[NAME OF CLIENT],
THE TWO MAIN FACTORS THAT CAN DETERMINE A DEBTOR OR DEBTORS’ MONTHLY CHAPTER 13 PAYMENTS, ARE THE DEBTORS’ ASSETS AND THE DEBTORS INCOME.
DEBTOR OR DEBTORS’ ASSETS
IN A CHAPTER 13 BANKRUPTCY, THE DEBTOR MUST PAY HIS OR HER UNSECURED CREDITORS AN AMOUNT EQUIVALENT TO WHAT SUCH UNSECURED CREDITORS WOULD RECEIVE IF THE DEBTOR FILED A CHAPTER 7 BANKRUPTCY.
WHEN A DEBTOR FILES BANKRUPTCY, THE BANKRUPTCY ESTATE IS CREATED. THE BANKRUPTCY ESTATE INCLUDES ALL OF THE DEBTOR’S INTERESTS IN ANY PROPERTY. SUCH PROPERTY MAY INCLUDE AN OWNERSHIP INTEREST IN A HOMESTEAD, OTHER REAL ESTATE, AN AUTOMOBILE, PERSONAL PROPERTY SUCH AS FURNITURE, AN ANTICIPATED TAX REFUND, A CAUSE OF ACTION IN A PERSONAL INJURY OR OTHER LAWSUIT WHEREIN THE DEBTOR MAY BE A PLAINTIFF OR SUING PARTY, AN EXPECTED INHERITANCE, OR EVEN A COPYRIGHT INTEREST IN A BOOK OR PUBLICATION.
THE BANKRUPTCY ESTATE INCLUDES ALL OF THE PROPERTY OF THE DEBTOR, AS REDUCED BY ALLOWABLE BANKRUPTCY EXEMPTIONS. IN MOST BANKRUPTCY CASES FILED IN THE STATE OF FLORIDA, THE DEBTOR WILL EMPLOY THE FLORIDA BANKRUPTCY EXEMPTIONS. HOWEVER, IF THE DEBTOR HAS RESIDED IN THE STATE OF FLORIDA FOR LESS THAN TWO YEARS BEFORE FILING BANKRUPTCY, THE DEBTOR MAY BE REQUIRED TO EMPLOY THE BANKRUPTCY EXEMPTIONS PROVIDED BY A PRIOR STATE IN WHICH RESIDED THE DEBTOR, OR THE FEDERAL BANKRUPTCY EXEMPTIONS.
FURTHERMORE, SOME ASSETS ARE EXCLUDED AS PROPERTY OF THE BANKRUPTCY ESTATE ACCORDING TO THE BANKRUPTCY LAWS.
IN A CHAPTER 7 BANKRUPTCY, THE BANKRUPTCY TRUSTEE DETERMINES THROUGH INVESTIGATION, WHAT IS THE PROPERTY OF THE BANKRUPTCY ESTATE. THE TRUSTEE THEN SUBTRACTS THE ALLOWABLE EXEMPTIONS, AND EXCLUDED PROPERTY, TO DETERMINE WHAT ASSETS ARE NOT EXEMPT, OR PROTECTED FROM LIQUIDATION BY THE BANKRUPTCY TRUSTEE.
IN A CHAPTER 13 BANKRUPTCY, THE DEBTOR MUST PAY TO THE UNSECURED CREDITORS AN AMOUNT EQUIVALENT TO WHAT THE UNSECURED CREDITORS WOULD RECEIVE IF THE DEBTOR FILED A CHAPTER 7 BANKRUPTCY. THIS IS CALLED THE LIQUIDATION TEST. THE LIQUIDATION TEST IS MET BY SIMPLY PERFORMING THE ANALYSIS OF THE CHAPTER 7 BANKRUPTCY TRUSTEE IN THE PRIOR PARAGRAPH.
