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					                               PERSONAL
          BANKRUPTCY
                               CHAPTER 13
                                             V/S
                                CHAPTER 7

               WHAT’S BEST FOR YOUR SITUATION

  UNDERSTANDING AND MAXIMIZING YOUR BENEFITS


                                           .~o0o~.


   BONUS
INFORMATION
 INCLUDES

                  BANKRUPTCY ATTORNEYS
                         How to Mindfully Find the Best
                              and Avoid the Rest


   AUTHOR: L. J. LOHEIT, Retired Chapter 7 and Chapter 13 Bankruptcy Trustee for over 35 years.
                  Please acknowledge our disclaimer before you read this book

                                                                                                  1
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                                        FORWARD

There are basically four messages this website in attempting to convey.

   1. Filing bankruptcy is a major juncture in anyone’s life. One that deserves serious consideration and
      professional care. It can often be more complex than one might expect, even in what may seem to
      be a simple case. Choosing an attorney is by far the single most important decision one will make
      regarding bankruptcy. This website shows what to consider, what to avoid and how to find and
      mindfully choose one of the best bankruptcy specialist in your area. Doing so will help insure
      you’ll not only receive all the benefits bankruptcy can possibly provide but you’re also more likely
      to avoid the pitfalls and possible losses associated with insufficient representation as well.

   2. The availability of Chapter 7 bankruptcy is not guaranteed to everyone nor is it always the best
      option. If you earn more than your states ‘Median Income’, you may be denied the use of Chapter
      7. When Chapter 7 is available, it’s the simplest, least expensive, fastest and easiest way to
      discharge most all non-priority unsecured obligations. While Chapter 7 is beneficial in that it
      discharges most all non-priority unsecured obligations, it generally does little or nothing in regard
      to priority or secured debt. They pretty much remain unchanged and unaffected by a Chapter 7
      bankruptcy. This leaves the debtor to deal directly with all; real estate mortgages, vehicle and
      non-vehicle secured creditors, any delinquency owed to those creditors as well as any priority
      debt, directly without any court alteration or intervention.

   3. Filing Chapter 13allows the court to alter the contractual rights of most creditors including;
      delinquency owed on mortgages, some mortgage creditors, vehicle and non-vehicle secured
      creditors as well as priority creditors. Those alterations usually provide substantial savings and
      benefits to a debtors’ financial affairs. Chapter 13 Reorganization Plans last at least 3 years and
      usually 5 years. Any debt which has a shorter remaining payment period than the length of the
      Chapter 13 Plan is subject to modification. This generally provides a significant reduction in the
      amount needed monthly and in the total amount which ultimately would be needed to fully satisfy
      those debts. Savings which is not available to a Chapter 7 debtor as they must deal with those very
      same creditors directly after their brief period in a Chapter 7 bankruptcy, having side-stepped the
      court alteration and intervention process.


       A Chapter 13 filing often reduces the amount needed per month and/or reduces the total amount
       needed to satisfy secured and priority debt when compared to the results of a Chapter 7
       bankruptcy. The manner and types of secured and priority creditors most often subject to court
       modification in a Chapter 13, which generally remain unchanged when filing Chapter 7, are
       listed below.

       a. A Chapter 13 filing can remove the secured status and pay mortgages owed on real estate
          which are no-longer secured by any equity, as unsecured.


                                                                                                         3
       b. A Chapter 13 filing can cure delinquency owed on mortgages secured by some equity in real
          estate over the life of a Chapter 13 Plan without paying any interest.


       c. A Chapter 13 filing can reduce a secured creditors’ interest rate when it’s greater than the
          Prime Rate plus 2%.


       d. A Chapter 13 filing can split a secured creditors’ vehicle contract into the secured portion and
          the unsecured portion if the value of the vehicle is than what’s owed, when the obligation was
          signed more than 910 days prior to filing.


       e. A Chapter 13 filing can split a secured creditors’ non-vehicle contract into the secured portion
          and the unsecured portion if the value of the collateral is less than what’s owed, when the
          obligation was signed more than 365 day prior to filing.


       f. A Chapter 13 filing can extend the repayment period of all secured and priority obligations
          over the life of the Chapter 13 Plan, often reducing the amount needed monthly when
          compared to the actual payment terms of the existing contract.


       g. A Chapter 13 filing can pay all delinquent income tax obligations over the life of the 3 to 5
          year Chapter 13 Plan, usually without having to pay any interest or penalties.


       h. A Chapter 13 filing can cure all delinquent domestic support obligations during the 3 to 5 year
          Chapter 13 Plan, unless a more favorable arrangement has been made.


   4. Filing Chapter 13 leaves open the option to discontinue the Chapter 13 at any time and without
      any prohibition to a future bankruptcy or to convert the Chapter 13 to a Chapter 7. This is often a
      valuable feature as should the financial circumstances change or some health, marital,
      employment or some other major issue cause a need to re-evaluate the financial situation
      sometime during the life of the Chapter 13 Plan, it’s an option. Chapter 7 would still be available,
      a modification to the Chapter 13 Plan may be possible or the conversion of the Chapter 13 to a
      Chapter 7 would all be alternatives to consider.

       This is not something available after filing a Chapter 7 bankruptcy. Generally there is no option to
       discontinue the bankruptcy process when it begins as a Chapter 7 filing.



These are specific situations where a Chapter 13 may be more beneficial monthly and in total than a
Chapter 7. This is not to say one should usually choose Chapter 13. Actually, Chapter 7 is usually the
best choice. It’s just that Chapter 13 is often overlooked when it would have been more advantageous.
This website provides a great deal of information regarding Chapter 13, Chapter 7, the bankruptcy
process and bankruptcy attorneys.

                                                                                                         4
As mentioned above in number one, the single most important decision one will make regarding
bankruptcy is when choosing their attorney. This can not be over emphasized. When you find an
attorney who fully understands numbers 2, 3 and 4 above, can skillfully apply and utilize the benefits of
bankruptcy to their clients greatest advantage without any preference or leanings toward a Chapter 7
over a Chapter 13, you are in good hands. That’s because any attorney who can skillfully design and
prepare a Chapter 13 can easily handle any Chapter 7. It’s just that not all attorneys who can handle
Chapter 7 can skillfully utilize Chapter 13 to the greatest extent possible.

Finding such an attorney is not a simple task. It was out of knowing consumer do not always make the
best decision when retaining bankruptcy attorneys that this site was born. To review two methods that
will provide insight and guidance when selecting a consumer bankruptcy specialist, review numbers (T)
25 “The EASY Method” and (T) 26 “The LESS C Method” under ‘Finding the Best Bankruptcy Attorneys’ in
the Table of Contents.

I hope you’ll find this site helpful and that your bankruptcy filing will be a trouble-free process, one
which will provide you with the financial relief you deserve.


                                                     Best Regards,




                                                    ~Larry Loheit
                                                     Chapter 7 and 13 Trustee, Retired




                                                                                                       5
                             WHAT WE’RE ABOUT
TO HELP THOSE EXPERIENCING FINANCIAL PROBLEMS TO:
 1.    Avoid scams, rip-offs, poor choices, costly errors and incompetent legal representation.
 2.    Understand the basic differences and advantages of Chapter 13 and Chapter 7 regarding your situation.
 3.    Know if you’ll want, should have or need a bankruptcy attorney.
 4.    Learn how to avoid inadequate, incomplete or mediocre legal representation.
 5.    Mindfully choose one of the best consumer bankruptcy specialist in your area.


TO LET YOU KNOW YOU MAY:
 6.    Be denied the use of Chapter 7 bankruptcy if you earn more than California’s Median Income.
 7.    Ultimately pay little or possibly nothing to non-priority unsecured creditors in a Chapter 13 bankruptcy.
 8.    Remove a junior mortgage(s) when the property’s worth less than what’s owed on a senior mortgage(s).
 9.    Take up-to 5 years to cure mortgage delinquency, pay just 1 months late charge and pay absolutely no interest.
 10.   Take up-to 5 years to repay delinquent income taxes without paying any interest or any penalties.
 11.   Reduce the interest to a secured creditors’ contract if it’s currently more than ‘Prime’ plus 2% annually.
 12.   Reduce the secured portion on a vehicle contracts claim down to the value, if purchased at least 2½ years ago.



WHAT’S THE MAIN MESSAGE?
 13. In about 20% of all consumer bankruptcy cases a Chapter 13 can eliminate more debt and/or result in a smaller
     total payment per month than what would be paid in total and/or monthly after filing a Chapter 7 bankruptcy.
 14. Be extremely careful when choosing a consumer bankruptcy attorney as many lack either: experience,
     knowledge, skills, motivation, interest or ability to take the greatest advantage of Chapter 13 and Chapter 7.
 15. Some attorneys are very skilled at handling Chapter 13 cases. Those who are can easily handle any consumer
     Chapter 7 case. However, not all attorneys who handle Chapter 7 cases can skillfully handle a Chapter 13.
 16. Avoid potential problems by using either one or both methods provided here which show you how to mindfully
     determine and select one of most skilled Chapter 13 specialist to handle your Chapter 7 or Chapter 13 case.


WHY ME?
 17.   I’m a retired Chapter 13 and Chapter 7 Trustee with 47 years of experience in bankruptcy matters.
 18.   I’ve personally reviewed, examined, critiqued and scrutinized over 50,000 consumer bankruptcy cases.
 19.   My experience provides insight and guidance from the inside so you’ll know what to avoid and what’s best.
 20.   It’s totally free. No E-mail address or personal information requested. No sign-in or sign-up. No commitment
       and there’s no referral fees arranged, charged or received… so there’s no bias and no manipulation.
                                                                                                                    6
A Table of Contents is shown next to give you an overall idea of this sites content. There are few sections in bold, (14, 19-26
& 32). These sections cover the main thrust of this sites purpose which is to inform consumers of the basic differences
between Chapter 13 and Chapter 7 and matters regarding the retaining of a Consumer Bankruptcy Attorney.




                                  T1   TABLE OF CONTENTS

                                                 INTRODUCTION

1.    TABLE OF CONTENTS
2.    WHY THIS SITE?
3.    WHY ME?
4.    DISCLAIMER
5.    21 POINTS OF INTEREST
6.    IT’S A MINE FIELD OUT THERE
7.    WHY YOU?
8.    ‘IT IS WHAT IT IS’
9.    WHO’S WHO



                                 ALTERNATIVES TO FINANCIAL PROBLEMS
                                   INCLUDING CHAPTER 7 & CHAPTER 13
10.   ALTERNATIVES TO RESOLVING FINANCIAL PROBLEMS
11.   WHAT CHAPTERS ARE THERE?
12.   95% OF ALL BANKRUPTCYS ARE CONSUMERS ~ CHAPTER 13’S & CHAPTER 7’S
13.   IS BANKRUPTCY THE RIGHT SOLUTION?
14.   BANKRUPTCY CHANGED IN 2005



                                                        ELIGIBILITY
15.   ELIGIBILITY TEST #1 ~ HAS THERE BEEN A PRIOR BANKRUPTCY?
16.   ELIGIBILITY TEST #2 ~ U.S.T. PRE-FILING CREDIT COUNSELING
17.   ELIGIBILITY TEST #3 ~ THE CHAPTER 7 ‘MEANS TEST’
18.   ELIGIBILITY TEST #4 ~ IS THERE AN ABILITY TO PAY?



                         BANKRUPTCY ATTORNEYS & SELF REPRESENTATION
19.   BANKRUPTCY, THE GROWTH INDUSTRY
20.   COULD IT HAVE BEEN BETTER?
21.   HOW TO AVOID MEDIOCRITY
22.   CONSUMER BANKRUPTCY ATTORNEY FEES
23.   SELF REPRESENTATION ~ IS AN ATTORNEY REALLY NECESSARY?


