Rats! I need a new car and I’m stuck in Chapter 13

Posted by Robert Weed / in Blog, Chapter 13, Chapter 13 Bankruptcy, Weekly Posts /

Do You Need to Finance a Car in Chapter 13?

The last thing you want to do is get further into debt while you are in Chapter 13.  (The goal of Chapter 13 is to get out of debt.)  But sometimes you need to–most often if you need to replace a junker car.

There are two things you need to know about financing a car while you are in Chapter 13?

First, car dealers are surprisingly eager to finance a car for people in Chapter 13.  That’s because they figure people in Chapter 13 are trying to get their lives together; but also people in Chapter 13 are stuck paying high interest rates, so those loans can be very profitable.

Second, you do need court approval to finance that car.  (The finance guys at the car dealerships usually know that and will tell you to get a letter from the court.)

Approval from the judge takes about four weeks

You need to get approval from the judge–that takes about four weeks–if nobody objects.

Here’s the info we’ll need from you, so we can put it in front of the Chapter 13 Trustee and the judge.

 

Five things we’ll need to explain to the judge and the trustee and yourself

1.  Why do you need a new car. If you had a car when your bankruptcy started, what happened to that one?
2.  What kind of a car do you want.  What’s the year, make and model.  (This court will never approve a luxury brand. And they won’t approve a souped-up economy brand either. )  What are you going to pay; where did you get the down payment, what’s the interest rate and monthly payments.  The dealership will need to give you that info. We’ll need it on their letterhead.
3. Now in three weeks that car will be gone, so don’t get attached to it.  But you’ll have court permission to get a similar car.
4. How can you afford this car? This court will never let you lower your bankruptcy payments no matter how much you need a car.  They will also turn you down no matter how much you need a car if they think you can’t afford it. So this needs a lot of explanation.
5. Is getting a car loan at a terrible interest rate really something you need to do.  Is there a way to keep your old car running a little longer?  Do you have some cheaper way to get around until your bankruptcy case is over? Are you really being smart here?

 

 

Chapter 13 Payment Information

Posted by Robert Weed / in Chapter 13, Chapter 13 Bankruptcy /

Here’s How You Can Make Your Chapter 13 Payments in the Alexandria VA Bankruptcy Court

The bankruptcy law tells you to make your first Chapter 13 payment one month after your bankruptcy case is filed.  If you forget, or bounce, your first payment, the Chapter 13 trustee can dismiss your case. (That means DO NOT wait until your Chapter 13 plan is approved–that will be three or four months down the road. Start making payments now!). That’s by law. 11 U.S.C. § 1326(a)(1).

When the Court confirms your plan, then the trustee may issue a “wage directive” to garnish the payment from your paycheck. If that doesn’t happen, you need just to keep making those payments.

Ten Things to know about how to make your Chapter 13 payments:

1.The Alexandria Chapter 13 Trustee, Thomas Gorman, does not accept cash, credit, or debit cards. He also won’t take online or telephone payments.  Mail your payments to his address in Memphis. (That bank in Memphis handles the payments for most of the bankruptcy courts in the country.)

2. Do not send money orders. They are too difficult to track down and get your money back if they get lost in the mail.  Instead, I suggest setting up a bill pay with your bank. With bill pay, your bank mails the check. You can watch your account and see when the check clears.  

3. Don’t send a post-dated check. The Memphis bank will deposit it as soon as they get it. So, don’t send your check until you’re sure it’s good.

4. The bank won’t put a bounced check through a second time. Just send a new check.

5. Don’t use UPS or FedEx. The payment address is a PO Box in Memphis. UPS and FEDEX don’t deliver to PO Boxes.  

6. If you bounce your check twice, then Thomas Gorman will make you to send all future payments by money order or cashiers check. That’s an enormous waste of time. It’s better to be late than to bounce a check.

7. If your check doesn’t clear your bank, don’t call to ask the Trustee if they got it. They don’t know. That bank in Memphis is handling over a hundred thousand Chapter 13 payments every month! If the bank doesn’t deposit your check, then you know it’s lost in the mail. Send it again.

8. Make your check payable to: Thomas P. Gorman, Trustee

9. Include your NAME and CASE NUMBER on your check. For bill paying purposes, your case number is your account number.  If you get that wrong, your payment might go to the wrong account.  People mail three thousand checks every day to that bank; so make sure yours has the right account number.

 

10. Mail all payments to the payment address at:

               Thomas P. Gorman

               Chapter 13 Trustee

               P.O. Box 1553

               Memphis, TN

                      38101-1553

And Remember to Pay:  

Trustee Gorman will not send you a monthly reminder or call when you are late. It is up to you to make sure he receives your payment every month.

 

Inflation Adjustment for Family of Two Goes the Wrong Way

Posted by Robert Weed / in Weekly Posts /

Bankruptcy Means Test Inflation Adjustment for Family of Two Goes the Wrong Way

Budgeting food and clothes in the bankruptcy court for a family of two just got harder.

According to the Justice Department (who gets them from the IRS, who gets them from the Bureau of Labor Statistics), the average cost of food, clothing and miscellaneous is lower for a family of two than it was a year ago.  And, that makes no sense at all, but there it is.  

Here’s the Means Test National Standards

National Standards cover five necessary expenses: food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous.                 

                  Family Size      May 2023      May 2022    Change  

                  Family of 1        $841               $785          $+56         

                  Family of 2       $1389             $1410         $-21

                  Family of 3       $1700             $1610         $+90

                  Family of 4       $1993             $1900         $+93

 

Date of these adjustments

These adjustments for the bankruptcy means test are posted usually April 1 and then reposted May 15.  But, it was today, May 15, 2023 that I first noticed the adjustment for a family of two went the wrong way.

