptcy, describing it as the best thing in the world for you. Someone else may have said the opposite -- that bankruptcy is a huge mistake and will ruin your life. Right now, you're filled with emotional turmoil -- confusion, fear, guilt, and anguish. You don't know what bankruptcy is, whether or not it can help you, or what it would mean for your future.
Relax. You're not alone. During each of the first few years of the new millennium, over 1.5 million Americans have filed for bankruptcy. So have thousands of companies. Bankruptcy has become a necessary and pervasive part of our economic system.
And bankruptcy may be right for you. For a filing fee of $194-$209 and the cost of a self-help law book, or the $150 fee charged by most nonlawyer bankruptcy petition typists, you may be able to:
If you're deep in debt, bankruptcy may seem like a magic wand. It often is.
But bankruptcy also has its drawbacks. Before you decide to file, you need to understand the different types of bankruptcies, what bankruptcy can and cannot do for you, and the long-term effect of bankruptcy. This book will explain all this.
Explore your options. You should determine whether there are ways of dealing with your creditors that might work just as well for you as bankruptcy. For instance, a simple letter may stop your creditors from harassing you, and a court judgment in the hands of a creditor might have no effect on your life, depending on your property and source of income. See Chapter 10 for a brief discussion of nonbankruptcy options and resources.
There is no mathematical formula to use to figure out if bankruptcy is right for you. For many, the need for and advantage of bankruptcy will be obvious. Others will benefit from closely examining their property, debts, income, recent financial transactions, and how hard their creditors are trying to collect what they are due.
The rest of this chapter describes the two main kinds of bankruptcies available to consumers. Then we walk you through the main issues you will face when deciding whether to file:
And finally, we introduce you to some proposed changes in bankruptcy law that may seriously affect your decision on whether to file.
At the back of the book is a checklist entitled "Should I File for Bankruptcy?" As you finish each chapter, you'll be reminded to turn to the checklist to answer the questions there that were raised by that chapter's discussion. Once you've read the entire book and have completed the checklist, you will have before you a summary of the major issues to consider when deciding whether or not to file.
There are two kinds of bankruptcy: "liquidation" and "reorganization." In a liquidation bankruptcy, your nonessential property items may be sold to pay down your debt, and most or all of your debts may be wiped out. The liquidation bankruptcy is called Chapter 7 bankruptcy, and it can be filed by individuals (a "consumer" Chapter 7 bankruptcy) or businesses (a "business" Chapter 7 bankruptcy). A Chapter 7 bankruptcy typically lasts three to six months.
In a reorganization bankruptcy, you devote part of your income to pay down your debt over time. There are three different kinds of reorganization bankruptcies:
In this book we focus on consumer Chapter 7 bankruptcies and Chapter 13 bankruptcies.
For additional discussion of Chapter 11 and Chapter 12 bankruptcies, see Chapter 10, Sections D and E, of this book.
Lawyers and judges use the words "liquidation" and "reorganization" bankruptcy, but you don't have to. To distinguish between a consumer Chapter 7 bankruptcy and a Chapter 13 bankruptcy, use language that makes sense to you -- such as "a bankruptcy where many, if not all, of my debts are cancelled outright in a short three- to six-month process" (Chapter 7), or " a bankruptcy where I'll be using my income to make payments on my debts over the next several years" (Chapter 13).
In a Chapter 7 bankruptcy, you get to cancel, or "discharge," certain types of debts. In return, however, you must be willing to give up certain types of property, to be sold for the benefit of your creditors. In fact, most Chapter 7 filers get to keep most or all of the property they need to get on with their lives -- because the law considers it necessary for a fresh start.
Chapters 4 and 5 explain what property you are at risk of losing in a Chapter 7 case.
The typical Chapter 7 bankruptcy case takes between three and six months from filing to discharge. It costs $209 in filing and administrative fees, and it commonly requires one physical appearance at what's called a "creditors' meeting."