                                                                                                                             7
                     FINDING THE BEST BANKRUPTCY ATTORNEYS
24. FINDING THE BEST OF THE BEST BANKRUPTCY ATTORNEYS
25. THE ‘EASY’ METHOD
26. THE ‘LESS ‘C’’ METHOD



                   BANKRUPTCY DATA, PAPERWORK & DOCUMENTS
27.   WHAT’S NEEDED TO FILE BANKRUPTCY?
28.   BANKRUPTCY… THE PAPERWORK
29.   INFORMATION NEEDED BY THE ATTORNEY
30.   DOCUMENTS REQUIRED AS A PART OF THE BANKRUPTCY PROCESS
31.   INFORMATION YOU SHOULD KNOW BEFORE FILING BANKRUPTCY



                            WHICH CHAPTER IS BEST FOR YOU?
32. IF I’M ELIGIBILE TO FILE CHAPTER 7, WOULDN’T THAT BE BEST?
33. WHEN TO CHOOSE CHAPTER 7
34. WHEN TO CHOOSE CHAPTER 13



                                THE CHAPTER 13 ‘PLAN’
35.   CHAPTER 13 HAS A ‘MEANS TEST’ TOO
36.   CHAPTER 13 REQUIRES A ‘PLAN’ OF REORGANIZATION
37.   DESIGNING THE CHAPTER 13 ‘PLAN’
38.   IN A ‘NUTSHELL’ THIS IS WHAT’S NEEDED



                            FILING THE BANKRUPTCY CASE
39. WHEN BEST TO FILE THE BANKRUPTCY PETITION
40. UPON FILING THE PETITION
41. UPON FILING THE CHAPTER 13 ‘PLAN’




                                BANKRUPTCY TRUSTEES
42. BANKRUPTCY TRUSTEES




                                                                 8
                               AFTER FILING CHAPTER 7
43.   CHAPTER 7 ~ THE PROCESS
44.   DUTIES OF THE CHAPTER 7 TRUSTEE
45.   REAFFIRMATION AGREEMENTS
46.   THE CHAPTER 7 341 MEETING OF CREDITORS
47.   ASSET OR NON-ASSET CASE?
48.   DEBTOR EDUCATION CERTIFICATE PREREQUISITE FOR A DISCHARGE
49.   THE CHAPTER 7 DISCHARGE ORDER
50.   NON-DISCHARGEABLE DEBT IN CHAPTER 7



                              AFTER FILING CHAPTER 13
51.   CHAPTER 13 ~ THE PROCESS
52.   DUTIES OF THE CHAPTER 13 TRUSTEE
53.   THE CHAPTER 13 341 MEETING OF CREDITORS
54.   REVIEW OF THE CHAPTER 13 ‘PLAN’
55.   REVIEW PROOFS OF CLAIMS IF A PURPOSE WOULD BE SERVED
56.   RECEIVE ‘PLAN’ PAYMENTS
57.   MAKE DISTRIBUTIONS TO CREDITORS
58.   MOVE TO DISMISS WHEN APPROPRIATE
59.   ADMINISTER THE ‘PLAN’
60.   PROVIDE A REPORT OF THE “NOTICE OF TIMELY FILED CLAIMS”
61.   PROVIDE ANNUAL REPORTS
62.   CALCULATE THE COMPLETION OF THE CHAPTER 13 ‘PLANS’ TERMS
63.   KEEP RECORDS AND PREPARE REPORTS
64.   DEBTOR EDUCATION CERTIFICATE PREREQUISITE FOR A DISCHARGE
65.   NON-DISCHARGEABLE DEBT IN CHAPTER 13
66.   TRUSTEES FINAL REPORT AND ACCOUNTING
67.   THE CHAPTER 13 DISCHARGE ORDER




                                       NO SOLUTION
68. NOTHING SEEMS TO SOLVE MY PROBLEM



                                          LINKS
69. LINKS




                       KEY POINTS, QUESTIONS & REFERENCES
70.   STATISTICS
71.   DID YOU KNOW THAT:
72.   111 FREQUENTLY ASKED QUESTIONS
73.   GLOSSARY

                                                                  9
                                     T2   WHY THIS SITE?


Behind most every bankruptcy information website is an attorney trying to pull in clients or a site whose
purpose is to refer potential clients to bankruptcy attorneys. That’s all fine and well and there’s a great deal
of good information out there too. The problem is you can’t judge the quality of the legal services you’ll
receive by the quality of a web site. A new twist to the old adage “You can’t judge a book by its cover”.

This site provides a great deal of information regarding Chapter 7, Chapter 13 and bankruptcy in general but
its real purpose is to help you find an attorney who will do justice to you and the practice of
bankruptcy law. There’s a hellalot of attorneys out there… in fact far too many. Bankruptcies are way up,
inspiring a migration of new lawyers to practice bankruptcy law. So now there’s this huge pool of green
bankruptcy attorneys vying for your business.

I’m not a lawyer and I’m not looking for your business. I’ve been a Consumer Bankruptcy Trustee for over
35 years and I’ve personally seen and helped ten’s-of-thousands of individuals (by helping their attorneys)
maneuver their way through the bankruptcy system. Bankruptcy is not a simple process… at least not if
you want to take full advantage of the law. It’s also no different from any other profession in that there
are practitioners encompassing the full range of mastering their craft… from the really ‘talented’ to the
really ‘inept’. The problem is how can someone unfamiliar with bankruptcy (someone outside of the
system) know or learn how to choose someone at the upper end of the ‘talented to inept’ scale?

This site provides information you won’t find anywhere else. Not only is everything free and unbiased, but
its sole purpose is to inform you of important differences between Chapter 7 and Chapter 13 and to show
you how to avoid the consequences of retaining an attorney who’s on the lower end of the ‘talented to
inept’ scale… an attorney who may not be capable of providing you with the maximum benefits a
bankruptcy filing can deliver. I want to give you the insight you’ll need to avoid the outcome of what I’ve
seen all too often as a trustee when people make an uninformed decision when hiring a bankruptcy attorney.

Information you’ll most definitely want to be aware of before filing bankruptcy and certainly before
retaining an attorney. I’ll show you a couple of different ways to insure you’ll choose one of the best
consumer bankruptcy attorneys and avoid the rest.




NOTE: The information in this site is based on bankruptcy law as it is practiced in the Eastern District of
California. If you reside outside of the 34 County area of the EDC this site may be helpful and insightful,
however, there are significant differences in the interpretation and application of bankruptcy law based on
Local Rules, The General Order, local practices, local forms, controlling case law and other factors that
cause the application of bankruptcy law to vary throughout the country.
                                                                                                             10
                                           T3   WHY ME?


I've recently retired from having been a Chapter 7 and 13 Bankruptcy Trustee. I began my career in the
administration of bankruptcy matters in 1963. My experience as a Bankruptcy Trustee began in 1969 when
I became a Chapter 7 Trustee for a brief period. In 1977 I was appointed by the United States District Court
to be the only Standing Chapter 13 Trustee in the 22 Counties encompassing the Sacramento Division of the
Eastern District of California.

During my last 25 years, 1986 to 2011, I was appointed as the Standing Chapter 13 Trustee through the
Department of Justice by the Executive Director of the U S Trustee Program in Washington D.C. One of
my main responsibilities was to review Chapter 13 Reorganization Plans filed by attorneys on behalf of their
clients. For 47 years I reviewed, examined critiqued, scrutinized and administered over 50,000 individual
Consumer Bankruptcy cases as a Court appointed or a U.S. Trustee appointed Bankruptcy Trustee. Of those
cases and Plans which I approved and were approved by a Bankruptcy Judge, my responsibility was to
administer them. In that capacity I received Plan payments and distributed over $300 million dollars to
creditors during my career. On July 31, 2011 I retired and transferred over 5000 active cases.

No one comes close to my experience regarding Consumer Bankruptcy matters in the Eastern District of
California. I not only survived as a non-lawyer in bankruptcies litigious process I became an influential
player in bankruptcy matters locally and nationally. This experience has allowed me to acquire a great deal
of useful knowledge when it comes to bankruptcy. I use that knowledge and experience to provide you with
pre-filing bankruptcy guidance. My goal is to put you securely on the path towards a financial fresh start.

By reviewing and using this site, you’ll acquire unbiased information regarding the bankruptcy process in
general, the advantages and disadvantages of Chapter 7 and Chapter 13 and most importantly you’ll learn
what to be aware of and how to avoid poor legal representation and how best to select quality bankruptcy
representation.

Pay particular attention to: T14“Bankruptcy Changed in 2005”, T23“Self Representation – Is an Attorney
Really Necessary?”, T24“Finding the Best of the Best Bankruptcy Attorneys”, T25”The ‘EASY’
Method, and T32“If I’m Eligible to file Chapter 7, Wouldn’t that be Best?”



                                                       Best Regards,



                                         Larry Loheit

                                                                                                         11
Before you read on, please read and acknowledge this DISCLAIMER as it encourages you to seek quality
legal representation by retaining a Consumer Bankruptcy Specialist to obtain proper legal advice before
you take any action regarding bankruptcy. The intention is to provide consumers considering
bankruptcy with information to allow them to have a better and more complete grasp of the complexity of
bankruptcy so they’ll be more inclined to seek quality legal representation.



                                            T4   DISCLAIMER

The following website has been compiled to provide the public with information which is not intended as legal or
financial advice. No reliance should be placed upon it for making legal, business, tax or other important decisions.
Your reliance upon information and content obtained by you at or through this or any site or downloaded information
owned or managed by Larry Loheit is solely for informational purposes and at your own risk.

Larry Loheit makes no warranties that the information provided by, through or related to this website will be error
free or without defect. In no event shall Larry Loheit be liable for indirect, special, incidental, exemplary, punitive or
consequential damages, as a result of, but not limited to loss or any other similar damages, whether or not foreseeable
and whether or not Larry Loheit has been advised of the possibility of such damages. Larry Loheit assumes no
liability or responsibility for damage or injury to you, other persons or property arising from the use of any
information, idea or instruction contained in the content provided to you through this or any related website.

Larry Loheit makes no commitment to update this site and is not responsible for any linked site or any link contained
in a linked site nor does he warrant the accuracy or completeness of the information, links or other items contained on
this website. Effort has been made to ensure that the information contained is accurate and up-to-date: however, in
our quickly changing environment, that is not always possible. This is a constantly changing area of the law and the
reader should get competent legal advice before taking any action. In fact the main purposes is to provide a general
overview of Chapter 7 and Chapter 13 bankruptcy matters as it is practiced in the Eastern District of California and to
encourage visitors to seek experienced bankruptcy representation.

Visitors and users of this website agree to indemnify, defend and hold harmless Larry Loheit, his agents or successors
and assignees from and against any and all liabilities, claims, demands, actions, damages, cost, and expenses
(including reasonable attorney fees), regardless of outcome, caused by, arising out of, or otherwise sustained as the
result of the use of this website.

Unless otherwise indicated, the information displayed on this site is the property of Larry Loheit and is protected by
copyright laws and is protected by U.S. and international copyrights law, as well as other laws. Any copying,
distribution, modification, transmission or dissemination of the information by any means now known or hereafter
developed, is strictly prohibited without the express prior written permission of Larry Loheit.

[ ] I DON’T ACCEPT



[ ] I HAVE READ, I UNDERSTAND AND I ACCEPT THESE CONDITIONS

                                                                                                                       12
                      T5   21 POINTS OF INTEREST

                REGARDING CHAPTER 13, CHAPTER 7
                  AND BANKRUPTCY ATTORNEYS


A. CHAPTER 7 ELIGIBILITY

   1. A Chapter 7 “Means Test” {T17} must be taken and passed in order to be eligible for Chapter
      7 bankruptcy relief. If the test shows the debtor earns more than California’s ‘Median’ Income
      {T70} and can afford to pay their ‘secured and priority creditors’ in full over a 5 year period
      plus at least 25% or $10,000 ($167.00 per month) towards their non-priority unsecured
      creditors over that same period, they may be denied the availability of Chapter 7 bankruptcy.

B. SPECIAL PROVISIONS IN CHAPTER 13 OF THE BANKRUPTCY CODE

   2. Non-first mortgages no-longer secured by any equity can be removed from their secured
      position against the real estate {Lien Strip G151}. No-longer-secured mortgages become
      unsecured and can therefore be paid less than the balance owed or possibly nothing.
   3. Mortgage delinquency can be cured over a period of up to 60 months.
   4. Mortgage delinquency is commonly paid without the allowance of any interest after the filing
      of the Chapter 13 Petition.
   5. When the value of a vehicle is less than the balance owed and it was purchased more than 910
      days (2½ years) prior to filing, the debt can be treated as partially unsecured {Cramdown
      G77}. This allows the (not-secured) unsecured portion to be paid less than the full balance or
      possibly nothing.
   6. When the value is less than the balance owed on non-vehicle merchandise such as appliances,
      electronics, tools, et cetera, which was purchased more than 365 days prior to filing, the debt
      can be treated as partially unsecured {Cramdown G77}. This allows the (not-secured)
      unsecured portion to be paid less than the full balance or possibly nothing.
   7. Chapter 13 Plans are commonly designed to stretch-out the repayment period of secured
      creditors (or the secured portion of crammed-down secured creditors) over the total length of
      the Plan period (up to 60 months) which reduces the amount needed per month.
   8. It is not uncommon to reduce the contractual rate of interest paid to consumer secured creditors
      through a Chapter 13 Plan.
   9. Chapter 13 Plans commonly eliminates future interest and penalties to income tax obligations
      {T37E16}.


C. CHAPTER 13 CAN OFTEN PROVIDE GREATER RELIEF THAN A CHAPTER 7



                                                                                                   13
         10. Many believe you have to repay all or most of your creditors in full through a Chapter 13 Plan
             of reorganization and that you pay little or nothing through a Chapter 7. Neither accurately
             describes what actually takes place.
         11. It’s not uncommon for debtors to pay less per month through a Chapter 13 ‘Plan’ than what
             they would have paid monthly after a Chapter 7 Bankruptcy.
         12. It’s not uncommon for debtors to pay less in total through a Chapter 13 ‘Plan’ than what they
             would have paid to their creditors after a Chapter 7 Bankruptcy.


