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Parties Involved When Someone Files for Bankruptcy

The question comes frequently to our office – who is involved when someone files for bankruptcy?  In reality, less parties are usually involved than most people think.   Let’s discuss who is involved when someone files for bankruptcy.

The Debtor

The debtor is the primary person (or persons) involved when filing for bankruptcy. The debtor is the person or company who needs their debts relieved.   Usually the debtor files a bankruptcy petition asking the court for bankruptcy relief.  Debtors range from a single filer, to a married couple, all the way to the largest corporations in America.

The Case Trustee

The Case Trustee (or Interim Trustee) is the person in charge of your Chapter 7 or Chapter 13 case.  The trustee makes sure that your case is handled correctly, making sure that all bankruptcy rules are followed. The Trustee is also responsible for your property during the bankruptcy case, making sure that all property (or income) that should go to your creditors is properly turned over to repay your debts.

The Bankruptcy Court and Judge

You are always assigned a bankruptcy Judge during your bankruptcy case.  However, most cases never come up in front of the Judge because there are not disputes in most bankruptcy cases.   The Bankruptcy Court is the forum and mechanism in which you file your case.  The bankruptcy court’s clerk office is responsible for receiving your bankruptcy petition request and managing the basic administrative functions of your bankruptcy case.

The United States Trustee

The United States Trustee is the “sheriff in town” during the bankruptcy process. This party makes sure that all bankruptcy rules are being followed and that no bankruptcy fraud is occurring.  This office is also required to randomly “audit” a certain amount of bankruptcy cases each year just to make sure that the system is being properly followed through a “spot checks.”  Their direct involvement is not common on most bankruptcy cases.  The United States Trustee also takes a more active role in larger Chapter 7 and Chapter 11 bankruptcy business cases.

The Creditors

The other major party – perhaps the most important in some ways – are the creditors.  All creditors of the debtor are notified when a bankruptcy is filed. The creditors are allowed to make objections in very limited situations.  All creditors must file a proof of their claim if they want to be paid by any amounts collected during the bankruptcy process.  However, in most Chapter 7 cases, the creditors can do very little during the process.  In the majority of Chapter 7 cases, the creditors do very little except just receive their bankruptcy notice and then write-off or cancel their debt when they receive the Chapter 7 discharge notice.

Photo of judge with gavel, Parties in bankruptcy

Do Both Spouses Have to Attend Bankruptcy Meeting?

Due to either job requirements or sometimes health restrictions, we are frequently asked whether both spouses are required to attend the bankruptcy meeting. The answer we give is an unqualified, “yes,” both spouses must attend the bankruptcy meeting. The reason why both spouses must attend can be found in Section 341 of the bankruptcy code.

Section 341 of the Bankruptcy Code requires an “Oral” Examination at a Creditor’s Meeting

Because Section 341 of the bankruptcy code requires an “oral” examination of the debtor at a “creditor’s meeting,” both spouses must attend this bankruptcy meeting of creditors. Because it needs to be oral and at a place where the creditors can attend, the meeting must occur in-person with both debtors present. Although creditors rarely attend basic Chapter 7 bankruptcy meetings, the opportunity to attend these meetings must take place on every case. If both debtors are not physically present, then they cannot be examined by the trustee or the creditors.

The bankruptcy system has developed the bankruptcy meeting from these requirements to be a single-set “hearing-like” setting. Just as any other court hearing, you are required to attend in person. Both debtors’ identities must also be clearly established to prevent bankruptcy fraud by bringing their driver’s license and social security card in person. Telephonic or other not-in-person approaches are not allowed or at least very much opposed by the bankruptcy system because this further frustrates attempts to prove identity.

Are There Any Exceptions? What About Power-Of-Attorney?

The bankruptcy system makes few exceptions to in-person examination during the bankruptcy meeting. Even power-of-attorney is usually insufficient for someone else or a spouse to testify without the debtor in person. If at all possible, the debtor needs to attend: work requirements or other practical-type considerations are usually insufficient excuses. If the debtor faces complete physical disability or mental incapacity, then accommodations are sometimes made to make the bankruptcy system work for these rare situations. In almost every other situation, both debtors need to attend the bankruptcy meeting in person in order to meet the requirements of the bankruptcy code.

