Common Questions and Concerns for Chapter 13

1. EFFECT ON CREDIT

Under the Fair Credit Reporting Act, the filing of a Chapter 13 petition remains on your credit record for a period of seven years. Having a bankruptcy on your credit report in and of itself does not prohibit you from obtaining credit, but obviously, it would be one of many factors a creditor would look at in determining whether or not you are creditworthy. While you are in Chapter 13, you must obtain the Bankruptcy Court’s approval to incur debt. In Chapter 13 you are entitled to credit rehabilitation assistance through the Chapter 13 Trustee’s office if you are able to pay 75% or more of the amount of the debt owed to those unsecured creditors who have filed a claim in your bankruptcy case.

2. EFFECT ON EMPLOYMENT

Federal law prohibits both public and private employers from discriminating against anyone solely because he or she has filed a bankruptcy. Public employers cannot terminate employment, refuse to promote or refuse to hire an applicant solely because of the filing of a bankruptcy, however employers cannot terminate an employee solely for filing a bankruptcy; however, they may refuse to hire you for having filed bankruptcy.

This employment discrimination prohibition does not apply to the granting of credit. It does not prohibit landlords from refusing to rent to you, banks from refusing to establish an account, nor insurance companies from refusing to insure you or your property. As a general rule, those issues are considered business decisions. Nonetheless, a landlord usually will not refuse to rent to you unless you have had a prior history of rent defaults. It is unusual for a bank to refuse you to establish an account, absent a prior history of bounced checks. Insurance cancellations are extremely rare.

3. FUTURE STUDENT LOANS AND GRANTS

It is illegal to deny a governmental grant, loan, loan guarantee or loan insurance to anyone seeking a student loan for themselves or a person associated with them because the person has filed a bankruptcy.

4. WHAT PROPERTY CAN I KEEP?

The issue of what property you can keep after filing a bankruptcy can be complicated, and you should discuss your specific situation with an attorney.

As a general rule, you are entitled to keep your home, contents of your home, vehicles, and retirement accounts. If you are single and have less than $18,450 equity in your home (or married and have less than $36,900 equity), or you do not own a home, you may be entitled to keep some money, stocks, savings, and accounts receivable. In Chapter 13, you may be able to keep assets that you would not be able to keep in a Chapter 7, but this must be discussed with the attorney specifically on a case by case basis.

5. BANK ACCOUNTS

A bank, savings and loan, credit union, or financial institution in which you have a deposit account, is allowed to take your deposit and set it off against any outstanding debt you may owe that institution. Therefore, as a general rule, you should not do business or have any deposit accounts in any financial institution to which you owe money.

You are single and have less than $18,450.00 equity in your home (or married and have less than $36,900.00 equity), or you do not own a home, you may be entitled to keep anywhere from $975 ($1,950.00 for a married couple filing bankruptcy together) to a maximum of $10,225.00 ($20,450 for a married couple filing bankruptcy together). The issue of whether you can keep the money on deposit in your bank accounts should be discussed with an attorney because the answer may be different in your situation.

6. TAX REFUNDS

A Chapter 13 bankruptcy delays a tax refund you might receive. The IRS reviews the tax return of each Chapter 13 debtor to determine if there is an outstanding tax liability. Therefore, your refund may be delayed for as long as six months. The delay is not as long if you file your return early. Please note that if you have not received your refund for the prior calendar year, and you have an outstanding liability to the IRS or other governmental units, such as a student loan creditor, that the governmental unit has the right to keep your tax refund.

* Please note that the “rapid refund”program is a loan program, which is prohibited. If you attempt a “rapid refund”, your refund could be tied up for many months. Please do not attempt “rapid refund” while you are in Chapter 13 or right before filing Chapter 13.

If you are entitled to a refund of less than $2,000.00, it will first be applied to the taxes that must be paid in your Chapter 13 plan. It will then be applied to any outstanding Chapter 13 plan payments which are due to the Trustee at the time of the refund. Any remaining balance will be forwarded to you. If you are entitled to a refund in excess of $2,000.00, it may be held by the Trustee and applied to the total amount due through your plan. The Trustee makes determinations to withhold refunds exceeding $2,000.00 on a case by case basis.

7. ATTORNEY FEES & SERVICES

The fee for the handling of your Chapter 13 case will depend on the complexity of your situation. The fee set by the for the Northern District of Texas for the handling of a standard consumer Chapter 13 case is $3,000.00 and for a standard business Chapter 13 case is $3,500.00. During your office consultation you will be advised of the fee associated with the handling of your case.

We may ask the Bankruptcy Court to approve additional fees in the event matters arise which are not considered regular and routine services. Such matters are addressed in the legal services agreement. If the circumstances of your case require additional fees, you, your creditors, and the Chapter 13 Trustee must be notified, and the Bankruptcy Judge must approve any application for additional fees.