   D. BANKRUPTCY ATTORNEYS

         13. Attorneys are paid a much better hourly rate when filing Chapter 7’s as compared to filing
             Chapter 13’s.
         14. Chapter 13 cases and Plans require more knowledge, skill, experience and time as they’re more
             complex and difficult to prepare than Chapter 7’s.
         15. The attorneys’ commitment to the client in a Chapter 13 is 3 to 5 years while it’s only 3 to 5
             months in a Chapter 7.
         16. Because of the above, some bankruptcy attorneys are more inclined to promote Chapter 7’s and
             steer-clear of Chapter 13 whenever possible.
         17. Because of the above, some bankruptcy attorneys actual experience, knowledge and skills in
             preparing Chapter 13 cases and ‘Plans’ is lacking.
         18. Because of the above, Chapter 13 has been slighted and brushed-aside, leading to it not being
             utilized in instances where it would have been more advantageous than a Chapter 7.
         19. Some bankruptcy attorneys provide incompetent or mediocre workmanship when drafting a
             Chapter 13 Plan.
         20. Some bankruptcy attorneys should or actually try to limit their practice to handling simple,
             non-asset or nominal asset Chapter 7 cases.
         21. Because of the above, not all Chapter 7 attorneys file or are capable of skillfully handling
             Chapter 13’s. On the other hand, all attorneys skilled in filing Chapter 13 cases can and do
             regularly and skillfully handle Chapter 7’s.

This is not to say that you will be denied the use of Chapter 7 or that you should file Chapter 13 rather than
Chapter 7. In fact, statistically Chapter 7 is a better alternative than a Chapter 13 in about 80% of all
consumer cases filed.

WHAT I AM SAYING IS:

   1. YOU MAY BE DENIED THE USE OF CHAPTER 7 (T17).

   2. YOU MAY BE BETTER OFF WITH A CHAPTER 13 THAN A CHAPTER 7 (T32).

For these two reasons alone, anyone considering bankruptcy should retain an attorney highly skilled and
experience in Chapter 13 representation. This site will provide you the means to choose one of the best
bankruptcy attorneys who will skillfully represent you in a Chapter 13 or a Chapter 7 case, whichever best
serves your needs {T24}.

                                                                                                           14
                     T6   IT’S A MINE FIELD OUT THERE


Because we try to avoid filing bankruptcy it’s not uncommon for a financial problem to become worse in
our attempts to avoid it. Often the more desperate we become the more open and vulnerable we are to those
who offer ‘solutions’ that aren’t always what they appear. “Solutions” that often make matters worse and
waste money in the process.

It's almost like a cry for help, brings out the wolves wrapped in 'helpers' clothing. The last few years
have been particularly brutal for families experiencing financial problems. Its' also been a spawning ground
for Hucksters and Charlatan’s who prey on people seeking financial relief. The California State Bar and
some governmental agencies have become alarmingly aware of the immensity of the problem. There
investigative efforts are beginning to result in disbarments, fines and prosecutions throughout the country.
Yet, there’s much more that needs to be done.

It's difficult if not downright impossible to know what or with whom you're dealing these days. There
are honest individuals and companies who do their best to do what they advertise, but I can also tell you
there are an unbelievable amount of scams and rip-off artist out there too.

All too often companies who advertise: Mortgage Modifications ~ Handle Your Debts Without Filing
Bankruptcy ~ Eliminate Unsecured Debt ~ Cut you Debt Payments in Half ~ Credit Card Repayment
or Reduction Programs ~ and Settle Tax Debts for Pennies on the Dollar. Many don’t or can’t do what
they advertise, some actually never even try. Many are just good at increasing ‘hope’ and decreasing your
‘savings’.




                                          T7   WHY YOU?

You're not alone in what you're experiencing. About a million people, like yourself, are wrestling
with the possibility of filing personal bankruptcy every year. That’s about one bankruptcy filing every
30 seconds. Understand that bankruptcy is here to help turn your financial life around, it's not here to screw
your life up.

When drafting the U.S. Constitution our Founding Fathers specifically included language that allows
Congress the power to draft laws regarding bankruptcy. They wanted to insure honest citizens would
remain free (no debtor prisons and no involuntary servitude) and have relief from debt so they could once
again become productive citizens (and tax payers). Bankruptcy provides financial relief and financial relief
feels good. Be thankful the bankruptcy process is available. It's not available in many countries.

                                                                                                           15
                                  T8   ‘IT IS WHAT IT IS’

Granted, filing bankruptcy will not be the proudest moment of your life and no doubt it will hinder
your ability to obtain credit for a while. You may have been laid off, lost some income, experienced a
divorce, made a bad investment, been hit with the current economic situation, the housing market, a health
issue or maybe you’ve been the victim of something that was simply unfair or unjust.... unfortunately life
does that sometimes. What defines you is how you handle difficult times and what you do next.

Take comfort in knowing that your financial future is going to be better than what you're currently
experiencing. The process will require some work and the process is a little humiliating. Big deal, you’ll
get over it. It’s a small price to pay for the kind of relief you'll receive. Bottom line is you’re chump-
change in the world of ‘Who’s Who’, of those who have had financial problems or filed bankruptcy. If you
don’t believe it, check out the “WHO’S WHO OF THE WHO FILED BANKRUPTCY AND WHO WENT
BROKE BEFORE BANKRUPTCY LEGISLATION” {T9}.




    T9   WHO'S WHO OF THE WHO FILED BANKRUPTCY
                 AND WHO WENT BROKE
            BEFORE BANKRUPTCY LEGISLATION


While our Founding Fathers specifically provided Congress the power to enact laws regarding bankruptcy,
Congress didn't pass any bankruptcy legislation until the late1800's. Prior to that many Famous Americans
could have been provided much needed relief had bankruptcy been available. Listed here are just a few
names you may recognize:

Abraham Lincoln, 16th U.S. President ~ William Penn, Founder of Pennsylvania ~ Benedict Arnold,
Revolutionary War Traitor ~ Daniel Webster, American Secretary of State ~ Samuel Adams, Signer of
Declaration of Independence ~ Daniel Boone, Frontiersman ~ Thomas Jefferson, 3rd U.S. President ~
Thomas Paine, Revolutionary War Agitator ~ James Wilson, 1st Supreme Court Justice ~ Ulysses S.
Grant, Union Army Leader, U.S. President ~ John James Audubon, Wildlife Painter ~ Charles
Goodyear, Inventor ~ P. T. Barnum, Circus Fame ~

After Congress passed Bankruptcy Legislation, many of our famous and infamous found financial
protection through the bankruptcy process. Here are a few names you may recognize:

                                                                                                       16
Samuel L. Clemens, a.k.a. Mark Twain, Writer ~ Heidi Fleiss, Hollywood Madam ~ John Connally,
Texas Governor & Treasury Secretary ~ George McGovern, U.S. Senator ~ John Wayne Bobbitt,
Severed penis survivor and Porn Star ~ Morton Downey, Jr., TV Talk Show Star ~ E. Howard Hunt,
Watergate Plumber ~ Larry King, TV Talk Show Host ~ Anna Nicole Smith, Supermodel ~ Toni
Braxton, R&B Superstar ~ Anita Bryant, Anti-Gay Activist ~ Luther Campbell, Rap Star ~ David
Crosby, Rock Superstar ~ Mick Fleetwood, Lead Singer Fleetwood Mac ~ Marvin Gaye, Singer ~ Andy
Gibb, Rock Star ~ Merle Haggard, Country Singer ~ MC Hammer, Rapper ~ Isaac Hayes, Superstar ~
Latoya Jackson, Singing Star ~ Cindy Lauper, Rock Star ~ Jerry Lee Lewis, Superstar ~ Meat Loaf,
Superstar ~ Willie Nelson, Superstar ~ Wayne Newton, Superstar ~ Tom Petty, Rock Star ~ Tammy
Wynette, Superstar ~ Run DMC, Rap Group ~ Kim Basinger, Actress ~ Gary Busey, Actor ~ Gary
Coleman, Actor ~ Doris Day, Actress ~ Redd Foxx, Comedian ~ Zsa Zsa Gabor, TV Personality ~ Judy
Garland, Movie Star ~ Grace Jones, Singer-Actress ~ Buster Keaton, Comic ~ Peter Lawford, Actor ~
Jerry Lewis, Movie Star ~ Randy Quaid, Actor ~ Burt Reynolds, Movie Star ~ Debbie Reynolds, Movie
Star ~ Mickey Rooney, Movie Star ~ Rollie Fingers, Baseball Star ~ Joe Lewis, Boxer ~ Leon Spinks,
Boxer ~ Johnny Unitas, Football Star ~ Melvin Belli, Lawyer ~ Francis Ford Coppola, Director ~ Walt
Disney, Founder of Disney Co. ~ Paulo Gucci, Fashion Mogul ~ H. J. Heinz, Heinz Co. ~ James McNeill
Whistler, Painted Whistler’s Mother



             ‘A PERSONS LEGACY IS NOT BASED ON THEIR FINANCIAL PROBLEMS’




                          ALTERNATIVES TO FINANCIAL PROBLEMS


       T10   ALTERNATIVES TO RESOLVING FINANCIAL
                         PROBLEMS
                    INCOME ~ EXPENSES ~ ASSETS ~ LIABILITIES

Income (T9A) ~ Can you increase your income? Are you overdue for a raise? Is it possible to take on a
second job? Is overtime available? Can you supplement your income with part-time work? Can you earn a
little extra money with a hobby, a talent, some skill or some experience you have? Would a change of
employment improve your earning capacity? Would additional education provide the skills or certification
needed to improve your earning capacity?


                                                                                                     17
Expenses (T9B) ~ Can you decrease your expenses? Re-evaluate your budget! Track your spending for a
month or two to see what you’re actually spending. Is it possible to reduce fuel expenses? Plan your
driving to reduce your miles… car-pool with co-workers or neighbors… public transportation… alternate
driving responsibilities with other parents for your childrens’ transportation needs. Grocery store items can
usually be reduced, watch for sales, coupons, bartering, split-up bulk buying discounts with friends and
family. Brown Bag your lunch, avoid vending machines, fast foods and dining out by preparing less
expensive and healthier meals at home.

Take a fresh look at your electric/onic cost… is there savings available by changing or bungling TV,
Internet, Cell and Home Phone services? Do you really need all those premium channels? Do you actually
need a Home Phone? Do you actually need all those features on your cell phone? Take a fresh look at your
insurance coverage… and while you’re there, ask yourself if you really need all of your vehicles including
recreational vehicles. Based on your current financial situation, is this what’s best? Is it a necessity, a
convenience or a luxury? Clothing and cleaning… is it really necessary to make those purchases and if
so… could you do a better job shopping? Compare shop and use the internet to save as well. Only shop
during major sales. For starters, buy clothing that doesn’t require dry cleaning. Shopping at consignment
stores not only saves money, its’ fun and you can trade-in some of your unwanted clothing too.

Search the internet or go to the library to discover other ways to reduce your living expenses. You’ll likely
be surprised by what you can do without any pain or suffering. In fact you may actually enjoy it by turning
your ‘economizing’ into a challenge or a game.

Use cash when making purchases, it hurts more and makes you actually think about the ‘need’ versus the
‘want’ factor and it helps you avoid ‘impulse’ buying too. Just before you pull your cart into the checkout
line review your purchases to consider; needs – wants – value/cost. We’re all in the ‘Immediate
Gratification’ mode, realize ‘that’ and try to use that understanding to help put that proclivity in check to
some degree.

Using credit cards is like using poker chips in a casino. It’s not real money so you don’t give it as much
respect as you do cash. USE CASH it’s more difficult to part with.

Keep track of your expenditure for a couple of months and review them to see what you’ve been spending
with the goal of improving your spending habits and reducing your expenses.

Assets (T9C) ~ Are you paying for storage? Do you have too much ‘stuff’? Do you have anything you don’t
owe on or that actually has equity that you can sell to create cash and reduce expenses that you truly don’t
need or won’t miss? Is it time to have a garage sale or rent a space at a flea-market? Can you sell some of
your ‘stuff’ on EBay or Craigslist? Putting some attention on reducing your ‘stuff’ while creating a little
extra cash not only simplifies your life it occupies your time. You might even save on storage expenses or,
who knows, maybe you’ll actually be able to put a car in your garage.

Liabilities (T9D) ~ There’s a limited number of alternatives to consider when addressing debts. They’re
pretty much limited to ‘consolidation loans’, ‘refinancing’, ‘negotiating with creditors’, ‘credit counseling
agencies’, ‘offers in compromise’ or dealing with your creditors as best as you can.


                                                                                                          18
A. Consolidation Loans (T9D1) are often used to reduce the number of outstanding debts. This usually
   reduces the amount paid-out monthly because it stretches out the repayment period. Pay attention to
   any change in the rate of interest as well, so be careful. Might be a good idea, might not be. The
   “might not be” is not only when the interest rate increases, it’s when an unsecured dischargeable
   credit card debt or some other personal obligation gets consolidated into a secured debt. Usually
   consolidation loans are secured by a mortgage on real estate or personal property. If the
   consolidation loan ‘solves’ the problem it would seem to be an ‘okay’ move. If a consolidation
   loan doesn’t really ‘solve’ the whole problem and ultimately a bankruptcy is needed some time
   later, the unsecured debt you could have discharged in a bankruptcy has been changed into a
   secured obligation which you must continue to pay after bankruptcy to avoid the loss of the
   pledged security.