To begin a Chapter 7 bankruptcy case, you would complete a packet of forms (shown in Chapter 8, Section A) and file them with the bankruptcy court in your area. The forms ask you to describe:
This book doesn't cover actual preparation and submission of bankruptcy paperwork. For this type of information, see one of the resources listed at the end of this chapter. Also, before you file Chapter 7 bankruptcy, you must meet a few eligibility requirements. These are explained in Chapter 2.
If you file for Chapter 7 bankruptcy, the court will discharge most of your bankruptcy debts at the end of your case. This means that you will no longer owe money to those creditors. However, certain types of debts will survive the bankruptcy intact, meaning you will still owe those creditors the money you owed when you filed your bankruptcy papers -- plus the interest that accrued during your case. (For more on these "nondischargeable" debts, see Chapter 3, Section A.) And finally, you will have to continue making payments on debts owed on property that you wish to hang on to, such as your home or car.
In rare situations, a judge may ask you to come to court at the end of your case for a group lecture that explains your bankruptcy discharge and cautions you against getting back into debt. More likely, however, you will just receive a court paper stating that you have received a discharge. Unfortunately, that paper doesn't specify which of your debts were discharged and which were not. The front of the paper simply states that all debts that qualified for discharge have been discharged, while the back of the paper provides a brief general summary of which debts are and are not discharged. It's up to you, with the help of this or another self-help law book, to identify which of your specific debts fall within each category.
If you file for bankruptcy and then change your mind, you can ask the court to dismiss your case. As a general rule, a court will dismiss a Chapter 7 bankruptcy, so long as the dismissal won't harm your creditors. Usually, you can file again if you want to, although in some circumstances you would have to wait 180 days and pay a new filing fee. Optionally, instead of dismissing your Chapter 7 case, you can convert it to another Chapter, typically Chapter 13 for consumers.
Chapter 13 bankruptcy, sometimes called the wage earner's plan, is quite different from Chapter 7 bankruptcy. In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time. Most Chapter 13 bankruptcies last three years. Some last longer -- a court can approve a case as long as five years. A few are shorter -- if you pay off 100% of your debts in less than three years, your case will be over sooner.
Chapter 13 bankruptcy isn't for everyone. If your income is too low or irregular, you may not be eligible. To file for Chapter 13, bankruptcy, you must have a steady income.
If your total debt burden is too high, you are also ineligible. Your secured debts cannot exceed $871,550 and your unsecured debts cannot be more than $290,525. A "secured debt" is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don't pay the debt. An "unsecured debt" doesn't give the creditor this right. Common examples of unsecured debts are credit card and medical bills.
To begin a Chapter 13 bankruptcy, you would fill out a packet of forms -- mostly the same forms as you would use in a Chapter 7 bankruptcy -- listing your income, property, expenses, and debts. You would then file these forms with a nearby bankruptcy court. At the time you file these papers you must also file a workable plan proposing how you plan to handle your debts over the plan period.
Currently, it costs $194 to file for Chapter 13 bankruptcy. See the end of this chapter for additional resources describing Chapter 13 bankruptcy filing procedures.
Under the Chapter 13 plan, you make payments, usually monthly, to the bankruptcy trustee, who is an official appointed by the bankruptcy court to oversee your case. (Section C, below, discusses the role played by the trustee.) The trustee in turn pays your creditors and collects a statutory commission based on the amounts paid out under your plan.
Some creditors are entitled to receive 100% of what you owe them, while others may receive a much smaller percentage. Typically, Chapter 13 bankruptcy plans provide that:
Administrative claims will be paid 100%. These include your filing fee, the trustee's commission, and attorney's fees, if you hire an attorney for help with your Chapter 13 bankruptcy.
Priority debts will be paid 100%. These include back alimony and child support; most tax debts (including state and federal income taxes); up to $4,650 in wages, salaries, or commissions you owe to anyone who worked for you within the 90 days before you filed for bankruptcy; and contributions you owe to an employee benefit fund.
Mortgage defaults will be paid 100% if you want to keep your house.
