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The Main Concerns About Chapter 13 Bankruptcy

The number one concern many people have is that their house or car will be taken from them in a bankruptcy. Many people also worry that the IRS may come after them and arrest them or levy their bank account, or that their employer would be contacted causing them to be fired. Because of those fears, a lot of people walk into a bankruptcy attorney’s office in a panic, trying to figure out what they can do about their situation.

There really is very little to worry about; if all goes according to plan in the chapter 13, with competent representation and everything done properly, it would only be necessary to attend one hearing which is called the Meeting of Creditors. That hearing is not in front of a judge but rather is in front of the Chapter 13 Trustee assigned to their case. At the hearing, the person will testify about everything contained in the bankruptcy petition and schedules that they filed with the court. People will obviously be stressed out having to testify under penalty of perjury but all they have to do is just answer the questions and they will be able to get on with their lives and be done with the process very quickly.

Why Does Bankruptcy Get A Bad Rap?

Bankruptcy gets a bad rap because creditors hate it and they want people who file for bankruptcy to feel guilty and to feel like a bad person for filing. Someone who takes out a loan with a credit card company and gets that piece of plastic has entered into a business transaction in which they have to pay 25{101dfa813761f2ee11cc0642c58ea4c8c59ef05f1e4ce84ab7a8c1732b654ffd} interest on any balance they carried on purchases they made. Sometimes life happens and they become buried in debt.

Of course, one reason the interest rate is so high is because the card issuers calculate a loss ratio as part of the interest rate they charge, which means they factor in the number of people who will default or file for bankruptcy. Since someone who files bankruptcy is nothing more than a loss ratio to a lender, there should be no guilt, no shameor no other negative emotions; it is just a business transaction.  Once consumers get past the guilt garbage, people usually come to realize it is really a business and a quality of life issue, because it is the only way they can get out of debt. Consumers who file for bankruptcy have finally realized that they cannot get out of debt by paying what they can and limiting their spending alone, they need a bigger solution.

One thing I try to impart on my clients when I meet with them is that they did the best they could, and the bankruptcy code is there to provide them with protection once every 8 years under chapter 7, and they should take advantage when they need it. It would be great if someone could find a way to dig themselves out of the debt without filing bankruptcy, but that is often not possible.

Filing a Chapter 7 allows people to wipe out their debts and get on with their life, and not drive themselves into heart attacks, depression, divorce and all kinds of health problems. Banks do not care if that happens to someone, so why should anyone else care about them when it comes to filing for bankruptcy? There is no place for guilt, shame or any of that in a business transaction, so I do my best to make sure my clients stop experience negative emotions immediately.

Speaking of improved emotions, regardless of which chapter of the bankruptcy code a person files, the automatic stay goes in to effect immediately, and bill collections must stop, including repossessions or foreclosures, wage garnishments must stop, and letters and phone calls must cease as soon as the creditors receive notice of the court filing. A wonderful thing about bankruptcy is that a person whose life was being torn apart by bill collectors suddenly had some piece of mind once the Chapter 13 filing takes place as it shuts everything down, so they can get their sanity and lives back very rapidly.

Can Someone Just Re-File if Their Case is Dismissed?

Someone who files under Chapter 7 and received a discharge will not be able to file a Chapter 13 and be eligible for discharge until at least 4 years after they had filed. However if they were already in a chapter 13 proceeding and their case got dismissed because they did not make their plan payments or failed to get their plan confirmed, they can file again although the attorney will have to do some additional work on the second case to get it confirmed. I handle these kinds of things all the time and they can be done. I have even dealt with people who had failed twice, but then the third time they got through and they are presently doing just fine.

Is There A Limit To The Number Of Times Someone Can Re-File A Chapter 13?

Generally if someone failed 3 times to complete a chapter 13 plan, the court will not allow them to file again for 180 days or longer at the judge’s discretion. However, if the court did not make a finding like that, then there is no limit to the number of times someone can re-file a chapter 13.

For more information on Main Concerns about Chapter 13, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (858) 278-2800 today.

San Diego Bankruptcy Guide by Steven Bliss

Bankruptcy Basics
In California

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