   NOTE: THIS IS A BIG PROBLEM. MANY HAVE BORROWED AGAINST THEIR HOME OR
   A VEHICLE TO PAY OFF HIGH INTEREST CREDIT CARDS. NOW THEY CAN’T AFFORD
   THE MORTGAGE PAYMENT AND HAVE LITTLE IN THE WAY OF UNSECURED
   DISCHARGEABLE DEBT.      UNFORTUNATELY BANKRUPTCY WILL NO LONGER
   PROVIDE THE RELIEF NEEDED AND THEY OWE MORE ON THE SECURITY PLEDGED
   THAN IT’S WORTH. A MAJOR SCREW-UP.

B. Refinancing Existing Debt (T9D2) is often used to reduce some of the financial pressure.
   Refinancing simply rewrites an existing loan so as to extend the repayment period thereby reducing
   the monthly payment. Often the ‘refinancing’ will include borrowing an additional amount with the
   intent of paying down or paying off some other (usually high interest unsecured debt). Again,
   converting an unsecured dischargeable debt into a collateralized secured debt isn’t always the wisest
   course of action unless it SOLVES the debt problem. See the NOTE in “A” above. Also remember
   to keep the interest rate as low as possible.

C. Borrowing from your Retirement (T9D3) may be attractive but it’s really risky. Again the decision
   is whether borrowing actually resolves the financial problem or only puts the problem off for a
   while. You can’t borrow your way out of debt. You can only restructure your debts in the hope of
   being able to better handle them. Borrowing against your retirement puts you at risk two ways. One
   is if you use the money to pay unsecured obligations you’re back to paying off dischargeable debt
   with obligations you’ll have to pay regardless of any future bankruptcy proceedings. Secondly, in
   borrowing from your retirement you’ve put your retirement at risk and if you find yourself in a
   position of having to allow the retirement loan to be paid off by off-setting the loan with the
   retirement funds, you’ll have a tax issue since your previously deferred income was used to pay debt.

D. Negotiate with your creditors. (T9D4) Once you begin experiencing financial problems and you
   become delinquent with creditors for an extending period of time, they’ll be more willing to work
   towards a mutual resolution. Often creditors will offer temporary reductions in payments, wave
   some fees and charges, adjust the rate of interest or offer to settle for less than the full amount due.
   It depends on the company policy and the current status of the account. Ultimately unsecured
   creditors will settle for less than half of the entire debt in order to avoid having to charge the debt off
   and turning it over to a collection company or selling the account at a huge discount. The closer they
   get to that point, the more receptive they become to agreeing to a cash settlement. Understand that

                                                                                                           19
   any reduction of debt may create a taxable event as the savings (amount discounted) may become an
   addition to your taxable income. Also understand that creditors are not going to be too receptive to
   cash settlement negotiations until the account is seriously delinquent, likely at least 6 to 9 months
   without any payment.

E. Credit Counseling Agencies (T9D5) may be able to help, particularly when the financial problem
   hasn’t gotten too out-of-control. Easy credit in the past has created a society which the credit
   industry has allowed anyone to overextend their ability to repay. As a result of loose credit, the
   proportionate amount an individual owes to unsecured credit card debt has risen astronomically.
   Today the amount owed to Credit Card debt by the typical consumer experiencing financial
   problems makes it almost impossible for a credit counseling agency to ‘solve’ an individual’s
   financial problem. Also beware there are many scams out there too. If you’re considering
   contacting a Credit Counseling Agency I would suggest you either try one who is a U.S. Trustee
   authorized Credit Counseling Agency {UST} or try www.nfcc.org. They have a national database
   of credit counselors that may assist you in finding a counselor that meets your standards.

F. Offers in Compromise (T9D6) or settling debts for less than the total amount owed. There are a
   couple of issues here that need to be understood. One is that if you’re looking to avoid filing
   bankruptcy because you don’t want to ruin your credit… this isn’t gonna do it. If you have the
   creditors in a position of being willing to negotiate for less than the full amount due, your
   credit is already seriously screwed-up.

   Secondly, having that bad of a credit history while not having used-up your right to file bankruptcy
   isn’t very comforting to any future credit grantor. Putting it another way… if you didn’t use-up your
   availability or right to file bankruptcy (because you were able to avoid filing) and your credit rating
   is showing you have; past delinquencies, write-off’s and settlements… your credit picture ain’t
   pretty, so don’t expect open doors and friendly faces!

   Lastly, you may have a tax consequence for the amount ‘forgiven’ by the creditor who accepted less
   than the full amount due as settlement of the entire debt. Unlike debts discharged in bankruptcy
   (debts discharged in bankruptcy are not a taxable event), the amount you ‘saved’ may become a
   taxable event. You’ll likely receive a 1099 ‘C’ from the creditor and you may have to pay income
   taxes on the amount discounted.




                                                                                                       20
                     T11   WHAT CHAPTERS ARE THERE?

When people discuss bankruptcy they toss around what they know about Chapters 7, 11 and 13. Where are
the rest of the chapters? When The United State Bankruptcy Code was passed by Congress in 1978 to
replace the Bankruptcy Act, it was written only using odd numbered chapters.

This was done to allow the insertion of additional chapters should Congress pass future bankruptcy
legislation that would be best inserted into the existing Bankruptcy Code. Therefore, in 1978 the
Bankruptcy Code consisted of Chapters 1,3,5,7,9,11 & 13. Congress added Chapters 12 & 15 to the
Bankruptcy Code in 2005.

The first three Chapters of the Bankruptcy Code are technical chapters and do not describe the type of relief
sought by a petitioning entity. Chapter 1 addresses the “General Provisions” of the Bankruptcy Code.
Chapter 3 goes over the “Case Administration’ while Chapter 5 covers “Creditors, the Debtor and the
Estate”. All other chapters refer to the type of bankruptcy being filed or sought by the Petitioner. Chapter
7 refers to “Liquidation” bankruptcy. There is no proposed ‘reorganization’ of the Petitioners financial
affairs. Chapters 9, 11, 12 and 13 are all “Reorganization Chapters”.

You can see that Chapter 12 is the only even numbered chapter. That’s because Chapter 12 was a blend of
Chapter 11 and Chapter 13 and was added by Congress in 2005. Chapter 15 was also added in 2005, but it
followed the prior practice of odd numbers to allow the insertion of future legislation that may be similar to
Chapter 15.




                                         T11ACHAPTER 7


                            LIQUIDATION BANKRUPTCY

Chapter 7 is what's referred to as "Liquidation Bankruptcy", “Credit Card Bankruptcy”, "Regular
Bankruptcy" or "Straight Bankruptcy". Chapter 7 is the only Chapter that does not include the
concept of proposing a ‘reorganization’ of the financial affairs of the Petitioning entity. There is no
reorganization. The estate of the filing entity is ‘liquidated’. There is no 'Plan' proposing to pay something
to the creditors over an extended period of time.



                                                                                                           21
Chapter 7 Bankruptcy is where an individual or the entity filing the Bankruptcy Petition list all ‘Assets’ and
the list of allowed ‘Exemptions’ regarding those assets. The Bankruptcy Trustee reviews the Bankruptcy
Petition, the Schedules, the Statement of Financial Affairs including other required documents and evidence
and examines the Petitioner at an official Meeting of Creditors, regarding the estate. The intent of the
Chapter 7 Trustee who conducts the 341 Meeting of Creditors is to find preferential payments, avoidable
transfers and non-exempt assets and reduce them to cash to pay a dividend to priority and unsecured
creditors who have filed claims in the bankruptcy estate.




                                         T11B  CHAPTER 9


       THE ADJUSTMENT OF DEBTS OF A MUNICIPALITY


Chapter 9 is the reorganization of Municipalities such as counties, cities, utility companies, et cetera. Think
of PG&E or the city of Vallejo. If you think you may be eligible for filing a Chapter 9, you’ve got a serious
problem if you think this web site is going to provide you with helpful information regarding the financial
problems of your Municipality or your Utility Company.




                                        T11CCHAPTER 11


           BUSINESS “REORGANIZATION” BANKRUPTCY


Approximately 1% of all bankruptcy filings are Business Bankruptcy reorganization cases. A
Business Bankruptcy Reorganization would be a Chapter 11. Chapter 11 is used by entities and individuals
who intend to reorganize the financial affairs of the petitioning entity or the individual.

Chapter 11 is most always used by Corporations, LLC’s or any other ‘stand-alone’ entity that doesn’t fall
into the perimeters of Chapter 9, 12 or 15. Corporations, LLC’s and other ‘stand-alone’ entities cannot file
                                                                                                            22
Chapter 13, however individuals can file Chapter 11 Bankruptcy. The complexities and expense of a
Chapter 11 is much more extensive than a Bankruptcy Reorganization via a Chapter 13. That’s why most
all individuals who file a Chapter 11 only turn to Chapter 11 because they exceed the statutory maximum
amount that can be owed in a Chapter 13.

The maximum that can be owed by those seeking relief through a Chapter 13 filing must be no more than
$1,081,400 in secured obligations and no more than $360,475 in unsecured debt (as of April 2012). The
ceiling is adjusted every few years so if you’re close, check with a bankruptcy attorney to see if you can
reorganize your financial affairs using Chapter 13 or if you must file a Chapter 11.




                                      T11DCHAPTER 12


      ADJUSTMENT OF DEBTS OF A FAMILY FARMER OR
       FISHERMAN WITH REGULAR ANNUAL INCOME


Chapter 12 is the reorganization of a Small Family Farmer or Fisherman. If you think you may qualify
as a Small Family Farmer or Family Fisherman you'll want to find an attorney who has filed a couple of
Chapter 12's. Chapter 12 is fairly specialized but if you think you might qualify, you should seriously
look into it because it may be extremely beneficial.

Depending on the circumstances it could be much more fruitful than a Chapter 7, 11 or 13. Only a few
Consumer Bankruptcy Attorneys who regularly file Chapter 7's and 13's have any experience with Chapter
12's. If you can find a Consumer Bankruptcy Attorney who has filed a couple of Chapter 12's it will be
much less expensive than going to the more expensive major laws firms who specialize in Chapter 11's.
Chapter 12, procedure wise, most closely resembles a Chapter 13, however, there are a few special
provisions that can make Chapter 12 much more beneficial.




                                                                                                       23
                                       T11ECHAPTER 13


       ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH
                   REGULAR INCOME


Chapter 13 is for individuals who want to repay all or a portion of their debt over a period of time, not to
exceed 5 years. Before the Bankruptcy Code of 1978, there was the Bankruptcy Act. Chapter XIII under
the ‘Act’ was known as the “Wage Earner Plan” because it was limited to and for ‘Wage Earners’. When
Congress replaced the Bankruptcy Act with the Bankruptcy Code in 1978 they wanted to be sure individuals
who may not be ‘Wage Earners’ would not be prohibited from filing Chapter 13. This would include
individuals who are self-employed. As long as the business operated by the individual was not a
Corporation, an LLC, or any other separate ‘stand-alone’ entity which has its own taxpaying identification
number. The Chapter 13 debtor must also have ‘regular’ income from which a ‘Plan’ of reorganization can
be funded.

Basically Chapter 13 as it is generally used today, is the repayment of non-dischargeable taxes and
delinquent domestic support obligations a debtor can’t wipe-out in a Chapter 7, plus the amount owed to
secured creditors in which the debtor wants to retain the collateral including mortgage delinquency. Those
‘factors’ when compared to what is remaining as a ‘Margin’ when comparing the ‘Net Income’ to the most
‘liberal budget’ that doesn’t draw an objection, is what determines the Chapter 13 Plan Payment. Most all
Plans require a repayment period of 3 to 5 years and most all ‘Plans’ propose to pay less than the full
amount due to unsecured creditors. Sounds a little cynical but more often than not, that is what it is. And
that really isn’t so bad as long as it helps an honest debtor who’s experiencing financial problems support
themselves and their dependents while allowing them to receive a ‘fresh start’ as long as they’re complying
with the Bankruptcy Code.

Individuals seeking relief through the use of Chapter 13 cannot owe secured debt in excess of $1,081,400
while the unsecured debts cannot exceed $360,475.




                                                                                                         24
                                       T11FCHAPTER 15


        ANCILLARY AND OTHER CROSS-BORDER CASES

Chapter 15 was added to the Bankruptcy Code in 2005 to provide a provision in the Code to assist
businesses who operate beyond the borders of the United States. If you think you may qualify as an entity
who should consider filing Chapter 15 and you think this web site will guide you in reorganizing your cross-
border business you’re either using too much of what you’ve been crossing the border or you should be
consulting with a ‘Big City’ Bankruptcy Law Firm whose practice emphasizes Chapter 11. Briefly stated,
you should have your team of attorneys consulting with those ‘Big Law Firms’ who specialize in Chapter 11
separate tax entity bankruptcies.




