Entering a Chapter 13 bankruptcy is not a short-term commitment. For the next three to five years, life is going to be different. How will you make it through until the day that the court discharges the bankruptcy? The team at Kepple Law Group have some tips that will help you get from here to there.
Create and Follow a Workable Budget
As part of the financial management courses required by the court, you received a refresher course in how to design a household budget. You already had to do something along those lines when you listed your basic living expenses in the bankruptcy paperwork. Now is the time to get serious about creating a fully functional budget.
Segregate the line items into two categories: basic living needs and wants. Items like food, clothing, and shelter are basic living needs. Meals out and entertainment are wants. Structure the budget so all needs are met. Try to set aside a few dollars if possible. Wants are funded after your needs and placing a modest amount in your savings account.
Avoid Applying for New Credit Cards or Loans
Part of the terms of the bankruptcy focused on not creating additional debt. In fact, some jurisdictions do not allow for creating any new debt at all. That means you should refrain from applying for new credit cards or short-term loans until the bankruptcy is discharged.
It’s true that many lenders will not approve an application while your bankruptcy is active. That’s actually a good thing since it helps ease the temptation. Even so, stay away from any lender or credit card issuer that tries to entice you with an offer. Along with the high interest rates, accepting the offer could put your bankruptcy in jeopardy.
And Don’t Use Accounts That Creditors Did Not Cancel
At the time you filed the Chapter 13 petition, you surrendered your credit cards. That was true even for accounts that had a zero balance. Most of those issuers closed the accounts once they were notified by the court. Even so, there may be one or two that never get around to closing the accounts since there were no balances due.
Those accounts do not constitute a workaround for you. Your commitment to the court is to devote your disposable income to paying off your creditors. Refrain from ordering replacement cards for those still-active accounts. No card translates into less temptation to use the accounts.
Make Mortgage and Rental Payments on Time
This is a season to ensure that you stay up to date on all of your recurring monthly expenses. Along with your utility bills, that also includes your rent or the mortgage payment. Even if you were not behind on either at the time you filed your Chapter 13 petition, keep them up to date now. The last thing that needs to happen is for the trustee to find out you’re behind and wonder why.
Consult the Trustee Before Major Purchases or Dealing With Emergency Situations
Trustees do understand that unforeseen circumstances can arise. The car could break down or you could be out of work with an illness for a short period of time. When situations arise that are beyond your control, the best move is to work with your lawyer to notify the court as quickly as possible.
With emergency situations, the trustee may allow you to skip a payment one month and then resume payments the following month. This can buy the time you need to get the car repaired or to return to work and begin catching up on your obligations.
The same holds true if the car needs to be replaced. Work with your legal counsel to develop an updated budget plan and present it to the court. If the car is your primary way of getting to and from work and you can show how you will manage the car loan and still keep up with the bankruptcy payments, there’s a good chance of being able to proceed with the court’s blessing.
File Your Tax Returns Without Fail
As with your monthly obligations, you want to file your tax forms on time every year. This is especially important if part of the debt you’re paying through the court happens to be back taxes. Failure to file could provide the grounds for having the bankruptcy dismissed.
Even if you’re not paying back taxes, the court may have a claim on any tax returns that you receive. Your lawyer can tell you if the court of jurisdiction normally requires the funds from returns to be surrendered to the trustee.
Report Changes in Income or Job Status Immediately
Over the three to five year period of your Chapter 13 bankruptcy, life changes can happen. A job layoff could mean there’s no longer an employer to remit payments on your behalf. Perhaps the job change is permanent and you’re unemployed for a time before finding a new job. There’s also the possibility that your new job won’t pay as well as the last one.
In all these instances, you and your bankruptcy lawyer will need to report the changes to the trustee as quickly as possible. At the least, the trustee will want to prepare documentation that authorizes the new employer to begin remitting payments on your behalf. In some cases, the change in income may require modifying the bankruptcy to reflect your new circumstances.
Do Keep Track of Remitted Payments
There are a number of reasons why you want to confirm that your payments are received and posted by the trustee. The most important one is to ensure that those payments make it to the trustee on time. That helps to keep you in good standing with the court.
You also want to have an idea of what’s being sent to your creditors. Fortunately, establishing an account with the National Data Center makes it easy to log in and find information about received payments, disbursements to your creditors, and how much the trustee is holding at present. That type of data will help you know that everything is proceeding according to the plan.
Remember that your lawyer is always there to answer any questions that you have about your Chapter 13 bankruptcy. Call Casey Kepple if you have a question or need to know how to find the information that you seek. Together, you will be able to get through this period and develop some skills that will help you build a stable financial future.
