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Chapter 13 Bankruptcy Frequently Asked Questions
No Attorney Fee to File   |   Only $360 in Court Costs

We have attempted to answer the most frequently asked questions about Chapter 13 in Oklahoma that our clients have asked us before.  We hope this will be helpful.

This is not intended as legal advice because bankruptcy is complicated and depends on the specific circumstances unique to every Debtor.  If you are considering a bankruptcy, call us toll free at (877) 886-5955 for a free consultation so we can provide legal advice tailored to your specific unique situation.  There is no obligation and the call is confidential.
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Q:  What is Chapter 13 Bankruptcy?

    A:  Chapter 13 of the Bankruptcy Code allows an individual with a regular source of income to propose a Plan that provides for the repayment of their creditors and and how their assets should be reorganized.  The Judge may approve the Debtor's Plan without the approval of Creditors as long as it meets the statutory requirements.  Plans are usually three to five years in length and may not exceed five years.  Sometimes they can be shorter.

    Chapter 13 may be looked at as a form of debt consolidation, but a Chapter 13 allows a person to achieve much more than simply consolidating his unsecured debt such as credit cards and personal loans.  Chapter 13 Plans are often used to cure arrearages on a mortgage, avoid underwater junior mortgages or other liens, pay back taxes over time and repay general unsecured debt like credit cards and medical bills in part, in full or sometimes not at all.

    See our detailed discussion of Chapter 13 for more information.

Q:  Is a lawyer necessary to file Chapter 13?

    A:  No.  However, Chapter 13 is a complicated process involving a significant number of forms and legal hearings that a lawyer can assist you with.  Since all of your property comes under the control of the Bankruptcy Trustee, it is possible that you will lose some or all of your property if it is not properly scheduled and analyzed.

    Likewise, since the purpose of filing bankruptcy is to wipe out or discharge your debts, if the bankruptcy is not properly done, it is possible that some of your debts will not be discharged including some that could have been discharged with proper legal advice and planning.

    A competent bankruptcy lawyer will quite often pay for himself or herself by legally ensuring that you legally maximize the property you keep and the debts that are discharged.  An experienced lawyer will be able to jog your memory for property that you might have forgotten that you have – that will otherwise be lost to the Trustee. 

    Moreover, an experienced lawyer can frequently legally advise you how to protect such assets so they will not be lost.  For example, all income tax refunds are not normally exempt and something the Trustee can take away from you – even if you have spent them.  A good lawyer might advise you to delay filing bankruptcy so you can use your income tax refunds to legitimately pay for something before you file – like your bankruptcy fees.

    Or a competent lawyer may advise you to not pay certain bills – like those to family – because if you do, the Bankruptcy Trustee may sue that relative to recover what you paid the relative – even if it was a legitimate debt.

    Bottom Line:  In bankruptcy the old adage – "you get what you pay for" – applies.

Q:  If I file Chapter 13, what property can I keep?

    A:  State law grants exemptions that allow an individual to exempt, or keep, certain kinds of property.  Oklahoma law defines what assets are considered exempt, but this typically includes (i) your home; (ii) the contents of your home; (iii) one vehicle per person; (iv) guns, personal effects and jewelry; (v) tools of the trade; (vi) among other things but not in unlimited amounts and not likely free of any valid liens.

    You must carefully consider what property is exempt – and what is not exempt – before you file.  After you file, it is too late to legally plan or take action to protect non-exempt assets.

Q:  Can I stop creditors from contacting me after I file Chapter 13?

    A:  After you file, you are immediately protected from your Creditors and they must stop all attempts to contact you or collect their debt without obtaining permission form the Bankruptcy Judge, which is usually difficult to obtain.  This is called an automatic stay.

    Thereafter, if a Creditor attempts to collect a debt, you should immediately notify the Creditor in writing that you have filed bankruptcy, and provide them with the case name, case number and filing date or provide a copy of the petition that shows it was filed.  If the Creditor still continues to attempt to collect the debt, you may be entitled to take legal action against it.  If you have a competent lawyer, the lawyer will typically handle all of this for you and specifically notify creditors known to be aggressive immediately after you file.