THE CHAPTER 13 BANKRUPTCY TRUSTEE MAY HAVE QUESTIONS ABOUT THE TRUE STATE OF THE DEBTOR’S PROPERTY OR ASSETS. OFTEN, THE CHAPTER 13 BANKRUPTCY TRUSTEE WILL REFLECT SUCH QUESTIONS OR CONCERNS, BY FILING AN UNFAVORABLE RECOMMENDATION IN THE DEBTOR’S CHAPTER 13 CASE.
AN UNFAVORABLE RECOMMENDATION IS GENERALLY NOT A CAUSE FOR WORRY. GENERALLY, IN THE UNFAVORABLE RECOMMENDATION, THE CHAPTER 13 BANKRUPTCY TRUSTEE WILL REQUEST THAT THE DEBTOR DO ONE OR MORE OF THE FOLLOWING:
- OBTAIN AN APPRAISAL OF ONE OR MORE ASSETS
IF THE BANKRUPTCY TRUSTEE REQUESTS AN APPRAISAL OF A CERTAIN ASSET OR PROPERTY, IT IS IMPORTANT THE DEBTOR OBTAIN A CERTIFIED APPRAISAL IMMEDIATELY. THE DEBTOR MAY LOCATE A CERTIFIED APPRAISER TO CONDUCT THE APPRAISAL, OR THE LAW OFFICE MAY PROVIDE A NUMBER OF LOCAL APPRAISERS WHO ARE QUALIFIED AND CERTIFIED TO CONDUCT SUCH APPRAISALS. IT IS BEST TO LOCATE AN APPRAISER WHO WILL BE WILLING TO TESTIFY IN THE BANKRUPTCY COURT, IF NECESSARY.
- AMEND THE PETITION TO ADD CERTAIN PROPERTY OR ASSETS
AN ASSET OR OTHER PROPERTY MAY NOT BE REVEALED IN THE CHAPTER 13 BANKRUPTCY PETITION. FOR EXAMPLE, THERE MAY BE AN AUTOMOBILE, OR ANOTHER ASSET THE DEBTOR NEGLECTED TO INCLUDE IN THE LIST OF HIS OR HER ASSETS OR PROPERTY. THERE MAY BE A CAUSE OF ACTION IN AN AUTOMOBILE ACCIDENT THAT IS NOT INCLUDED. IN SUCH AN INSTANCE, THE DEBTOR MUST AMEND SCHEDULES B AND C TO ADD OR INCLUDE SUCH ASSETS.
- TRUSTEE REQUEST FOR OTHER DOCUMENTS, REGARDING TRANSFERS OR PROPERTY BEFORE FILING
IF THE TRUSTEE REQUESTS OTHER INFORMATION OR DOCUMENTS, IT IS IMPORTANT TO PROVIDE SUCH DOCUMENTS AS QUICKLY AS POSSIBLE. THE BANKRUPTCY ATTORNEY WILL EXAMINE THIS AND ANY OTHER INFORMATION BEFORE PROVIDING SUCH INFORMATION TO THE CHAPTER 13 BANKRUPTCY TRUSTEE. THE BANKRUPTCY ATTORNEY SHOULD ADVISE THE DEBTOR OF THE MEANING BEHIND ANY SUCH REQUESTS BY THE CHAPTER 13 BANKRUPTCYTRUSTEE, AND WHY SUCH DOCUMENTS ARE IMPORTANT.
DEBTOR OR DEBTORS’ INCOME AND EXPENSES
THE DEBTOR OR DEBTORS’ INCOME AND EXPENSES MAY ALSO AFFECT THE MONTHLY PAYMENT IN THE CHAPTER 13 BANKRUPTCY. THE CHAPTER 13 DISPOSABLE INCOME TEST, WHICH IS SIMILAR TO THE MEANS TEST IN THE CHAPTER 7 BANKRUPTCY, IS THE FIRST TEST IN DETERMINING THE DEBTORS’ MONTHLY PAYMENT. THE DISPOSABLE INCOME TEST CALCULATES THE DEBTORS’ DISPOSABLE INCOME BY CONSIDERING A NUMBER OF FACTORS INCLUDING THE DEBTORS’ INCOME, THE SIZE OF THE DEBTORS’ FAMILY OR HOUSEHOLD, AND ALLOWABLE EXPENSES, AS DETERMINED BY THE TEST.
