Re-Filing Chapter 13 Bankruptcy Provides A Welcome Surprise

Current Chapter 13 Bankruptcy Client

I have a client that is currently in a chapter 13 bankruptcy case, but is struggling to make her plan payments. The trustee has filed a motion to dismiss the case for failure to make timely payments. My client is approximately $1500 behind even though her trustee payments are being deducted out of her pay. This is primarily due to the fact that she was in between jobs and during that lapse in employment, she did not pay the entire plan payment on her own. Faced with the dilemma of the trustee’s motion to dismiss, the client came to see me with regard to her options.

 Option One

One of the options of course is to get caught up with the trustee and save the case. Sometimes this can be done and at other times it’s clearly impossible. In this particular case, with the debtor being $1500 behind, there is no realistic chance for her to catch up with the trustee. This is true even if the trustee gives her a continuance and puts the motion over for another four weeks. The debtor does have another option. This option is commonly used and is known as the re-file.

 Option Two

What we have is essentially a second bite at the apple or a second attempt to reorganize the debt. It is a brand-new filing and a brand-new case number and a brand-new filing date. The debtor will have to take credit counseling once again, provide two months’ worth of paycheck stubs or other pay advices, and provide four years’ worth of federal tax returns. The debtor also will have to pay another filing fee to the clerk of the United States bankruptcy court and be on the hook for another round of attorney’s fees. This all starts to sound very burdensome at first. However, as in this case, my client actually has a hidden advantage of re-filing.

 Bankruptcy Discharge

You may be aware that filing a chapter 13 bankruptcy case within four years of receiving a chapter 7 discharge will not enable the client to receive a discharge in the chapter 13 case. This means that creditors will either have to be paid in full or creditors will be entitled to collect whatever amount remains due and owing after the debtor completes the monthly plan payments. My client’s original case was a no discharge case because she had received a discharge in a chapter 7 bankruptcy case within four years of filing her current chapter 13. If we look to re-file her case, it appears that more than four years will have elapsed since the time that she received her chapter 7 discharge. This is a tremendous, unexpected bonus for my client. Let me explain.

When we re-file her chapter 13 bankruptcy case, she will be entitled to a discharge. This means that we can propose to pay creditors back at 10% and eliminate the remaining 90% after her plan is complete. In her case, she financed a vehicle while she was in her chapter 13. When we re-file a chapter 13 for her, she can reorganize that vehicle that she purchased inside the new bankruptcy case. With her auto receiving the majority of the payments, the remaining creditors can receive a 10% pay back. She can also do this over 36 months because she is an under the median debtor. As you can see, these rules and regulations and the interplay that they have with bankruptcy clients and bankruptcy cases is quite extravagant. For this reason, you need an experienced, seasoned chapter 13 bankruptcy attorney working on your behalf. It’s quite possible that another bankruptcy attorney would propose a 100% repayment plan not knowing the intricacies of how and when a chapter 13 client can receive a discharge after filing a chapter 7.

 Summary

So in this particular case, the debtor was in severe stress regarding the trustee’s motion to dismiss. Imagine her relief when she realized that I can help her re-file a new chapter 13 bankruptcy case and actually reduce the amount being repaid to creditors. Helping people get out of debt by utilizing existing federal bankruptcy laws is my passion. Giving people the opportunity to repay a portion of their debt and give them back their dignity, is something I take great pride in. I’m honored and pleased to have played a role in so many people’s financial lives since I began doing bankruptcy back in 1991. If you are struggling financially, you would be wise to consult with me. I can be reached directly at 847-520-8100.

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