Q:  Is it possible for my Creditors to object to my Chapter 13?

    A:  Yes.  Creditors are permitted to object to how you propose to pay specific debts in a Chapter 13 Plan in amount, frequency or otherwise.  In Chapter 13 Creditors can object to the Chapter 13 Plan for repayment and the court may take this into consideration.  If there are no objections filed by Creditors or the Trustee, the Plan may be confirmed as filed.

Q:  Do I lose my Social Security or retirement accounts if I file Chapter 13?

    A:  Generally, no.  Retirement accounts that are ERISA-qualified are not considered property of a bankruptcy estate, are not considered non-assets or lost to the Trustee.  Social Security benefits are protected from assignment, or garnishment for debts in bankruptcy.  Once paid, such benefits continue to be protected only as long as they can be identified as Social Security benefits.  For example, if all of the money in a bank account were direct deposits of Social Security benefits, they will be easily identifiable and generally protected.

    Conversely, if Social Security benefits are mixed or commingled with other funds, they may be lost.  Here, the expertise of an experienced bankruptcy will be invaluable if obtained before you file.

Q:  Is there a minimum amount of amount of debt to file Chapter 13?

    A:  No.  Nevertheless, your situation may be one in which a bankruptcy in unwise.  If your financial situation is temporary, you should consider contacting individual Creditors seeking a change in payment amounts or a reduction in the total amount due.

    If you do not have much property or money that is not exempt, a bankruptcy may be unwarranted, as there may be nothing the Creditor can do to collect the debt.  Persons in that situation are sometimes referred to as judgment proof meaning there is nothing a creditor can do to them.  

    For example an older person with only Social Security income living is a rented apartment might well be judgment proof; however, some judgment proof clients still want to take bankruptcy to avoid the stress and hassle from overly aggressive creditors and collection agencies.  Often the involvement of a good bankruptcy lawyer can be persuasive and dissuade the Creditor from acting.

Q:  What does a Chapter 13 Trustee do?

    A:  Generally the Chapter 13 Trustee’s job is to (i) Administer the bankruptcy; (ii) Make sure creditors get as much money as possible; (iii) Run the first meeting of creditors often also called the 341 Hearing; (iv) Collect payments under the Chapter 13 Plan from the Debtor; (v) sell non-exempt property; (vi) pay out money on a Chapter 13 Plan; and (vii) Obtain information from you and documents related to your bankruptcy.  The Trustee's fees are a set percentage of the money collected in the Chapter 13.

Q:  Do I lose my home if I file Chapter 13?

    A:  Typically no; however, this depends on many factors but if you can present a feasible Chapter 13 Plan that the Judge confirms, you can also keep your home.  This means in large measure that the Judge believes you can make the payments you say you can in your Chapter 13 Plan.  Even if you are in foreclosure or default and behind on mortgage payments, you can cure or catch up these back payments while you are in Chapter 13 if you have sufficient income.

Q:  If I file for bankruptcy, is a co-signor responsible for my debt?

    A:  Yes.  However, when a Chapter 13 is filed, the law imposes a co-debtor stay – much like the automatic stay – against actions to collect the debt from a co-signer until that co-debtor stay is lifted.  Moreover, if the Debtor proposes a Chapter 13 Plan that pays the debt in full, that co-debtor stay will normally remain in place and the non-filing co-debtor not bothered.

Q:  What is necessary to file for bankruptcy?

    A:  You must compile a list of past and present debts as well as a schedule, or list, or assets and liabilities.  You must also prepare a statement of financial affairs to file with the bankruptcy court in addition to your filing fee.  You must also complete an authorized course in credit counseling before you file and pay the fee of the agency providing the counseling.  If you retain a bankruptcy lawyer to assist you, that lawyer will guide you through everything that is required.