        T12   99% OF ALL BANKRUPTCIES ARE FILED BY
              CONSUMERS ~ CHAPTER 13 & CHAPTER 7


Approximately 99% of all bankruptcy filings are individuals... "Consumer Cases". Consumer cases
are made up of individuals who receive regular income from: salary, wages, commissions, retirement,
pensions, disability, unemployment, social security or income from a small proprietary business (not a
separate tax ID entity such as a Corporation or an LLC). If you fall into the 99% category, you'll want to
hire an attorney who specializes in Consumer Bankruptcy Law. Consumer Bankruptcy is limited to
Chapter 7 and Chapter 13 and maybe Chapter 12 (Small Family Farmers and Fishermen).

Nationally, Chapter 7 filings alone represent about 80% of all bankruptcy filings while Chapter 13
represents about 19%. The other 1% consist of specialized Bankruptcy Chapters 9, 11 and 12 and then
Chapter 15.




                                                                                                         25
           T13   IS BANKRUPTCY THE RIGHT SOLUTION?


What may be the best answer for one set of circumstances may be the worst possible course of action in a
different set of circumstances. So why did I pose this question if I can’t provide an appropriate answer?
For starters, you’re unlikely to find one person or business who’s capable of giving you a professional
opinion regarding all of the alternatives you may have available. Only a professional ‘Credit Counselor’
will be able to let you know if a Credit Counseling program will solve your problem. Only a ‘Lender’ will
be able to let you know if a loan, refinancing or mortgage modification is possible or if it would help solve
your problem. Only a bankruptcy attorney will be able to give you answers regarding bankruptcy. It’s also
likely you’ll receive a variety of professional opinions from the various ‘Lenders’, ‘Credit Counselors’ or
‘Bankruptcy Lawyers’ you consult.

Many attorneys will tell you that Chapter 7 will solve your problems or that Chapter 13 is or is not a good
alternative for you. In regard to bankruptcy, each case needs to be analyzed by looking into the income,
expenses, assets, liabilities, exemptions, equities, past income – financial activities during the past few years
and certainly during the last six months as well as future intentions… all of this should be taken into
consideration before coming to any final conclusion.. There may be a couple of major factors that will
‘lead’ an attorney to believe that a Chapter 7 or a Chapter 13 will be the ‘likely’ choice. But the final choice
must take everything into consideration including the Chapter 7 Means Test and the Chapter 13 Means Test
if necessary. So, if the attorney gives you a quick answer…. you may want to make a quick exit!

When an attorney who is a Consumer Bankruptcy Specialist reviews these factors, then and only then can
anyone know if bankruptcy is the right tool or not. When all of the Schedules, Statement of Financial
Affairs, supporting documents, the Means Test and other information gathered in preparation for a
bankruptcy filing, will it be ultimately known as to what is available and what’s the best alternative…
Chapter 7 or Chapter 13.

This is why it’s important to know some of the basic differences between Chapter 13 and Chapter 7
bankruptcy before retaining a bankruptcy attorney. This is also why IT’S IMPORTANT TO FIND AN
ATTORNEY WHO SKILLFULLY FILES BOTH CHAPTER 13 AND CHAPTER 7 ‘WITHOUT’
ANY BIAS OR FAVORTISM… BEFORE RETAINING AN ATTORNEY.

If someone tells you bankruptcy is the best tool or that Chapter 7 or a Chapter 13 is the best for you, don’t
put too much value on the advice when it isn’t based on an ‘informed’ opinion. An opinion that comes from
a ‘consumer bankruptcy specialist’ who regularly files Chapter 13 and Chapter 7 whichever best addresses
the debtor’s particular financial situation, but then only after they’ve reviewed most if not all of your
financial details.




                                                                                                              26
                   T14   BANKRUPTCY CHANGED IN 2005

In 2005 the Bankruptcy Code was amended. Congress wanted to implement a method to discourage
individuals from using Chapter 7 Bankruptcy if they could actually afford to repay a significant
portion (25%) of their non-priority unsecured debt. Even if it would be necessary to file a Chapter 13
in order to do so.

As a result of these changes it’s necessary to go through a couple of review processes to determine
eligibility and to insure there’s a need to file any form of bankruptcy, particularly a Chapter 7 bankruptcy.
If a debtor’s denied the use of Chapter 7 and consequently chooses to file a Chapter 13, the ‘system’ also
wants to make sure the Chapter 13 Plan proposes to properly provide for creditors. Creditors don’t have to
be paid in full through a Chapter 13 Plan, but there is a methodology employed to insure they’re treated
fairly {T37E}.



                   STEP ONE ~ THE CREDIT COUNSELOR PROCESS



So, lets’ start off with what the ‘system’ requires debtors to do. Even before filing a Bankruptcy Petition a
debtor must become ‘eligible’ to file a Chapter 7 or a Chapter 13. The first threshold of eligibility is
obtained by having the debtors financial affairs reviewed by a U.S. Trustee approved “Credit Counseling
Agency”. Their purpose is to determine if the services of a ‘Credit Counselor’ would enable the debtor to
avoid bankruptcy altogether. If it’s determined they cannot assist the debtor with their financial problem,
they’ll provide a Certificate Identification Number confirming they have gone through the process. This
‘Certificate’ and it’s control number confirms the debtors’ compliance with this ‘pre-filing’ requirement.



                         STEP TWO ~ THE CHAPTER 7 MEANS TEST

                                                 LEVEL I



The second step required at the direction of Congress to deter abusive/unnecessary Chapter 7 filings is the
Chapter 7 ‘Means Test’. This is intended to prevent debtors who can afford to pay all or a significant
portion of their non-priority unsecured debt from being able to receive the benefits of a Chapter 7
Bankruptcy.



                                                                                                          27
If the Chapter 7 Means Test shows a debtors’ income is less than California’s ‘Median’ Income {T70},
there is no prohibition to filing a Chapter 7 bankruptcy. If the income is more than California’s ‘Median’
income, there is a ‘presumption’ the debtor can afford to at least pay a significant portion of their non-
priority unsecured debt and therefore should be denied the benefits of a Chapter 7 bankruptcy discharge.


                                                LEVEL II


What’s interpreted as a ‘Significant Portion’ is when the Chapter 7 Means Test results of an over ‘Median’
income debtor there’s a ‘presumption’ the debtor has the ability to repay there consumer ‘Secured and
Priority’ creditors in full over a 5 year period plus pay at least 25% or $10,000 to their non-priority
unsecured debt over that same 5 years (that’s $167.00 per month). Unless the basis for this ‘presumption’
can be successfully invalidated, Chapter 7 may not be an option.

If the debtor is denied access to the benefits of a Chapter 7 they may look to Chapter 13 as an alternative.
When people think of Chapter 13 their most immediate reaction is negative. That’s because most people
think Chapter 7 is where you pay little if anything to your creditors and Chapter 13 is where you repay your
creditors over an extended period of time. NEITHER IS REALLY VERY ACCURATE.



                                   CHAPTER 7 V/S CHAPTER 13

It’s not unusual that in proper legal hands, a Chapter 13 filing can provide better results than a Chapter 7.
The filing of a Chapter 13 can often allow a debtor to pay less per month than what they would be paying
monthly to creditors who would have remained after a Chapter 7 discharge. It also should be pointed out
that the proper use of Chapter 13 can often allow a debtor to pay less in total than what they would have
paid to the creditors who would have remained after a Chapter 7 discharge {T32}.




              THE SINGLE MOST IMPORTANT DECISION
         AN INDIVIDUAL MAKES REGARDING BANKRUPTCY….
                  IS CHOOSING THEIR ATTORNEY

While the initial appointment with a bankruptcy attorney can be very informative, an actual thorough
analysis of whether; bankruptcy is available, whether Chapter 7 is an option or if a Chapter 13 may be a
better alternative may be speculative. In order to provide an accurate analysis a great deal of financial
information must be gathered and analyzed from a Chapter 7 and Chapter 13 perspective. There may be
some presumptions or educated guesses as to what the debtors options may be based on information
                                                                                                          28
gathered during the initial consultation. However there is often no absolute certainty if either or both
Chapter 7 or Chapter 13 is available and which would provide the best financial relief until more detailed
information is analyzed. Therefore they’ll need to retain the attorney. Once the retainer is paid, you’ve
hired the attorney… for better or for worse. You’ve also just hired an attorney before you even know if a
Chapter 7 is available.

Have you just hired an attorney who can skillfully analyze when a Chapter 13 would be more beneficial
than a Chapter 7? Have you hired an attorney who has a vast amount of experience in filing Chapter 13
Plans should Chapter 7 not be available or if a Chapter 13 would be more advantageous? Did you hire an
attorney who would prefer to avoid Chapter 13 whenever possible? Is this attorney familiar and up-to-date
with the ever-changing practice of Chapter 13 matters so a comparative analysis can be made {T32}?

Does this attorney have experience and ‘know-how’ that’s sufficient to take the greatest advantage of the
Bankruptcy Code when addressing your specific financial situation?

The odds are you’ll file a Chapter 7 since 80% of consumer bankruptcy cases are Chapter 7. However,
there is a 20% chance you’ll end-up in a Chapter 13 either because it provides better results or because
Chapter 7 was not an available alternative.

Even attorneys who pride themselves of designing and gaining approval of creative Chapter 13 Plans have a
bankruptcy practice that reflects about 75% of their bankruptcy cases are Chapter 7’s. So it’s not as though
a Chapter 13 specialist doesn’t know how to handle a Chapter 7. Seventy-five percent of their bankruptcy
experience is in representing Chapter 7 cases. The problem is not all Chapter 7 attorneys know how to
handle or skillfully put together a Chapter 13 case.

When you make the effort to find an attorney who’s a skilled specialist in both Chapter 13 and
Chapter 7, who doesn’t favor one chapter over another, before you pay a retainer, you may well be
eliminating a multitude of problems. That’s also why I want to show you how (not tell you who) to find
local attorneys who can skillfully represent their clients in Chapter 13’s and Chapter 7’s. Attorneys who
know which chapter best serves their client’s needs, attorneys who will explain how and why they came to
that conclusion, an attorney who doesn’t have any back-off on filing Chapter 13 cases and most importantly
an attorney who can creatively take advantage of the special provisions afforded Chapter 13 of the
Bankruptcy Code (T24).




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                                               ELIGIBILITY

          AM I ELIGIBLE TO FILE BANKRUPTCY?

                                T15   ELIGIBILITY TEST # 1

           HAS THERE BEEN A PRIOR BANKRUPTCY?
A prior discharge in an earlier filing of bankruptcy may be a prohibition from being eligible to
receive the discharge benefits of a subsequent bankruptcy.

Filing Chapter 7 after having filed a Chapter 7. When a prior Chapter 7 filing resulted in a discharge of
debt, a subsequent filing of another Chapter 7 within 8 years of the prior Chapter 7 filing would be a bar to
receiving a discharge. Therefore the subsequent or more recent Chapter 7 filing would not be allowed to
proceed towards a discharge in a Chapter 7. Whether you received a ‘discharge’ in the earlier filing is what
determines eligibility. It’s the filing date that’s used to determine the time period. Filing date to filing date.

Filing Chapter 13 after having filed a Chapter 7. When a prior Chapter 7 filing resulted in a discharge of
debt, a subsequent filing of a Chapter 13 within 4 years of the earlier Chapter 7’s filing would be a bar to
receiving a discharge in the subsequent Chapter 13 filing. Filing date to filing date.

NOTE: You will not be prohibited from filing a Chapter 13 in fewer than 4 years… you will not, however,
be entitled to a discharge at the conclusion of the more recent Chapter 13 case.

Filing Chapter 13 after having filed a Chapter 13. When a prior Chapter 13 filing resulted in a discharge
of debt, a subsequent filing of a Chapter 13 within 2 years of the earlier Chapter 13’s filing would be a bar
to receiving a discharge in the subsequent Chapter 13. Filing date to filing date.

NOTE: I don’t know how this applies since it most always takes a minimum of 3 years and often 5 years to
complete a Chapter 13 Plan of Reorganization. That being the case, it would be difficult (if not impossible)
to have a situation where filing a Chapter 13 would be any bar to filing a subsequent Chapter 13. I must be
missing something here!

Filing Chapter 7 after having filed a Chapter 13. When a prior Chapter 13 filing resulted in a discharge
of debt, a subsequent filing of a Chapter 7 within 6 years of the earlier Chapter 13’s filing would be a bar to
receiving a discharge in the subsequent Chapter 7 filing, unless the Chapter 13 Plan was the petitioners Best
Effort {T37D5}, was filed in Good Faith {T37D4} and paid no less than 70% of the allowed unsecured
claims
                                                                                                               30
                                 T16   ELIGIBILITY TEST #2

    U.S. TRUSTEE PRE-FILING CREDIT COUNSELING
                   REQUIREMENT
            CAN YOUR FINANCIAL PROBLEM BE HANDLED BY A CREDIT COUNSELOR?