SOME INCOME IS NOT INCLUDED IN THE DISPOSABLE INCOME TEST, SUCH AS INCOME RECEIVED PURSUANT TO THE SOCIAL SECURITY ADMINISTRATION, SUCH AS SOCIAL SECURITY RETIREMENT AND DISABILITY INCOME. THE TEST ALSO EXCLUDES INCOME RECEIVED PURSUANT TO THE VETERANS ADMINISTRATION, SUCH AS VETERANS PENSION OR DISABILITY PAYMENTS.
THE SECOND TEST IN DETERMINING THE DEBTORS’ MONTHLY PAYMENT IS THE ACTUAL INCOME AND EXPENSES OF THE DEBTORS, AS INDICATED ON SCHEDULES I AND J. THIS TEST INCLUDES ALL SOURCES OF INCOME, INCLUDING SOCIAL SECURITY AND VETERANS BENEFITS, AND ALSO INCLUDES ALL REASONABLE EXPENSES OF THE DEBTORS.
THIS SECOND TEST IS THE ULTIMATE DETERMINER OF THE DEBTORS’ MONTHLY PAYMENTS AS SUCH TEST REFLECTS MOST ACCURATELY THE INCOME AND EXPENSES OF THE DEBTOR, IN DETERMINING DISPOSABLE INCOME.
IT IS IMPORTANT WHEN THE DEBTOR APPLIES FOR THE PRE-FILING CREDIT COUNSELING CERTIFICATE THAT THE DEBTOR ACCURATELY REFLECTS HIS OR HER MONTHLY INCOME AND EXEPENSES. THE CHAPTER 13 BANKRUPTCY TRUSTEE MAY PROPERLY QUESTION ANY WIDE DIVERGENCE BETWEEN THE INCOME AND EXPENSES INDICATED IN THE APPLICATION FOR THE PRE-FILING CERTIFICATE AND THE INCOME AND EXPENSES AS INDICATED IN THE CHAPTER 13 BANKRUPTCY PETITION.
SPECIAL CIRCUMSTANCES MAY BE SHOWN BY THE DEBTOR IN DETERMINING THE MONTHLY PAYMENT TO THE CHAPTER 13 BANKRUPTCY TRUSTEE. SPECIAL CIRCUMSTANCES ARE NECESSARY EXPENSES FOR WHICH THERE IS NO REASONABLE ALTERNATIVE. A COMMON EXAMPLE OF SPECIAL CIRCUMSTANCES IS UNUSUAL MEDICAL EXPENSES. ANOTHER EXAMPLE MAY BE A DEBTOR WHOSE OCCUPATION REQUIRES UNUSUAL TRAVEL EXPENSES. ANOTHER SPECIAL CIRCUMSTANCE MAY BE EXPENSES INCURRED BY A DEBTOR WHOSE CHILD OR CHILDREN ATTEND EITHER A PRIVATE OR RELIGIOUS SCHOOL.
A DEBTOR IN A CHAPTER 13 BANKRUPTCY MUST PROVIDE A COPY OF THE ANNUAL TAX RETURN FILED BY THE DEBTOR OR DEBTORS. IF THE DEBTOR OR DEBTORS ARE TAX EXEMPT, THEN THE DEBTOR MUST SIGN A DOCUMENT ATTESTING TO SUCH TAX EXEMPTION. IF THE DEBTOR OR DEBTORS INCOME INCREASING OR DECREASES SIGNIFICANTLY, THE MONTHLY PAYMENT MAY EITHER INCREASE OR DECREASE. SUCH CHANGE TO THE MONTHLY PAYMENT IS NOT AUTOMATIC. THE CHAPTER 13 BANKRUPTCY TRUSTEE MUST SEEK AN INCREASE IN MONTHLY PAYMENTS AND THE DEBTOR MUST SEEK MODIFICATION OF THE PLAN IN ORDER TO SEEK A DECREASE IN MONTHLY PAYMENTS.
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