Behind on Car Payments: What You Can Do About It

If you are behind on car payments, you are not alone.  America is now reaching record levels of consumers behind on car payments.   What should you do if you find yourself behind on car payments?   This article discusses why consumers are behind on car payments and what you can do about it.

Automobile Lending is Based on Profit, Not People

Automobile lenders as a whole use various forms of statistics to determine how many U.S. car loans should be generated each year.  These statistics are based upon maximum profit projections. These automobile loans do not have the consumer’s best interests at heart.   Instead, the focus is on profit.    Therefore, thousands of automobile loans are generated each year that may spell economic doom for the purchaser.   If the purchaser defaults after thousands of dollars in payments (going mostly to interest payments), it’s of no concern to the lender.  The lender will repossess the automobile, sell it, and then slap a massive deficiency judgment on the purchaser.

Therefore, whenever you seek to purchase an automobile on credit, you need to be fully aware of the dangers.  The automobile sellers and lender are seeking a profit at your expense.  You need to always start at this point of understanding: it’s all about auto-sellers profit at your expense.

Behind on Car Payments: What Are My Options?

Multiple options are available when you are behind on car payments.  First, you usually have 2-3 months before the lender repossesses the vehicle.  During this time, you can usually cure the deficiency without much trouble from the lender.   Some lenders also give “grace” periods or even a limited amount of “deferments” for a monthly payment.   Some buy-here-pay-here lenders are more strict however: they will not give any payment “graces” and sometimes repossess after 30 days of being late or less.

Secondly, you may be able to settle your obligations to your automobile lender, at least eventually.  If your automobile is behind in payments, it will eventually be repossessed and then sold a short time later.  From that point, you will be responsible legally to pay any “deficiency” after the sale. These deficiency amounts vary based on the circumstances, but can sometimes be even in excess frequently of $10,000.   The automobile lender may take much less than your “deficiency” amount in settlement just to get the loan “off their books.”

Third, you can file either Chapter 7 or Chapter 13 bankruptcy when you are behind on automobile payments.   Chapter 7 mainly only erases your debts.   In Chapter 7, generally you would be forced to make payment arrangements and keep paying on the vehicle if you desire to keep it.

Chapter 13, however, has much more powerful options in dealing with a behind-on-car-payments situation.   Chapter 13 can “reorganize your debt” and you can pay the automobile through the Chapter 13 plan at low interest.  Sometimes the automobile payments can also be much lowered in Chapter 13.   Chapter 13 also can even force your automobile lender to return a repossessed automobile if it was only recently repossessed and has not yet been sold.

The “Best” Thing You Can Do About Being Behind on Automobile Payments

By far, the best thing you can do to prevent being behind on automobile payments is simple: never buy financed cars.   Completely avoid the auto-lending market by saving to purchase paid-in-full automobiles.  Take advantage of various learning opportunities to learn how to purchase and maintain an automobile more affordably.   Buy multiple affordable vehicles: then you’ll never be forced to make a poor “quick” purchase.  If you are always “under the gun” to purchase an automobile, you will always come away with a horrible deal.   Make the wise purchasing of automobiles one of your top financial goals.

Indianapolis Bankruptcy Attorney John Bymaster explains your options if you are behind on car payments

 

 

 

 

 

 

 

What Happens to Your Chapter 13 Case if Your Spouse Files For Divorce?

What happens to your Chapter 13 case if your spouse files for divorce?  If your spouse has filed for divorce, major changes can come quickly to your financial situation.  Your Chapter 13 case can be handled in two primary ways if a divorce situation develops.  You can either “stay the course” or consider other options.

Remaining in Chapter 13 despite the divorce: Staying the Course

Even though your spouse has filed for divorce during Chapter 13, you both may still be entitled to receive relief in Chapter 13.  If you stay the course, you will eventually receive your discharge of debts.  If you are capable of making the ongoing Chapter 13 payment yourself, then you may not need to make any changes to your case.  In other cases – although this may not be recommended – both parties in the divorce situation can agree to make a portion of the Chapter 13 payment.   If a Chapter 13 case is almost complete, continuing in the Chapter 13 could be more feasible than if the Chapter 13 case has just begun.