A Credit Counseling Certificate verifying that a U.S. Trustee approved Credit Counseling Agency
reviewed your financial affairs ‘before filing bankruptcy’ is required before being eligible to file a
consumer bankruptcy case. This is one of the processes Congress implemented in its’ attempt to insure
bankruptcy would not be used unnecessarily. Congress wanted to make it so any consumer who wanted to
file bankruptcy must first prove they would not be able to handle their debts without resorting to Chapter 7
or Chapter 13. From that perspective the Credit Counseling Program was born. The Certificate confirming
this prerequisite has been complied must be dated prior to filing bankruptcy and the Certificate must have
been dated no more than 6 months prior to filing bankruptcy.

A Credit Counseling Certificate should be filed with the Bankruptcy Court Clerk when the Bankruptcy
Petition is filed. Showing compliance is most always required. There are a few exceptions such as
handicapped individuals or Military personnel. Check with a bankruptcy specialist if this may be an issue.
The intent behind this process was to have a U.S. Trustee approved Credit Counseling Agency analyze an
individual’s financial affairs. This is done to determine if a consumer seeking relief though a bankruptcy
filing, were to receive the benefits of filing, would such a filing be an unnecessary or abusive use of the
provisions of bankruptcy. The Credit Counseling Agencies purpose is to weed-out debtors who can handle
their financial affairs without the need to resort to a bankruptcy filing.

The Credit Counseling process, with all of its well-intended purposes, has affected very few filers. Most all
(if not literally all) debtors desiring to gain financial relief through a Bankruptcy have not been barred from
filing as a result of this process. Personally I have no knowledge of any single individual ever having been
barred from filing bankruptcy as a result of the Credit Counseling prerequisite.

However, the Credit Counseling program remains a process every consumer must comply in order to
become eligible to file Chapter 7 or Chapter 13. Most often the Credit Counseling Certificate process is
done after a debtor has retained a bankruptcy attorney. Many attorneys actually pay the authorized Credit
Counseling Agencies from the retainer fees paid by their client. The attorney directs their clients to an
authorized agency with whom they have a working relationship. If the agency chosen by the attorney
‘denies’ certification of an attorneys client and effectively bars their client from filing bankruptcy, it’s likely
the attorney would choose another agency from the U. S. Trustees’ approved list to refer future clients.




                                                                                                                31
                             T17   ELIGIBILITY TEST # 3

                      THE CHAPTER 7 ‘MEANS TEST’
           DO THE RESULTS OF THIS TEST SHOW A NEED
                FOR CHAPTER “7” BANKRUPTCY?
The Chapter 7 ‘Means Test’ Form 22 ‘A’ must be taken by individuals seeking a bankruptcy discharge
through the filing of a Chapter 7 Bankruptcy. The Chapter 7 ‘Means Test’ is required to allow the
‘system’ to analyze the debtors financial situation to determine if an individual has the ‘means’ to
avoid Chapter 7 because they can repay all or a significant portion of their non-priority unsecured
debt.

The idea is that to allow a debtor a discharge in a Chapter 7 when they could actually repay a significant
portion of their non-priority unsecured debt without resorting to filing a Chapter 7 (even if such avoidance
required the use of Chapter 13) would be an abuse of a Chapter 7 Bankruptcy. That’s why the results of the
‘Means Test’ can become a bar to the filing of Chapter 7 Bankruptcy.

In 2005 Congress passed Bankruptcy Legislation (* BAPCPA) which was in-part intended to inhibit
consumer debtors who earn more than their states ‘Median’ income from being able to file or receive the
benefits of a Chapter 7 Bankruptcy. A debtor must enter their income and expense information on the
Chapter 7 'Means Test' Form 22A and make calculations using the information provided. Following the
forms instructions the debtor uses a combination of their own personal financial records and data available
from the Census Bureau and the IRS. In the first part of the ‘Means Test’ the debtor simply follows the
instructions to calculate their average monthly income based on their prior six months income. That
average monthly income is then used to determine if the petitioner earns more or less than California’s
"Median" income {T70B}.

NOTE: There are specific inclusions and exclusions in completing Form 22 A as to what should and should
not be including when calculating the income.

After completing Part I, II & III of the ‘Means Test’, the debtor is able to compare their annual income to
their states 'Median' income. If their income is less than, or equal to, their states ‘Median’ income, they're
eligible to file Chapter 7 Bankruptcy and don't need to complete the remaining six pages of the Chapter 7
‘Means Test’ Form 22A.

It should be noted here however, that although the Means Test may have shown eligibility for Chapter 7
Bankruptcy relief, the Chapter 7 Trustee may, after review of the Schedule 'I' of Income and the Schedule 'J'
of Expenses, believe that the petitioner can actually afford to pay a significant portion of their unsecured
debt… in spite of the Means Test results. If such a determination is made, the Chapter 7 Trustee may bring
the basis for that opinion to the attention of the U.S. Trustee or the court in an effort to have the Chapter 7
either dismissed or converted to a Chapter 13 {T18}.
                                                                                                            32
If the petitioner’s income is more than the ‘Median’ income for California {T70B} there is a ‘presumption’
they can afford to repay all or a significant portion of their non-priority unsecured debt. Above ‘Median’
debtors must complete the remaining portion of the Means Test to determine if a secondary presumption
regarding their ability to repay a significant portion of their non-priority unsecured debt still remains. If
after completing the entire form it shows the debtor cannot afford to repay a significant portion of their non-
priority unsecured creditors they should be free to file Chapter 7 Bankruptcy.

If after completion of the entire Form 22 A the results shows that the debtor can afford to repay their
consumer secured and priority creditors in full over a period of 5 years plus pay 25% or $10,000 [$166.67
monthly] to their non-priority unsecured debt over the same five year period, the Chapter 7 Trustee or the
U.S. Trustee will likely take steps to either dismiss the Chapter 7 Bankruptcy or possibly give the debtor the
opportunity to convert the Chapter 7 to a Chapter 13.

* BAPCPA 'The Bankruptcy Abuse, Prevention & Consumer Protection Act of 2005'




                               T18   ELIGIBILITY TEST # 4

                       IS THERE AN ABILITY TO PAY?

                 THE CHAPTER 7 TRUSTEES’ REVIEW OF
                        SCHEDULE ‘I’ AND ‘J’

If the debtors current Schedule 'I' (Disposable Income) when compared to their current Schedule 'J'
(Reasonable and Necessary Projected Expenses of the Debtor and their Dependents) shows a
‘Margin’ that is an amount which could repay a significant portion of the debtors non-priority
unsecured debt, Chapter 7 may not be available. One of the duties of a Chapter 7 Bankruptcy Trustee is
to review the petitioner’s financial affairs. If their review leads the trustee to believe the petitioner has an
ability to repay a significant portion of their unsecured creditors over a period of 5 years (in spite of having
passed the Chapter 7 Means Test), they may take steps to bring those considerations to the attention of the
Bankruptcy Court or the U.S. Trustee.




                                                                                                             33
                   BANKRUPTCY ATTORNEYS & SELF REPRESENTATION

         T19   BANKRUPTCY, THE ‘GROWTH INDUSTRY’

                  NOVICES AND MEDIOCRE ATTORNEYS
Bankruptcy, unlike most areas of law is experiencing growth… filings are up! As a result, many attorneys
who’ve practiced non-bankruptcy law are either expanding their practice to include bankruptcy or they’re
completely moving their practice over to bankruptcy. This plus those who’ve just obtained their license to
practice law have caused a glut of attorneys. With so many new attorneys, the average fee has remained
either unchanged or have actually gone down. That’s good news, in part! Unfortunately the bi-product is
the quality of bankruptcy representation has been going down too. I and many others have grown
increasingly concerned about the quality of representation debtors have been receiving lately.

Having been a Bankruptcy Trustee for over 35 years I’ve frequently seen debtors come before me
with Petitions and Plans prepared by their attorney which lack creativity, don’t take full advantage of
the special provisions of Chapter 13 or are just in serious need of repair. This can happen for any
number of reasons. The point is, it happens… it always has and it always will, it just fluctuates. Many
things can go wrong, most all are avoidable, particularly when one has competent representation.
Unfortunately I’ve often seen situations that in the long run have cost debtors thousands, tens-of-thousands
and in more than just a few instances over a hundred thousand dollars.


                       A good percentage of Consumer Bankruptcy cases
                     are “simple non-asset cases” and may well not require
                                   a Bankruptcy Specialist.

                The problem is that it takes a trained eye and expert knowledge
                     to insure that nothing significant is being missed…
                                 even in the simplest of cases.
An oversight or a missed opportunity can be extremely costly. Although it may be unlikely you’ll need an
expert Consumer Bankruptcy Attorney, you’re much better off having the best to reduce or eliminate the
possibility of costly errors, oversights or missed opportunities. Do everything reasonably possible to make
sure you choose an attorney who will provide the best possible bankruptcy representation. Review the next
few sections to learn what to be on the lookout for, how to avoid mediocrity and learn how to find one of the
best possible Bankruptcy Specialist available.




                                                                                                          34
                    T20   COULD IT HAVE BEEN BETTER?

It’s understandable and forgivable to have a couple of harmless oversights in the preparation and the
presentation of the Petition, the Schedules, the Statement of Financial Affairs the Means Test and even in a
Chapter 13 Plan. Unfortunately the trend of what I’ve seen in recent past is discerning to say the least. The
petitioner isn’t going to catch any oversights or any missed opportunities, it’s likely they wouldn’t know one
if they saw it. Other attorneys don’t review files that aren’t their own, so it’s not likely they’ll ever know
what should have or could have been done regarding any case that isn’t their own. Even if they did, it’s
unlikely they’d make any comment or get involved.

Bankruptcy Trustee’s will point things out they find which may help them discover a benefit for creditors of
the estate but they generally won’t point out oversights that benefit the petitioner. It’s not there
responsibility, it doesn’t serve their purpose, nor is it a function of their duties. The Bankruptcy Judge is not
likely to ever have a need to review a typical bankruptcy file. Even if they did, they may not have a need to
review anything that doesn’t directly relate to the reason they have the case before them.

So who’s going to know or take any action when the petitioner’s attorney misses something that could
have seriously benefited their client? NOBODY!




                       T21   HOW TO AVOID MEDIOCRITY


The best way to avoid unnecessary losses and gain the most out of your bankruptcy proceedings is to
hire an attorney who is the best of the best. Someone who’s a cut-above the rest, someone who’s not an
‘average, run-of-the-mill’ or ‘mediocre’ bankruptcy attorney.

I’ll show you how to find the best. But understand that choosing the best isn’t based on: who lives closest
to your home, who’s the cheapest, who requires the least amount of down payment to get started, or who has
the best ad, the best web site, the best marketing strategy, free parking validation or a dinner for two at
Denny’s. You’ve got to make more intelligent choices! Believe me when I say:




                "The single most important decision
            an individual makes regarding bankruptcy…
                     is choosing their attorney"
                                                                                                              35
There’s quite a bit of information here. At least skim through it. If you do, the whole bankruptcy process
will become less stressful, less overwhelming, less confusing and a little less intimidating. Even more
importantly, you’ll learn enough to sniff out the ‘good’ the ‘bad’ and the ‘ugly’ attorneys. Using that
knowledge and followings the steps in ‘Finding the Best of the Best Bankruptcy Attorneys” {T24}, you’ll
know you have retained excellent legal representation.




       T22   CONSUMER BANKRUPTCY ATTORNEY FEES


Attorney fees in Consumer Bankruptcy cases are reviewed by the U.S. Trustee, Bankruptcy Trustees and the
Bankruptcy Court. They want to make sure the fees are reasonable and that the work done was reasonably
and necessary. Hourly rates or flat fees are reviewed and any excessive amount charged or amount of time
spent, on a typical case, is looked at closely. Because of this scrutiny, attorney fees do not vary to any
significant degree. In the practice of Consumer Bankruptcy you have Chapter 7’s and Chapter 13’s. About
95% of all Consumer Chapter 7 filings are non-asset cases. As such, they take a similar amount of time and
work to prepare and represent the client.

Chapter 13 filings are more involved and require some creativity. Many are fairly typical and don’t require
excessive amounts of creativity to put a case and a Plan together. That being the case, the fees are going to
generally fall into a ‘typical range’. The more elements involved in the estate may cause an increase in the
workload as well. As an example, if there are 2 houses, a foreclosure in process, a ‘lien strip’, 2 vehicles,
one which should be ‘cramed-down’, disputed creditors and assumed leases, there’s obviously more work
and expense involved. Therefore attorney fees may vary from case to case depending on what’s involved.

Any time a fee request falls out of that ‘typical range’, up goes a Red Flag. When that happens the trustee
or the court begin to question; ‘Why’ so much?’, ‘Why the extra fees or hours?’ This practice has pretty
much kept attorney fees in line and has prevented excessive charges or excessive ‘time’ a client is being
billed/charged in a ‘typical’ consumer bankruptcy case.

As a result, the amount you'd pay to hire one of the best bankruptcy lawyers is not much different than what
you'd pay for one of the 'less-than-best'. Unfortunately having one of the 'least expensive' attorneys
increases the chances of having one of the 'less-than-best'. When you have less than the best, it increases the
chances of: the process not going as smooth as it could, of paying more in the long run, or not taking full
advantage of the Bankruptcy Code. You may not always get what you pay for, but if you find an attorney
who’s really cheap, you’re increasing your chances of not having quality representation which could
become very costly in the long-run.

