Chapter 13 Bankruptcy

There are events that define a generation. September 11, 2001 comes to mind as one and certainly the COVID-19 pandemic has changed our economy for the foreseeable future. Unemployment rates are up and people are struggling to make payments. Even some people who make good money have the slightest decrease in hours or salary and before they know it, they cannot keep up with their bills.

When your finances spiral out of control, Bankruptcy is always an option. Even so, you need to keep in mind that everyone's situation is different, and there are multiple options when someone is considering bankruptcy. That's why it's important to take the time to sit with a Lowell Bankruptcy Lawyer. An experienced attorney can explain your options and give you advice as to what you can do to move forward.

A Chapter 13 Bankruptcy is a good option for debtors who would not pass the “means test” for a Chapter 7 Bankruptcy. A Chapter 13 case allows the debtor to enter into an interest free repayment plan with their creditors. 

In most cases, the debtor will pay a small percentage of what was original owed on the debt, interest free, over three to five years. This repayment plan has to be approved by the Bankruptcy Court. Once the bankruptcy petition is filed and the plan is approved, the creditors are not allowed to attempt to collect the debt or even continue lawsuits against the debtor.

A Chapter 13 case may be preferred because it allows the debtor to get caught up on mortgages or car loans without the threat of foreclosure or repossession. The amount paid and the length of the repayment plan depends on the debtor's property, income, and expenses. 

In a Chapter 13 repayment plan, if the debtor has lots of credit card debt and are behind on mortgage payments, they may pay back as little as 5% of the outstanding credit card balances, interest free.

In both a Chapter 7 and Chapter 13 bankruptcy case, there is a Section 341 hearing. This is also call the “Meeting of the Creditors” and “Trustee Hearing”. At the 341 hearing, the Trustee who oversees the bankruptcy petition will first swear the debtor in and then ask them questions under oath.

They might ask the debtor about a variety of items like, how they valued their house, how they valued their car, their sources of income, and/or transfers of money or property that occurred before the bankruptcy. The whole point is to make sure the debtor was completely honest and forthright in the petition they filed with the Bankruptcy Court.

The Trustee will then ask if any creditors have questions for the debtor. If the creditor or its lawyer is present, they might ask questions similar to the ones listed above. In most cases, the creditors will have sixty days from the 341 hearing to file an Adversary Proceeding contesting to the debtor filing for bankruptcy.

An Adversary Proceeding is a lawsuit within the bankruptcy suit. It is a lawsuit initiated by a creditor's attorney or the Trustee claiming that some of the debtor's debts should not be dischargeable because the debtor did something improper under the bankruptcy code.

For example, an adversary proceeding could claim that the debtor lied on their petition for bankruptcy. Or, the Trustee could attempt to “unwind” a transfer that occurred within 2 years of the debtor filing for bankruptcy.

Section 544(b) of the bankruptcy code allows for the court to undo fraudulent transfers that occur within two years of filing. Colloquially, this is called a “claw-back suit”.

These are merely examples. There are a variety of types of claims that could be brought as adversary proceedings and they are all complicated. That is why you need an experienced bankruptcy attorney to advise you as to potential proceedings that could be brought against you upon filing for bankruptcy.

The Bankruptcy lawyers at Marcotte Law Firm has the experience and tenacity to help guide you through the complex process that is filing for bankruptcy. Our Lowell Bankruptcy Attorneys are here to help.

Give a Bankruptcy Lawyer at Marcotte Law Firm a call to set up a free consultation, (978) 458-1229.