Other secured debt defaults will usually be paid 100% if you want to keep the property. Missed car payments fall into this category. Once the default amount is paid off, you may be able to use a special Chapter 13 option (called a "cramdown") to keep the property, by paying the rest of what the property is worth rather than what you still owe on the contract.
Unsecured debts will be paid anywhere from 0% to 100% of what you owe. The exact amount depends on all of the following:
Some courts have no problem approving a Chapter 13 plan that proposes to repay very little or nothing to unsecured creditors. Other courts refuse to approve a plan that proposes paying anything less than 50% to 75% of what's owed.
If you complete your full three- or five-year repayment plan, the remaining unpaid balance on any of your debts that qualify for discharge are wiped out at the end. If any balance remains on a debt that doesn't qualify for discharge, you will continue to owe it. (The debts that qualify for discharge are explained in Chapter 3.)
You can't enjoy any of the Chapter 13 debt-reduction benefits unless and until the plan is completed -- either because you make all your payments or because the court grants you an early discharge. If you don't complete your plan, your remaining debts are not discharged. For this reason, if you can't make some payments under your plan, you'll want to ask the bankruptcy court for permission to modify it. As long as it's clear that you're acting in good faith, the court is likely to approve a request for a modification. If you can't complete the plan because of circumstances beyond your control, the court might even let you end your case early and discharge the remainder of your debts on the basis of hardship.
If the bankruptcy court won't let you modify your plan or give you a hardship discharge, you can:
As you may have concluded, Chapter 13 bankruptcy requires discipline. For the entire length of your case, you will have to live strictly within your means. The Chapter 13 trustee will not allow you to spend money on anything deemed nonessential. Not surprisingly, only about 35% of Chapter 13 plans are successfully completed. Many Chapter 13 filers drop out early in the process, without ever submitting a feasible repayment plan to the court. Nevertheless, for the 35% of those who do make it to the end, the rewards often include an earlier and easier path to restoring good credit.
In most parts of the country, the majority of people who file for bankruptcy file a Chapter 7 case. In a few places, however, Chapter 13 filings equal or far exceed the Chapter 7 filings. This is true in parts of Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah.
Neither of these trends is surprising. Most people choose Chapter 7 bankruptcy because it's fast, effective, easy to file, and doesn't require payments over time. In the typical situation, a case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain types of debts that survive bankruptcy, such as student loans, recent taxes, and back child support. (See Chapter 3 for more on these "nondischargeable" debts.) In addition, few individuals lose any property in Chapter 7 bankruptcy. As we've mentioned, bankruptcy lets you keep most necessities. (See Chapters 4 and 5 for what property you can keep.)
On the other hand, many individuals in the South and in Utah -- recognized as highly religious parts of the country -- have a moral objection to not paying their debts, at least to the extent possible. In those places, Chapter 13 filings are much higher than average.
Watch out for this scary trend. The U.S. Trustee, which is the Department of Justice official legally in charge of the various court-appointed trustees, has recently been requiring the trustees to force Chapter 7 debtors into Chapter 13 if it appears that they have enough income to pay off all their priority debts over a three-year period and still pay at least a portion of their unsecured debts.
This policy is based on a bankruptcy code provision (11 U.S.C. § 707) that allows a Chapter 7 case to be dismissed for "substantial abuse." The U.S. Trustee has decided that it's substantial abuse for someone to file a Chaptscaryer 7 bankruptcy when he or she could file a Chapter 13 bankruptcy instead. If this policy survives court challenges, we can expect to see an increase in Chapter 13 filings. (See "Oversight by the U.S. Trustee's Office," in Section C, below, for more explanation of what the U.S. Trustee does.)
One major problem in choosing a Chapter 13 bankruptcy over a Chapter 7 bankruptcy is that you usually need to complete your payment plan to get any benefit from the Chapter 13 process. (The court will, in some circumstances, let you off the hook early for hardship reasons.) If your Chapter 13 fails -- and, as we've pointed out, most do -- money put toward your unsecured debts under the plan will have been paid for naught if you convert to Chapter 7 bankruptcy and discharge the debts in their entirety (as is often the case). However, if you decide to handle, outside of bankruptcy, what debts remain after your Chapter 13 case, you may not have as much debt to repay as when you originally filed your Chapter 13 case.