Granted you’ll have some attorneys who’ll strive to undercut the ‘market rate’, but remember you’re not
shopping at the .99 Cent Store. Your goal here is to find a professional. Someone who will represent your
best interest with skilled, specialized expertise in an important financial-legal situation. A situation that is a
                                                                                                               36
major turning point in your financial life and you don’t want to risk screwing it up by retaining an attorney
who may not be able to utilized the Bankruptcy Code to your greatest advantage.



                  Remember, the cheapest bankruptcy attorney in town
          just might turn out to be the most expensive mistake you’ve ever made.

                          Choosing an expert bankruptcy attorney
               is imperative to getting the most out of the bankruptcy process.




                     SELF REPRESENTATION
                            T23

                              ~
             IS AN ATTORNEY REALLY NECESSARY?


When someone represents themselves in a legal matter without the assistance of a lawyer it might be called
many things… including ‘stupid’… however, it really depends on the legal process involved. Self-
representation is actually called (Pro Se) or (Pro Per) and it may be an excellent way to handle an
‘uncontested’ matter such as a divorce when both parties are in total agreement. The actual term “Pro Per”
or “Pro Se” is a corruption of the Latin phrase ‘in propria persona’ which refers to a person representing
themselves in a legal process.

Should you go to the expense of hiring an attorney to assist in the filing of a bankruptcy or would filing in
Pro Se be a way to save some money? This is a difficult question to answer because it falls into the “It
depends on the circumstances”, type of answer. So I’ll go over the considerations as thoroughly as possible.

I don’t want to unnecessarily discourage someone from filing in Pro Se or from going to a Paralegal or a
Typing Service… when it’s appropriate to do so. On the otherhand, I don’t want to encourage someone to
file a bankruptcy in pro se when it would be foolish to proceed without expert legal advice.

The real issue is that under some circumstances filing without an attorney is really an okay way to go.
Under other circumstances it would be pure insanity to try to file a bankruptcy without expert legal
representation. So the problem here is, “How does one know when it’s okay and when it’s really stupid and
then, where do you draw the line in the sand in-between the two?” Let’s start off with… “When it’s really
stupid”.


                                                                                                          37
                                    23APRO SE CHAPTER 13’S
DO NOT ATTEMPT TO FILE A CHAPTER 13 WITHOUT AN ATTORNEY. Many attorneys have a
great deal of difficulty filing a Chapter 13 so it’s likely you’ll find yourself overwhelmed if you attempt to
file your own Chapter 13. I’ve seen attorneys file their own Chapter 13’s cases for their own personal
financial problems and mess it up. If an attorney attempting to handle their own case has difficulty getting it
right, it’s likely you’re not going to fare any better.

In fact, statistically about 15% to 19% of the Chapter 13 cases filed are Pro Se. Just out of the Sacramento
Division of the Eastern District of California that’s about 80 to 85 individual Chapter 13 cases per month
being filed by debtors without a lawyer. Out of about 1000 Pro Se Chapter 13 filing annually (80 to 85 per
month), I have personally seen 2 pro se filings gain court approval of their Plan. And neither of those two
ever received a ‘discharge’ from having completed the terms of their Plan. NONE! Every last one of them
was dismissed. Most all were dismissed within 3 to 4 months of the case having been filed. Those are
pretty disgusting odds.

Read “If I’m Eligible to file a Chapter 7, Wouldn’t that be Best?” {T32} to get a good idea about Chapter
13 or {T34} for a shorter version of when to consider Chapter 13. If you believe a Chapter 13 may be more
favorable than a Chapter 7, find an attorney who can competently handle a Chapter 13 by reading {T24}
“Finding the Best of the Best Bankruptcy Attorneys”. After you’ve found one or two Chapter 13 Attorneys,
take advantage of their ‘free initial consultation’ to see if they agree Chapter 13 would be a better option
than a Chapter 7. If they agree, follow through with the filing after you’ve found a Chapter 13 attorney you
feel confident in retaining. Generally some of the Chapter 13 attorneys’ fees are paid out of the 3 to 5 year
Chapter 13 Plan payments. Under no circumstances should you attempt to file a Chapter 13 without an
‘expert’ consumer bankruptcy specialist who has experience with and has no fear of, or back-off on, filing
Chapter 13’s. See {T24} Finding the Best of the Best Bankruptcy Attorneys.


                                     23B   PRO SE CHAPTER 7’S

This is where it gets dicey. There are simple Chapter 7’s and complex Chapter 7’s. Any Chapter 7 that
goes beyond a ‘simple’ case is a case that if something went wrong it could be something that’s ‘not –
simple’. And you don’t want to have something go wrong in a matter that involves money or the United
States Federal Court. Either way, you’re inviting trouble.

It would be impossible to list all that could go wrong. Not properly listing a debt or an expense, an income
or an asset, or not properly noticing a creditor, miss-classifying a creditor or some transaction in which you
were involved that sparks the interest of the Chapter 7 Trustee can all have serious consequences. Much can
go wrong administratively or otherwise. So the more ‘matters/issues/transactions’ there are/have been/may
be and the more money that’s involved, the greater the chances of something not being done correct which
could have serious consequences. When filing a U.S. Bankruptcy Court action, if something goes wrong, is
wrong or was done wrong, it’s usually not just a matter of saying “ ‘oops’ I’ll fix that”. Often, what’s done


                                                                                                            38
is done and it’s the consequences that the debtor must experience rather than just a ‘re-do’, a harsh word or
a slap on the wrist.

Therefore if you’re dealing with a significant amount of debt, or assets, or income, or expenses or any
financial activities that go beyond the most basic personal living expenses, then you should NOT consider
filing a bankruptcy without the assistance of a well-qualified bankruptcy specialist.

This leaves only those circumstances where it’s known with certainty that a Chapter 13 filing would not be
more advantageous than a Chapter 7 and then only in the simplest of Chapter 7 cases when one should
consider filing without an attorney. A Chapter 7 case that does not involve any significant debt (preferably
only unsecured dischargeable debt). A Chapter 7 case that doesn’t include anything beyond the basic assets
of an individual. The ‘simplest’ of Chapter 7 cases would be those where the income is without question
below the California Median Income level {T70B} and doesn’t involve a personal living budget that would
attract any attention.

Bottom line is that if a debtor (and possibly their spouse) have an income which is obviously below the
Median Income level, who basically owe consumer unsecured obligations and maybe a secured vehicle debt
(even if they want to retain that vehicle and the payments are affordable and current), where there are no
out-of-the-ordinary assets nor any ‘interesting’ financial transactions which have taken place (during the
past few years) or are about to take place (within the next 6 months), then filing a personal Chapter 7
without an attorney should go fairly smooth and if something does go wrong it shouldn’t be a major
problem since it’s not a major set of circumstances.

If after understanding all of this you feel as though you may want to “go ‘it’ alone”, then you may still want
to hire a ‘paralegal’ or a ‘typing service’ to assist you in the preparation of the documents. If you do, you
should not pay more than a couple of hundred dollars for their services. There also may be a ‘help-desk’ at
the Bankruptcy Clerks Office that might provide ‘some’ guidance.

As a side note, my ‘rule of thumb’ on pro se filings is that if after taking everything above into consideration
it looks like it may be ‘safe’ to file a bankruptcy without a lawyer but:

   1. Your ‘unsecured dischargeable debt’ is more than $75,000 or more than your annual income, you
      may still want to hire an expert consumer bankruptcy attorney, and/or

   2. The ‘cost of having an expert consumer bankruptcy attorney’ is less than 5% of your ‘unsecured
      dischargeable debt’, you may want to play it safe and hire an expert consumer bankruptcy attorney.


My rational is, WHY risk screwing it up when you have so much at risk proportionately? The cost to
benefit ratio just doesn’t make sense.




                                                                                                             39
                   FINDING THE BEST BANKRUPTCY ATTORNEYS


   T24   FINDING THE BEST OF THE BEST BANKRUPTCY
                       ATTORNEYS

My area of expertise is Consumer Bankruptcy. My goal is to provide you a better understanding of Chapter
7, Chapter 13 and bankruptcy in general… but most importantly my goal is to help you avoid poor
bankruptcy representation by showing you how to find one of the very best Consumer Bankruptcy
Attorney Specialist in your area.
There’s a significant problem with incompetent attorneys and poor bankruptcy representation and
the problem’s not limited to this geographical/jurisdictional area. Trustees across the country have
expressed concern and frustration with incompetent attorneys. Bankruptcy Courts and the U.S. Trustees
Offices throughout the country are well aware of the problem too. There are numerous educational
opportunities for bankruptcy attorneys to improve their craft and there are attorneys who take advantage of
those offerings and those who don’t.



THE SYSTEM IS FLAWED IN THAT IT’S DAMN NEAR IMPOSSIBLE TO MAKE
    AN ATTORNEY IMPROVE THEIR QUALITY OF REPRESENTATION
       OR TO PROHIBIT THEM FROM PRACTICING BANKRUPTCY

Unfortunately many attorneys continue to demonstrate poor workmanship by not following or
understanding the Bankruptcy Code, Local Rules, The General Order, local practices, procedures and
policies by filing incomplete and inaccurate paperwork and cases that lack the quality of representation a
client deserves. Their overall lack of competence is apparent to those of us who deal with bankruptcy cases
on a daily basis.
The problems with poor legal representation persist because not much can be done about it. You can’t force
an attorney to improve their quality of representation. After a great deal of effort, documentation and
expense they can be sanctioned or be ordered to disgorge their fees but it’s not easy to stop them from
continuing to practice bankruptcy.
Those who deal with the attorneys on a regular basis know who the best and worst attorneys are and
whether the others fall above or below an acceptable level of practice. The Bankruptcy Trustees, the U.S.
Trustees’ Office, the Bankruptcy Clerks Office all know… and so too do their employees know who the
Good, the Bad and the Ugly bankruptcy attorneys are. Unfortunately none of them are in a position to
‘recommend’ attorneys… PUBLICLY.


                                                                                                        40
I provide two methods to help you choose one of the best attorneys and avoid retaining someone who may
not provide you with all of the benefits bankruptcy can offer.

It’s possible you may not be eligible to file a Chapter 7.
It’s also possible the filing of a Chapter 13 could be more advantageous than a Chapter 7.
That being the case, it would be wise to avoid an attorney who has little experience with or interest in
Chapter 13. Any consumer considering bankruptcy should consult an attorney who is experienced and
capable of skillfully handling both Chapter 13’s and Chapter 7’s. Certainly an attorney who has been filing
consumer bankruptcy cases for at least two or three years and has filed and represented at least a hundred
Chapter 13 matters. An attorney whose current practice regularly includes creative Chapter 13 Plans…
because that may be the only choice or the best choice for you, their client.



  ABOUT 20% OF CONSUMER DEBTORS WHO FILE BANKRUPTCY WOULD
  BENEFIT MORE FROM A CHAPTER 13 FILING… ARE YOU IN THE 20% ?

Attorneys’ who regularly file Chapter 13, regularly file Chapter 7’s too. In fact the average ratio of a
Chapter 13 attorney is one (1) Chapter 13 case for every four (4) to six (6) Chapter 7 cases they file. So
attorneys who regularly file Chapter 13 cases have four to six times as much experience filing Chapter 7
cases as they do Chapter 13’s.
It’s not like bankruptcy attorneys either file only Chapter 7’s or only Chapter 13’s… it’s just that some
Chapter 7 attorney’s emphasise Chapter 7’s because they’d rather steer clear of Chapter 13’s when possible.
They’re just a lot more work, a big hassle, you make less money and you’re stuck with the client for years
rather than months. On the other hand, attorneys who regularly file Chapter 13’s have no back-off or
reluctance to filing a Chapter 7. The differentiation is that a Chapter 7 attorneys’ practice might include
about 5% Chapter 13 cases and 95% Chapter 7’s. A Chapter 13 attorneys practice includes about 20%
Chapter 13’s and about 80% Chapter 7 cases. The difference is 13 attorneys are called “13 attorneys”
because they readily and openly embrace a Chapter 13 without any hesitation when it serves their clients
best interest.

Any attorney who can ‘artfully’ file a Chapter 13 Plan is also an attorney who can handle consumer
Chapter 7 cases with ease. Many attorneys who file Chapter 7’s don’t like, prefer to avoid or are not
in touch with the current considerations that go into artfully crafting a 13 Plan. Unfortunately this
inhibits their ability to take full advantage of the special provisions of the Bankruptcy Code afforded
Chapter 13 cases.



           CHOOSE A BANKRUPTCY ATTORNEY WHO’S KNOWLEDGEABLE
                     AND EXPERIENCED IN CHAPTER 13…..
             THEY’LL HAVE PLENTY OF EXPERIENCE IN CHAPTER 7’S

                                                                                                        41
With these basic understandings you should choose an attorney who regularly files Chapter 13 cases,
someone who has filed at least a hundred Chapter 13’s and whose been filing them for at least two or three
years.
Why would anyone do otherwise? It makes absolutely no sense to go to a Chapter 7 specialist or someone
who emphasizes 7’s and is reluctant, is uncomfortable or has some back-off on Chapter 13’s when Chapter
13 may be necessary or advantageous.

