Chapter 13 Bankruptcy Requires The Debtor To Be Honest

My Recent Client

I recently had the opportunity to speak with a chapter 13 debtor. This debtor had done a prior chapter 13, where the plan payment was $350 per month. The debtor was unable to make his monthly payment to the trustee and his case was soon dismissed. The debtor then came to my office to talk about re-filing chapter 13. This debtor had parking tickets owed to the city of Chicago which were causing his license to be suspended. He did have some other debt but the significant debt was that owed to the city of Chicago. We went through a confidential bankruptcy intake questionnaire, we agreed on a contract price, and we began to prepare his petition for filing. Upon further review, we learned that the debtor had $3100 per month in VA benefits that he had not disclosed. When I questioned the debtor as to how he was not able to make his $350 per month payment when his income minus expenses showed an excess of approximately 2500.00, he said that there were things that he was paying for. Since he had so much disposable income per month, his case would only succeed at a 100% repayment plan to the creditors. This required a monthly payment of $350.

The Debtor Decided Not To File

Upon learning that he would have to pay $350 per month to the trustee, he decided that he no longer could go forward with the chapter 13. I questioned him as to how he didn’t feel he had the ability to make the payment per month when his budget was showing such a huge surplus. He then stated that he couldn’t make the payments in the last case and that he wasn’t going to be able to make the payments in this case. In fact, anything greater than $100 per month was going to be too much and he would simply work it out with the city Chicago on his own. Once again I questioned him as to where his money was going. He stated that he was paying for other things and that he just didn’t have the ability to pay for a chapter 13.

In this particular case, this debtor would never have succeeded with a chapter 13 case because he was not honest. He was not honest when he came into my office about what he was bringing in per month and he was not honest about what he was spending his money on per month. Chapter 13 requires the debtor to fully disclose all of his income and all of his expenses and all of his debt. If the debtor is simply unable to do so, the case is not going to be recommended for confirmation by the chapter 13 trustee. Further, the debtor is not going to win favor with the trustee and is not going to get a case in a confirmable position.

Clients I Like To Help

I like to help debtors who are honest in their financial affairs yet need help. I love to help debtors who are able to make a payment to a trustee which equates to all of his disposable income per month. Now disposable income per month is income minus expenses. We are able to the deduct for housing, food, clothing, auto insurance, and any other reasonable expense that the debtor has. What we cannot do is file fictitious documents based on the untruthfulness of the debtor. I was pleased that the debtor did not want to go forward with a chapter 13 because the debtor was not going to be truthful and he was not going to be a good client. If you or someone you know is struggling financially, you may have the option to reorganize your debt under Chapter 13 bankruptcy law. To do so however, know in advance that you’re going to have to provide all of your income and document all of your expenses. For most of my clients, this is not a very difficult process by way of disclosure. The client simply provides a recent paycheck stub or other proof of income and then we go through a financial budget which shows how much they’re spending per month. It is only in extreme cases where the debts are exceedingly high per month where the trustee might ask for some documentation. For example, if the debtor has a tremendous electric bill or gas bill, then the trustee might become suspicious and want some justification.  In most cases however, the chapter 13 Trustee will not cause a problem. If you are open and honest, you can certainly benefit from filing a Chapter 13.