What is strict compliance in a Chapter 13 bankruptcy case?

July 09, 2020 00:04:24
What is strict compliance in a Chapter 13 bankruptcy case?
Kelly Bankruptcy
What is strict compliance in a Chapter 13 bankruptcy case?
/

Show Notes

Transcript:

Hello! this is Jeff Kelly, today is July the ninth 2020 and today we are going to talk about what is strict compliance in a chapter 13 bankruptcy case. Strict compliance in a chapter 13 bankruptcy is when your case has been placed on a period where if you miss a single chapter 13 payment your case is automatically dismissed without a hearing. Dismiss without a hearing is a bad thing because you have no time to prepare. The second your case is dismissed, the creditors are free to legally take action against you as soon as the law is as soon as the law allows.

So how fast do you think a car creditor is going to come after your car and try to repossess it after your case is dismissed?

Answer, as fast as they humanly can contrast a chapter 13 on strict compliance versus a case where strict compliance does not exist. Normally When a chapter 13 debtor falls behind on payments to the trustee, the hearing is set down with the bankruptcy court which gives them time to come up with the plan to make up for missed payments or in the alternative if you know your bankruptcy case is about to dismiss you could make plans for alternative transportation, when you know your car is about to get repossessed. In contrast, if a case is is on strict compliance, or chapter 13 case will be dismissed shortly after a payment is missed. All bankruptcy protection is lost as soon as the dismissal order is entered.

Thank you, Lord, we do have gracious chapter 13 trustees.

So during this COVID-19 crisis, the chapter 13 trustees have been extremely gracious by not enforcing strict compliance orders. But now that we are months into the crisis and people are back to work, most trustees have resumed enforcing strict compliance orders. So how does someone end up on strict compliance to begin with? Well, in some cases, the debtors attorney might agree with a trustee for a requested period of strict compliance. For example, most chapter 13 cases have what’s called an employment deduction order. That’s where they’re going to take, you know, the chapter 13 payment directly out of your paycheck every single time you get paid. So your whatever your monthly payment is, it gets prorated. You know, like if you get paid weekly, then it would be divided by four and so forth. So, some people do not want a an employment deduction in order at any cost. And because maybe they’re, you know, give an example. Maybe they’re a supervisor and they’re worried. This is going to hurt their chances for promotion. So a trustee might say, okay, fine, you can pay it directly to me every month, on the condition that you agree to one year strict compliance for the first year of the case. This way that you know saves the trustee a lot of trouble if you don’t make your payment, they can just boom automatically dismiss it without having to set it down for a hearing.

So another situation where strict compliance could be added to a chapter 13 bankruptcy case is after a motion to dismiss has been filed. In some cases, you know, people miss work for extended periods, maybe it’s because of surgery, maybe, you know, the plant shut down for a short time, whatever. Your payments, get missed payments gets missed, the trustee files a motion to throw the case out. And we can go to the hearing and say, Okay, we’re back at work. Now we can make payments, and as a condition of allowing you to continue in the chapter 13 case, the trustee might require a period of strict compliance. Sometimes if you’re really far behind, they may say, hey, I want strict compliance for the rest of this case, and so that’s how that works.

If you think your case has been placed on strict compliance or you’re not sure, call us. If you’ve missed some recent payments, call us as soon as you can. Don’t wait for a dismissal order to come in the mail. It’s much better to address the problem ahead of time.

Thank you for tuning in today. Have a good one.

Episode Transcript

No transcript available...

Other Episodes

Episode 1

November 02, 2020 00:29:55

Radio Show #1 : Interview with Patrick Matson

Welcome to the first radio show with Jeff Kelly featuring guest Patrick Matson. Today we debunk the fears surrounding bankruptcy and ensuring that your bankruptcy experience is one that goes smoothly. ...

Listen

Episode

June 22, 2020

What happens to the credit score after bankruptcy?

Hello, this is Jeff Kelly. And in this podcast today, I’m going to talk about what happens to your credit score after bankruptcy. Am I doomed? For many years. What does my future look like? Will I ever be able to buy a new car at a decent interest rate? Will I ever be able to buy that house that I’ve always dreamed of? Is my financial future ruined forever as a bankruptcy attorney who has practiced in this area since 1998? I have heard questions like these hundreds of times. And the answer might shock you. The answer is this. Most people do recover within about two years, one to two years of filing Chapter 7 bankruptcy. How can that possibly be? You may say, well, first of all, usually by the time the clients come meet with me, the damage has already been done. Most potential clients have stopped paying credit cards. Many months ago, had cars repossessed. Been sued by creditors. Had wages garnished or had their house foreclosed. Any of these will put a major hit to your credit rating. For most people considering bankruptcy, like I said, the damage is already there. So the question is, what do we want to do going forward? Do you ever get a knot in your stomach when you think about your credit score? David, just feel sick to your stomach thinking about all that debt and the interest and late fees and just mess that’s hanging over you and it’s not going anywhere. Well, Chapter 7 might help make that pain ...

Listen

Episode

June 15, 2020

How to protect yourself from thieves in a Chapter 13 bankruptcy case

Hello, this is Jeff Kelly and Today is June the 15th 2020. And today I want to talk about how to protect yourself from theft in a chapter 13 with NDC.org. Every active chapter 13 debtor should open an account with NDC.org, the cost is free, but the information you see could be worth a lot of money and save you from theft. Having an account with NDC.org will allow you to see every single proof of claim that has been filed in your bankruptcy case and it will also allow you to verify that your chapter 13 payments are being received by the trustee. Years ago I had a client whose employer took money from her paycheck, but never sent it into the trustee. We caught the error and had to sue the employer to get the money paid. Having an account with NDC.org allows you to catch stuff like this. Proof of claim is a form signed under oath, with supporting documentation that a creditor must file in a bankruptcy case in order to get paid. The proof of claim will tell the trustee the type of claim and the amount owed. If a creditor fails to file before the deadline in your case, they won’t get paid anything. For example, let’s say you had a car repossessed a few years ago, and owe the car creditor $10,000. If they fail to file a proof of claim on time, you will not have to pay that $10,000. Let’s change up the facts ...

Listen