Moral and bureaucratic issues aside, there are many reasons why people who qualify for both types of bankruptcy decide to choose Chapter 13 bankruptcy over Chapter 7 bankruptcy. (Eligibility is covered in Chapter 2.) Generally, you are probably a good candidate for Chapter 13 bankruptcy if you qualify economically and are in any of the following situations:
One of the most powerful features of bankruptcy is that it stops most debt collectors dead in their tracks and keeps them at bay for the rest of your case. Once you file, all collection activity must go through the bankruptcy court -- and no creditor can take any further action against you directly. Below, we describe how it works.
You don't need bankruptcy to stop your creditors from harassing you. Many people start thinking about bankruptcy when their creditors start phoning their homes and/or places of employment. Federal law prohibits this activity, once the creditor learns that you don't want to be called. While just telling the creditor to stop usually works, a written letter is sometimes necessary. (See Chapter 10 for a sample letter.)
When you file for any kind of bankruptcy, something called the "automatic stay" goes into effect. The automatic stay prohibits virtually all creditors from taking any action directed at collecting the debts you owe them unless the bankruptcy court says otherwise. In general, creditors cannot:
If a creditor tries to collect a debt in violation of the automatic stay, you can ask the bankruptcy court to hold the creditor in contempt of court and to fine the creditor.
There are some notable exceptions to the automatic stay. The following proceedings can continue regardless of the stay:
The bankruptcy court can lift the automatic stay for a particular creditor if that creditor convinces the court that the stay isn't serving its intended purpose: to freeze your assets and debts so that the court can deal with them. This is also called "relief from stay," and it is granted at a "relief from stay" hearing. (For more on relief from stay, see Chapter 8, Sections B and C.) The stay can be lifted within a week or two, though more commonly it's a few months. Here is how the automatic stay affects some common emergencies:
Until your Chapter 7 or Chapter 13 bankruptcy case ends, your financial problems are in the hands of the bankruptcy court. With few exceptions, the court takes legal control of your property and debts as of the date you file. If, without the court's consent, you sell or give away any property or pay off any debts while your case is open, you risk having your case dismissed. The court exercises its control through a court-appointed person called a bankruptcy trustee. In addition to making sure that your case proceeds in accord with the rules governing bankruptcy, the trustee's primary duty is to see that your unsecured creditors are paid as much as possible on the debts you owe them.
The trustee may be a local bankruptcy attorney, or someone very knowledgeable about Chapter 7 or Chapter 13 bankruptcy generally, and the local court's rules and procedures specifically. In some courts, trustees are not attorneys but are business people with specialized knowledge of finance or personal bankruptcy.
Just a few days after you file your bankruptcy papers, you'll get a Notice of Appointment of Trustee from the court, giving the name, business address, and business phone number of the trustee. The letter may also include a list of any financial documents the trustee wants copies of, such as bank statements, canceled checks, and tax returns, as well as the date by which the trustee wants them. (These documents are usually required only in Chapter 13 cases.)
In a Chapter 7 bankruptcy, the trustee is mostly interested in what you own and what property you claim as exempt. The more assets the trustee recovers for your unsecured creditors, the more the trustee gets paid. The trustee may receive 25% of the first $5,000, 10% of any amount between $5,000 and $50,000, and 5% of any additional money up to $1,000,000.
The trustee is also required to assess your bankruptcy papers for accuracy and for signs of possible fraud or abuse of the bankruptcy system. In some parts of the country, the trustee may move to dismiss your case for "abuse" (or allow you to convert it to Chapter 13) if your income and expenses show the possibility that you could pay a significant portion of your unsecured debts.
