Considering the length of a Chapter 13 case, and also its many advantages, you need to know what it takes to successfully finish it.
After filing a Chapter 13 “adjustment of debts” bankruptcy case, attending its “meeting of creditors,” and getting court approval of your plan at the “confirmation hearing,” your case is on its way. Besides making your plan payments each month, what else has to happen before your case is completed?
Just as in Chapter 7, besides completing a “credit counseling” class—usually done online—before filing bankruptcy, after filing you must also complete a “debtor education” class. This is also usually done online, in one sitting.
With everything else going on, it’s all too easy to neglect this requirement. Although it can be done anytime during the case, it’s prudent to get it out of the way during the first month or two. The law is very clear: “The court shall not grant a discharge… to a debtor” without having completed the “debtor education” class. That means that you would not get a court order writing off the remaining debts at the completion of your case, one of the most important benefits of most Chapter 13 cases. After years of dutifully complying with all the rest of the Chapter 13 requirements, you don’t want your case to flounder on this one.
Avoid “Nondischargeability” Complaints
Also as in Chapter 7, each creditor has until 60 days after the “meeting of creditors” to file a formal complaint objecting to the “dischargeability” of its particular debt. Such complaints can only be raised on very narrow grounds, generally related to alleged fraud or misrepresentation by you in incurring the debt, or related to your “willful and malicious injury” to someone or his or her property. If the creditor does not raise such an objection within this 60-day period, it can never do so after that (assuming it is listed in your schedule of creditors and received notice of the deadline).
These “nondischargeability” complaints are rarely filed, but can cause major headaches if one is in your case. If a debt that you expected to be discharged can’t be, the financial consequences can jeopardize your entire case. Again these complaints are filed so rarely that people tend to forget about the possibility. But the passage of that 60-day deadline is one worth keeping an eye on and quietly celebrating if no creditor crawls out of the woodwork.
Pay Your Chapter 13 Plan Payments
So much revolves around calculating and making these monthly payments each month from when your case is filed that it’s not something that you’d forget. But be absolutely clear about the payment amount, and how and when to pay it. Keep a detailed record of your payments. Carefully track any scheduled increases or decreases in the payment amount. If for any reason you cannot make the payment, tell your attorney as far in advance as much as possible, so that any adjustments can be discussed and implemented before fail to make a court-ordered payment and risk having your Chapter 13 case be “dismissed,” or thrown out.
Pay Any “Outside the Plan” Obligations
In many Chapter 13 plans, you pay nothing to your creditors except the plan payment each month. The trustee divides that payment among the creditors as specified under the terms of the court-approved plan, and that satisfies your obligations to all of your creditors. But in other plans, you may be required (or allowed) to pay some creditors directly, “outside the plan.” These are usually creditors with secured debts such as home mortgages or vehicle loans, often used when you are simply continuing the regular payment. (This practice varies in different jurisdictions.) Of course it’s crucial to know if you have any creditors that need to be paid separately from your plan payment, and that you keep up those payments.
It’s especially important to maintain child and spousal support payments. Near the end of your Chapter 13 case you must certify that you have made all such required payments throughout the case before the court will grant a discharge of your remaining debts.
Do Whatever Else the Plan and the “Order Confirming Plan” States
The combination of two documents—your plan and the Order Confirming Plan signed by the bankruptcy judge—contain the rules of your case. These documents include some “boilerplate” rules that apply to everybody, as well as sometimes some which are special to your case.
The general rules include obligations to provide the trustee with copies of your annual income tax returns, to avoid using credit without prior permission, and such. Special rules can include a specified deadline to sell an asset, permission for you to use a tax return for a special expense like a vehicle repair, a requirement to report when a spouse finds employment—issues usually involving anticipated changes to your income, expenses, or assets. These rules guide your case, and everyone involved must comply with them. You must do so as well or else risk the case being dismissed.
There’s no question: there are many hoops to jump through to finish a Chapter 13 case successfully. But there’s also no question that Chapter 13 can provide you with tremendous benefits, potentially saving you tens or even hundreds of thousands of dollars. It gives you many tools beyond what Chapter 7 does, enabling to meet important goals which would otherwise be out of reach. Once you’ve decided that these benefits are worthwhile, in most cases you will find the “hoops” to be sensible and manageable.