Q:  Can one spouse file for bankruptcy but not the other?

    A:  Yes.  If one spouse files and the other does not, the one who does not file will responsible for all debts he or she was obligated on before the other filed bankruptcy.  This requires careful thought and analysis.  For example, if one spouse is only obligated on a small amount of debt, it may make sense for that spouse to not file for bankruptcy so that spouse might have better or even good credit regardless of what the filing spouse does.

Q:  What happens at the first meeting of creditors or the 341 hearing? 

    A:  Once you declare bankruptcy you must attend the first meeting of creditors also called the 341 Hearing conducted by the Trustee in your case.  You must appear and answer questions concerning any actions taken with the property and about debts listed in the petition or any other financial information requested by the Trustee   Failure to truthfully answer may result in the petition being dismissed or, in extreme cases, a perjury charge.  Creditors can attend and question you about your assets or any other matter relevant to your bankruptcy.

Q:  Does a Chapter 13 have any impact on an inheritance?

    A:  In Chapter 13 your inheritance can be used in determining how much you have available to pay creditors under your Chapter 13 Plan for repayment.  Regardless, you must inform the Trustee about the inheritance.  If you are considering filing for bankruptcy, you should ask a bankruptcy lawyer how an expected inheritance might factor into your plans.

Q:  How are my Creditors notified that I have filed Chapter 13?

    A:  Shortly after you file the bankruptcy court notifies, by mail, all creditors advising them of (i) the filing of the bankruptcy, (ii) the case number, (iii) the automatic stay, (iv) the name of the Bankruptcy Trustee assigned to your case, (v) the date set for the first meeting of creditors, (vi) the deadline, if any, set for filing objections to the discharge of debts, and (vii) whether and where to file claims.  The exact information in the notice may be slightly different depending on the Chapter filed or where the bankruptcy is filed.

Q:  Is all debt discharged by bankruptcy?

    A:  No.  Debts that cannot be discharged vary slightly between the different chapters of bankruptcy but typically the following cannot be discharged:  (i) Most debts for taxes owed to local, state or federal agencies; (ii) Debts for money, property, services, or an extension, renewal, or refinancing of credit, which was obtained fraudulently; (iii) Debts that were not in the initial list of debts; (iv) Debts owed to a spouse, former spouse, or child, for alimony, maintenance, or support of a spouse or child, with a separation agreement, divorce decree or other order of a court of record; (v) Debts owed for injury to another person or property owned by another like those granted by a court in a judgment; (vii) Debts for government-sponsored educational loans, unless it can be shown that repayment will cause an undue hardship, which is virtually impossible to show; (viii) Debts for death or personal injury caused by the debtor’s drunk driving or from driving while under the influence of drugs or other substances such as in a judgment by a court; and (ix) Debts incurred after a bankruptcy was filed.

Q:  Is it possible to convert to another Chapter?

    A:  In most cases it is possible to convert a case one time to any other Chapter for which you are eligible.  The request to convert is very simple; however, there are possible pitfalls.  To illustrate, if you move from Chapter 13 to a Chapter 7, some of your property may be part of the Chapter 7 estate and consequently taken and sold to pay your debts, even though they were protected from creditors under Chapter 13.

Q:  Can you file for Chapter 13 more than once?

    A:  Generally a Chapter 13 can be filed four years following a previous Chapter 7 filing, or two years from a prior Chapter 13 filing.

Q:  If I plan to file Chapter 13, when should I stop using my credit cards?

    A:  As soon as you anticipate filing bankruptcy, you should stop using your credit cards.  Bankruptcy law scrutinizes questionable purchases for potential fraud.  If purchases are made 40 days prior to filing or cash advances taken within 20 days of filing, the debt may possibly be excluded from the bankruptcy discharge.  Again, here is where a competent bankruptcy lawyer can be helpful in advising you to delay – and if so, how long to delay – filing for bankruptcy to increase the likelihood such debts are discharge.