If your papers indicate that all your property is exempt, your case will initially be considered a "no-asset" case -- in other words, on the face of it you've got nothing that can be sold to pay creditors. This means that the trustee's interest in your case will be diminished unless something in your papers indicates the possibility that you are hiding or mischaracterizing assets. In that event the trustee will investigate further, both during the creditors' meeting (see below) and, if necessary, in a formal deposition. Again, the trustee is motivated by the fact that he or she gets a commission on any property that he or she can seize and sell to pay your unsecured creditors. If there is no such property, then there is no commission.
The first time you are likely to encounter the trustee in a Chapter 7 case is when you appear at your creditors' meeting, which you must attend if you don't want your bankruptcy dismissed. (We provide more detail about the creditors' meeting in Section D, below.) At this meeting, the trustee may question you about information in your papers that might turn up assets. For instance, if you claim that a family heirloom is worth $500, and the laws of your state exempt heirlooms worth $500 or less, the trustee may ask you how you arrived at the $500 figure.
Typically, if all your assets appear to be exempt, you will hear nothing further from the trustee. However, if your bankruptcy estate contains (or appears to contain) nonexempt assets, the trustee may reschedule your creditors' meeting for another date and ask you to submit appropriate documentation in the meantime. (In legalese, this rescheduling is called a "continuance.") More rarely, the trustee may hire an attorney to pursue nonexempt assets you appear to own or even refer your case to the U.S. Trustee's office for further action, if it appears you have engaged in dishonest activity. (See "Oversight by the U.S. Trustee's Office," above, for more explanation.)
If your bankruptcy estate contains nonexempt assets for the trustee to seize and sell, you will be expected to cooperate in the delivery of these assets to the trustee for disposition. You may also buy the assets back from the trustee at a negotiated price or substitute exempt assets for the nonexempt assets. For instance, assume you own a nonexempt canoe worth $2,000, and you want to hold on to it, perhaps because you inherited it from a parent. If you have a second exempt car that will fetch $2,000 in a quick sale and can do without the car, the trustee will happily take the car in place of the canoe.
If you have nonexempt property but it isn't worth very much, or it would be cumbersome for the trustee to sell, the trustee can -- and often will -- "abandon" the property -- which means you get to keep it. For example, no matter how much your used furniture may be worth in theory, many trustees won't bother with it. Arranging to sell used furniture is expensive and often won't produce enough profit to make anybody happy.
In a Chapter 13 bankruptcy, the trustee's primary role is to receive your payments and distribute them to your creditors in the manner required by law. As mentioned, some of your creditors may get paid 100%, while others may receive a small fraction of what you owe them. The trustee gets paid by keeping a percentage of the payments you make -- anywhere from 3% to 10%.
Many Chapter 13 trustees play a fairly active role in the cases they administer. This is especially true in small suburban or rural judicial districts, or in districts with many Chapter 13 bankruptcy cases. For example, a trustee may:
Despite the trustee's intense interest in the details of your finances, your financial relationship with the trustee is not as stifling as it may sound. In most situations, you keep complete control over money and property you acquire after filing -- as long as you make the payments called for under your repayment plan, and you make all regular payments on your secured debts.
A key event in the early phases of any bankruptcy case is what's called the meeting of creditors. This is a coming together of the debtor, all the creditors interested enough to show up, and the trustee, who presides. The creditors and trustee are allowed to ask you questions about issues in your case.
In the typical Chapter 7 case, you won't even see a bankruptcy judge, so your big appearance will be at this creditors' meeting. In the typical Chapter 13 case, however, you will appear once at the creditors' meeting and at least once before the bankruptcy judge, to have your Chapter 13 plan confirmed. If your plan, as submitted, needs changes or you run into trouble while trying to complete your plan (for instance, you get laid off), one or more additional appearances in court will be required. In this section we discuss the creditors' meeting in more detail. (For more on court appearances before the bankruptcy judge, see Chapter 8, Sections B and C.)
Shortly after you file your bankruptcy petition, the court will schedule the meeting of creditors, in keeping with Section 341 of the U.S. Bankruptcy Code. (You'll often hear these referred to as "341 meetings.") The date of this meeting is usually about a month after you file. You, as well as your creditors, will receive official notice of the meeting from the court.