Considering Other Options

You may instead consider other options besides Chapter 13 if a divorce situation develops.  You may not want to be locked down in a Chapter 13 plan for several years if you are no longer on good terms with your spouse. Other possible options may include both spouses converting the case to Chapter 7.    Another option may be bifurcating the case into two separate cases in which one spouse stays in the Chapter 13 and the other spouse converts their part to Chapter 7. Because your financial situation is changing, it is very likely that additional options outside of the Chapter 13 will become available.

Remember, divorce actions can bring a conflict of interest or the lack of trustworthiness. Therefore, if an option outside of a combined Chapter 13 case is available, you may want to take advantage of that option quickly. It is not advisable to wait because in the future you may not be eligible for options present in a quickly changing financial situation.  In addition, if sufficient conflict or disharmony arises, you may even need to seek separate bankruptcy or debt relief counsel.

Options outside of bankruptcy may also become available in a divorce situation.   Depending on the amount of each party’s debts, you may be able to seek outside options.  Plans can change dramatically in a divorce situation.  When plans change, non-bankruptcy options may open up to deal with your debts.

There are many options available if divorced during a confirmed Chapter 13 bankruptcy.

Credit Offers After Filing for Bankruptcy?

Credit offers after filing for bankruptcy?   Yes, you will likely receive several credit offers after filing for Chapter 7 bankruptcy.  Recently, one of our clients volunteered the above photograph of how many automobile credit offers he received after filing for bankruptcy.   He quickly trashed them thereafter!  Credit offers surprisingly do come right after filing for bankruptcy.  They can be a good thing or bad thing after you file for bankruptcy.

Credit Offers after Bankruptcy: My Credit Was Not Destroyed by Bankruptcy?

Nothing proves the fact that your credit was not destroyed by bankruptcy greater than receiving innumerable credit offers after your bankruptcy filing.  Remember, bankruptcy many times can be the start to rebuilding your credit.  If you had “F” credit before you filed for bankruptcy, your credit ability will instantly increase after filing.  If you had stellar “A” credit, your credit ability will obviously decline.   I usually like to express after-bankruptcy-credit by saying that you have “C” credit.  (Note – this is all for illustration purposes only: you are not actually in A to F credit grading system).

How much can “C” credit get you?   It certainly appears to get you automobile offers and sometimes small balance credit lines.   It also many times revives the ability to enter a residential lease to rent a home or apartment.   It appears that “C” credit can get you the “essentials” on credit.   But do you want to buy the essentials on credit?   Can you afford the higher interest rates they may be offering?   Be careful jumping back into credit situations just because of piles of credit offers you may receive.

Credit Offers and Bankruptcy: Which Offers Should I Consider?

Credit offers after bankruptcy should generally be ignored.  You should pursue very few of them.   Any offer that you do pursue should be geared toward responsibly rebuilding your credit.

We have seen numerous times when a new automobile loan eventually failed when it was purchased directly after filing for Chapter 7.   In fact, purchasing automobiles (even brand new automobiles) directly after filing for Chapter 7 causes many of our client to return to our office a short time later to file a Chapter 13 case or a subsequent Chapter 7.   The best way to guarantee a return to bankruptcy court is to immediately pursue credit opportunities.   You must change your approach to incurring new debts if you want to avoid a future bankruptcy filing.

Any credit offers you consider must be capable of rebuilding your credit in a responsible and manageable manor.  If you take on too much debt, you will likely fail regardless of your motives.   We strongly recommend that you only pursue light credit responsibilities and set up automatic payments to ensure that the payments are always made on time.   Live under your means and develop a paid-in-full mentality to your finances.  Credit should only serve you, you should not serve credit!  Therefore, use only light credit only to make sure that your credit eventually fully recovers.

Image of credit offers for automobiles after filing bankruptcy