Bankruptcy Trustee Hearings Will Soon Be on Zoom

Posted by Robert Weed / in Blog, Virginia Bankruptcy, Weekly Posts /

Bankruptcy Court Trustee Hearings Will Soon Be On Zoom

Bankruptcy Trustee hearings are now telephonic. That started for the pandemic, effective April 9, 2020. They are moving to Zoom, soon.

Associate Attorney General Vanita Gupta made that announcement Friday at the annual convention of the National Association of Consumer Bankruptcy Attorneys.  Colorado, Wyoming, and Utah switched at the first of this year.  Ohio, Michigan and Hawaii are next.  We hope Virginia will be in the next expansion.  

Zoom Hearings Should Work Better for Everyone

Before the pandemic, people in bankruptcy often lost a day from work for their three-or-four minute bankruptcy trustee hearings. In some parts of the country people had to travel hundreds of miles to the nearest Federal Court House. Here, you could spend hours in traffic trying to get to Old Town Alexandria during the morning rush.

Doing the hearings by telephone conference call avoided that travel time; but phone hearings could often be noisy and hard to follow who was talking. Zoom should work a lot better.

Why Do We Have These Hearings?

By law, people who file bankruptcy“appear” in front of the bankruptcy trustee to answer questions.  (For most people, the questions are, “Did you go over these papers when you signed them, and is everything you put there true?”) Those hearings are called “Meeting of Creditors” although creditors rarely show up. By law are between four and six weeks after we send your papers to the court. The Alexandria bankruptcy court schedules forteen an hour. So that’s four minutes or so per case.  

Paying Your Mortgage with Money Order is a Bad Idea

Posted by Robert Weed / in After Bankruptcy, Blog, Chapter 13, Weekly Posts /

Paying Your Mortgage with Money Orders is a Bad Idea

Handing somebody a money order to buy a car or something–that’s sometimes safer than cash.  But mailing a money order to pay your mortgage–that’s almost always a bad idea.

Let me tell you about Norman.  Norman filed Chapter 13 bankruptcy with different lawyer.  He later came to see me in a panic. Selene, his mortgage company, has started to foreclose. “So have you paid on time for the fifteen month since the bankruptcy was over?” I asked.  “Absolutely,” he replied.  That was Friday.  Sunday afternoon, he sent proof.  Eleven cancelled checks and four sets of Western Union money orders.

We need to move quickly to stop that foreclosure but I don’t really have proof he made the payments. The cancelled checks–they show Selene got them.  But the money orders; who knows where they actually went.

Getting Proof from Western Union

We are sure glad Norman kept his receipts.  Western Union money orders have form on the back he can mail in–with $15.00–to track if the money orders were cashed.  And by whom.  That will be a total of $240 to track sixteen money orders.  (Western Union money orders are limited to $500; so Norman needed four money orders for each mortgage payment.)

If they haven’t been cashed, he can get his money back. If Selene cashed them, we can prove the mortgage is current. Meanwhile, the clock is ticking toward foreclosure.  Because Virginia foreclosure law was changed a few years ago, we do have enough time to work with. But no time to spare. 

Selene Violates Regulation Z and Makes This Problem Worse

When Norman filed for Chapter 13 bankruptcy, Selene stopped sending monthly to him. As far as I can tell, that’s their national policy. (I’m suing Selene because of that.) Regulation Z requires mortgage companies to send periodic statements. And expressly says that bankruptcy is NOT an excuse to stop sending statements.

If Selene had sent monthly statements, Norman could have seen right away if the money orders weren’t being properly credited.  When the case was over and Selene started sending statements, Norman couldn’t figure out what was going on.  We went to the Selene website to download the past monthly statements.  But they would only give us six months of past statements.

 

 

 

Inflation Adjustment on income–But not on Expenses

Posted by Robert Weed / in Weekly Posts /

Bankruptcy income eligibility got easier April 1, 2023

Income eligibility to file Chapter 7 bankruptcy in Virginia got easier April 1, 2023.  The median income–that’s the cutoff for automatic eligibility based on income–shot up six to ten thousand dollars.

The median income for a family of four increased from $124,304 to $134,252.  For a family of three, from $102,791 to $111,017.  For a one person household from $69,791 to $75,376.

Budget Eligibility Did NOT Change

Bankruptcy budget eligibility for people with higher incomes (incomes over the median) did NOT change. Families, and individuals, making more than those median incomes can often get approved for Chapter 7 bankruptcy. But only if they can show budget eligibility on a “means test.” Some parts of the means test use actual expenses, but some are based on fixed allowances.  Those fixated allowances have not changed.  (The food and clothing allowance for a family of five is unchanged at $1651 per month.) 

Usually, the budget allowances increase on either May 1 or May 15.  If your eligibility is border line, not filing until May might get your Chapter 7 case approved.  (Or get you a lower payment in Chapter 13.)

Consumers Do Have a Friendly Person in Charge

These bankruptcy eligibility numbers are published by the Office of the United States Trustee.  In February 2023, the Biden administration appointed Tara Twomey to be in charge there.  Tara was previously Executive Director of the National Consumer Bankruptcy Rights Center and Of Counsel to the National Consumer Law Center.  Over the last ten years she did as much as any lawyer in the country to help consumers get favorable decisions pm close questions of law.  

Her office needs information from the Internal Revenue Service to publish the budget numbers. But I know Tara will pressure them in every way possible to get those numbers published on time.