You (and your spouse if you have filed for bankruptcy jointly) are required to attend and bring two forms of ID -- a picture ID and proof of your Social Security number. (If your meeting is held in a federal building, be prepared to show your picture ID at the building's entrance; otherwise, you won't get anywhere near the meeting of creditors.)
Many other people who have filed for bankruptcy around the same time you did will have their creditors' meeting scheduled for the same time as yours. Chapter 7 trustees typically handle about ten to 25 cases an hour. You can usually figure out when your individual case will be considered based on its order on the list of cases posted outside the meeting room. You can use the wait time to observe how the meetings are being conducted. Also, while you are waiting, many trustees will require you to read a bankruptcy fact sheet prepared by the U.S. Trustee, and to affirm on the record that you have read and understood it.
Most likely, your particular "moment of truth" will be brief. Typically, an appearance in a no-asset case lasts less than five minutes. Despite the meeting's name, creditors rarely show up, so the trustee is usually the only one asking the questions. After swearing you in and checking your identity, the trustee will ask you to affirm your understanding of the bankruptcy fact sheet and then ask about the information in your papers. The trustee may simply ask you whether all the information in your papers is 100% correct and end the meeting if you say, "Yes." However, depending on your paperwork, the trustee might inquire further about such matters as:
If your papers give any indication that you own valuable nonexempt property, the trustee may question you quite vigorously. You may also be questioned about why you claimed certain property as exempt.
When the trustee is finished, any creditors who showed up are given a chance to question you. They may seek clarification of anything unclear on your forms or ask you to agree to pay a debt after your bankruptcy case ends. (This is called "reaffirming a debt.")
A creditor might also ask for an explanation if information in your bankruptcy papers differs from what was on your credit application. If you lied about your income, debts, or something else important on a credit application, the creditor may claim that you committed fraud and that you should therefore not be allowed to discharge your debt to that creditor.
When the trustee and creditors (if any) are finished asking questions, your meeting is closed and you are dismissed. As mentioned, if yours is the typical bankruptcy case, the next official communication about your case you will receive is a discharge notice from the court. (See Section A1, above.)
Shortly after you file your Chapter 13 bankruptcy petition, the court will schedule a meeting of creditors for a date about a month after you file. The court then sends an official notice of the meeting to all your creditors. You (and your spouse if you have filed jointly) are required to attend. You'll need to bring two forms of ID -- a picture ID and proof of your Social Security number.
Your creditors' meeting, if it's typical, will last less than 15 minutes. The trustee will briefly go over your forms with you. No judge will be present. The trustee is likely to be most interested in the fairness of your proposed plan and your ability to make the payments you have proposed. (See Chapter 2, Section B, for more on Chapter 13 requirements). The trustee has a vested interest in helping you successfully navigate the Chapter 13 process: Remember, the trustee gets paid a percentage of all payments doled out under your plan.
When the trustee is finished, any creditors who showed up are given a chance to question you. Often, secured creditors come, especially if they have any objections to the plan you have proposed as part of your Chapter 13 filing. They may claim, for example, that your plan isn't feasible, that you're giving yourself too much time to pay your arrears on a secured debt, or that the value you assigned the collateral is wrong. An unsecured creditor who is receiving very little under your plan might show up, too, if that creditor thinks you should cut your living expenses and thereby increase your disposable income.
At the end of the hearing, be ready to negotiate with the creditors. If you agree to make changes to accommodate their objections, you must submit a modified plan. While the trustee won't use the creditors' meeting to rule on any objections raised by the creditors, the trustee may raise these objections on behalf of the creditors at your confirmation hearing before the judge. For more information on the confirmation hearing, see Chapter 8, Section C.
In Appendix A at the back of this book is a checklist entitled "Should I File for Bankruptcy?" This checklist summarizes the issues discussed in each chapter, and helps you make decisions based on your own situation. Now is the time to complete the Chapter 1 questions on the checklist.