So the real question is, “Which attorneys are the ones who are skilled in filing Chapter 13 cases and…
how do you find the best of them?
The list of ‘highly skilled’ Chapter 13 attorneys isn’t very long. There’s about three hundred Consumer
Bankruptcy Attorneys in the Eastern District of California and only about half of them file more than a
couple of Chapter 13 cases every year. Of those attorneys, about a hundred of them have been filing them
for more than just a couple of years, have filed at least a hundred Chapter 13’s and continue to file them
with any frequency. Of those attorneys who meet these qualification some do a ‘pretty good job’ and only
need a little hand holding, some just never will ‘get it’ and some are a cut-above the rest.
I’d like to see everyone align themselves with one of the best Consumer Bankruptcy Specialist. Someone
whose name comes to the mind of anyone ‘in the know’ would recommend a friend or a family member
when they needed a good bankruptcy attorney. I’m sure I’ve missed a few who are quite capable of
competently filing Chapter 13’s and Chapter 7’s. However I’ve tried to include only the very best, yet I
know I’ve likely overlooked some competent Chapter 13 attorneys. I’ve also tried to only include those
who have all of the attributes detailed in the ‘LESS’ part (Location – Experience – Staffing – Specialization)
of the ‘LESS C’ Method {T26} of choosing a Consumer Bankruptcy Attorney.
Basically you are being presented with two methods to consider using in order to find a quality Consumer
Bankruptcy Attorney. The “EASY Method” and the “LESS C” Method.



         THE ‘EASY METHOD’ TO FIND ONE OF THE BEST ATTORNEYS


One is the ‘EASY’ Method. I’ve put together a list of attorneys most of whom I’ve worked with and
personally have known to consistently demonstrate their ability to: provide quality work, thoroughly know
the local consumer bankruptcy practice, have been filing Chapter 7’s and Chapter 13’s for over 3 years.
They also have over 100 Chapter 13 filings under their belt and have demonstrated an ability to skillfully
craft a Chapter 13 Plan. Only a few of them are California State Bar Certified Bankruptcy Specialist
although I’m sure that if this site’s used to any significant degree, many of them will soon become State Bar
Certified.
The ‘EASY’ Method is simply based on a limited number of attorneys whose information and/or web site
has been provided along with their office location(s), how long they’ve been practicing law and whether
their practice is a small, medium or large practice.
If you want to see the attorneys included on The ‘EASY’ Method, {T25}
                                                                                                           42
                              T25   THE ‘EASY’ METHOD


   OF CHOOSING A SKILLED CHAPTER 13 AND CHAPTER 7 BANKRUPTCY ATTORNEY



The “EASY’ Method can be used to locate one of the best Consumer Bankruptcy Attorneys in the Eastern
District of California who have demonstrated the ability to provide quality Chapter 13 and Chapter 7
representation. This method can be used as it is, or in conjunction with the “LESS C” {T26} Method which
helps individuals locate competent Chapter 13 and Chapter 7 attorneys independent of any specific name or
list of attorneys.
The “EASY” Method includes a list of attorneys whose ‘main’ office is located within the 34 Counties
representing the Eastern District of California. The Eastern District of California is divided into three
divisions. The Sacramento the Modesto and the Fresno Divisions. The 22 Counties representing the
Sacramento Division conducts 341 Meetings of Creditors in Sacramento and Redding. The 4 County region
of the Modesto Division conducts 341 Meetings in Modesto and the 8 Counties making-up the Fresno
Division conducts 341 Meetings in Fresno and Bakersfield. The ‘Attorney List’ below will indicate which
341 Meeting of Creditors location the attorney most often appears… Sacramento or Redding… Modesto…
Fresno or Bakersfield. Some Divisions are then further divided into a one to four county geographical
grouping of the attorneys’ office(s) which may be convenient for client appointments within the Division
they practice.
This is a limited listing of selected attorneys who have been practicing bankruptcy for a minimum of 3
years, have filed at least 100 Chapter 13 cases (and many hundreds more Chapter 7’s) and are a cut-
above the rest because they have consistently demonstrated the ability to provide quality Chapter 13
and Chapter 7 debtor representation. Some of these attorneys are California State Bar Certified
Bankruptcy Specialist, some are not.



                                     IMPORTANT NOTE

My intention is to retain a list of bankruptcy attorneys who I personally know
or through inside sources I believe are the best consumer bankruptcy attorneys
in each the five 341 Meeting of Creditors area in the Eastern District of
California. In order to insure the number is limited to only those who
continue to do quality work, your observations, experiences and comments are
important.
                                                                                                      43
Should you retain one of the attorneys from the EASY Method list, please
email me a brief note and let me know your experience regarding your
attorneys’ representation. These comments not only help future clients, they
also help the attorneys know there strengths and weaknesses so they can
improve the quality of their representation. I want to insure the EASY Method
list represents only those attorneys who continue to demonstrate the highest
degree of quality consumer bankruptcy representation.
Also note that I do not receive a referral fee. I charge a small monthly flat fee
to those who wish to be included and qualify to be included in this list.


LISTINGS BY LOCATION
It’s important that you select an attorney whose practice is focused in your Division of the Eastern District
of California. As long as you have someone in your Division represent you, they’ll be familiar with the
local practice, the Bankruptcy Judges and Trustees you’ll be assigned. They’ll also be convenient enough
for you to meet them and their staff for the initial interviews, pre-bankruptcy preparation and post filing
consultations as necessary. While all of this can be done telephonically, by e-mail, fax and regular mail,
such meetings are best when conducted in person. Listed below is the location of each attorneys’ office and
the location of any satellite office(s) they maintain for the convenience of their clients.
The Sacramento Division list of attorneys has been divided into two geographical areas. One is the area
where the 341 Meetings of Creditors are held in Redding, the other is the area where the 341 Meetings of
Creditors are held in Sacramento. The Sacramento 341 Meeting of Creditor area is further divided into 5
geographical locations. The Modesto Division is not divided into separate areas although the town and zip
code where the attorneys’ office is located in listed. The Fresno Division is divided into the two 341
Meeting of Creditors areas, Fresno and Bakersfield which also list the town(s) the attorney maintains an
office. Choosing an attorney in your Division is important. Ideally, you should choose an attorney who
maintains an office in your 341 Meeting of Creditors area…Redding, Sacramento, Modesto, Fresno
or Bakersfield.


HIGHLIGHTING THOSE WHO ARE CALIFORNIA STATE BAR CERTIFIED SPECIALIST
An important consideration when listing attorneys is to give special recognition to those who are California
State Bar Certified Consumer Bankruptcy Specialist. These attorneys are highlighted with an ‘ * ‘ and then
their last name is ‘bolded’ and, if known, the date they first became a California State Bar Certified
Bankruptcy Specialist (CSBCBS) is provided as well.




                                                                                                          44
LISTINGS BY VOLUME OF ANNUAL FILINGS
The attorneys have been grouped together based on the average annual volume of bankruptcy cases they
file. Remember, volume helps but it isn’t the only factor you should consider when choosing an attorney.
All attorneys listed here provide excellent Chapter 13 and Chapter 7 consumer debtor representation…
that’s what this is all about. The volume they handle is what they personally feel most comfortable. Some
prefer high volume operations with a support staff to back-up and effectively handle the administrative
aspects of their office and many of the non-legal aspects of cases while others like to roll-up their sleeves
and personally handle all or most every aspect of a case. Most are in-between because they prefer one or
two employees to handle the office and perform some of the administrative and paralegal aspects of their
law office. All of them, without exception, have been specializing in the practice of bankruptcy law for at
least 3 years and have filed at least a hundred Chapter 13 cases which means they’ve likely filed well over
five-hundred Chapter 7 cases.


Group ‘L’ is more than 360 bankruptcy filings annually
Group ‘M’ is between 120 and 360 bankruptcy filings annually
Group ‘S’ is less than 120 bankruptcy filings annually



LISTING THE DATE THEY BECAME LICIENCED TO PRACTICE LAW

Also shown is the date the attorney became licensed to practice law in the State of California. It doesn’t
necessarily mean they’ve been practicing Bankruptcy Law during their entire legal career.


                                                 REDDING
                              REDDING 341 MEETING LOCATIONS



A-1 SISKIYOU, MODOC, TRINITY, SHASTA, LASSEN, TEHAMA, GLENN, BUTTE &
PLUMAS COUNTIES T25A6
REDDING – RED BLUFF – WEAVERVILLE – YREKA – ALTURAS – SUSANVILLE – PARADISE – OROVILLE – CHICO

    NAME                  BAR     VOLUME      MAIN OFFICE         ZIP       SATELLITE OFFICE LOCATIONS
                          DATE




                                                                                                          45
                              T25A   SACRAMENTO DIVISION
                                              SACRAMENTO
The 341 Meetings held in Sacramento covers 13 counties which have been divided into 5 geographically
separate locations showing the attorneys’ office(s) which may be convenient for their clients.



                           SACRAMENTO 341 MEETING LOCATIONS


2 - S SACRAMENTO & YOLO COUNTIES T25A1
SACRAMENTO – WOODLAND – DAVIS – FAIR OAKS – RANCHO CORDOVA – CARMICHAEL – ELK GROVE – GALT

3 - V SOLANO COUNTY T25A2
VACAVILLE – VALLEJO – FAIRFIELD – BENICIA – SUISUN CITY – CORDELIA

4 - E EL DORADO, ALPINE, AMADOR & MONO COUNTIES T25A3
FOLSOM – PLACERVILLE – POLLOCK PINES – SOUTH LAKE TAHOE – JACKSON - MARKLEVILLE

5 - A NEVADA, PLACER & SIERRA COUNTIES T25A4
AUBURN – ROSEVILLE – LINCOLN – GRASS VALLEY – NEVADA CITY – DOWNEYVILLE - TRUCKEE

6 - Y COLUSA, SUTTER & YUBA COUNTIES T25A5
YUBA CITY – MARYSVILLE – OLIVEHURST – LIVE OAK – BROWNS VALLEY




     NAME                    BAR     VOLUME           MAIN OFFICE            ZIP       SATELLITE LOCATIONS
                            DATE                                                    (2 - S) (3 - V) (4 - E) (5- A) (6 - Y)


*TOSNEY, John A.           Jan ’91   Large       331 ‘J’ St. # 200        95814       S       V              A       Y
  CSBCBS 1995                                    Sacramento, CA
                                                 916-441-4002              johntosney13@yahoo.com


*WHITE, Helga             Dec ’83    Small       310 Bridgeview Drive     95603                              A
  CSBCBS                                         Auburn, CA 95603
                                                 530-885-4433              helgawh@gotsky.com




                                                                                                                             46
                                    MODESTO DIVISION
                                 T25B

                             MODESTO 341 MEETING LOCATION



B-1 CALAVERAS, SAN JOAQUIN, STANISLAUS & TUOLUMNE COUNTIES T25B1
MODESTO – STOCKTON – MANTECA – TURLOCK – OAKDALE – SONORA – CERES – TRACY


      NAME                 BAR    VOLUME     MAIN OFFICE       ZIP          SATELLITE OFFICE LOCATIONS
                          DATE




                                                                                                         47
                                    T25C   FRESNO DIVISION
                               FRESNO 341 MEETING LOCATIONS


C-1 FRESNO, INYO, KINGS, MARIPOSA, MERCED & TULARE COUNTIES T25C1
FRESNO – MERERA – MERCED – TULARE – VISALIA – PORTERVILLE – HANFORD – COLINGA – OAKHURST



NAME                       BAR    VOLUME      MAIN OFFICE        ZIP        SATELLITE OFFICE LOCATIONS
                           DATE




                                            BAKERSFIELD
                          BAKERSFIELD 341 MEETING LOCATIONS


C-2 KERN COUNTY T25C2
BAKERSFIELD – CALIFORNIA CITY – TEHACHAPI – TAFT – DELANO – RIDGECREST – OILDALE – ROSAMOND


NAME                       BAR    VOLUME      MAIN OFFICE        ZIP        SATELLITE OFFICE LOCATIONS
                           DATE




                                                                                                         48
        THE ‘LESS C METHOD’ TO FIND ONE OF THE BEST ATTORNEYS


The other is the ‘LESS C’ Method which guides you in selecting an attorney based on: L ~ Location, E ~
Experience, S ~ Staff, S ~ Specialization and C ~ Certification. The ‘LESS C’ Method is extensive, but it
guides you through a step-by-step method to intelligently and logically choose one of the best qualified
consumer bankruptcy attorneys in your area.


If you wish to view The ‘LESS C’ Method, {T26}




                            T26   THE “LESS C” METHOD
   OF CHOOSING A SKILLED CHAPTER 13 AND CHAPTER 7 BANKRUPTCY ATTORNEY



                                      “L” for LOCATION
                                   T26A




Real Estate isn't the only profession that should emphasize LOCATION, LOCATION, LOCATION.
Bankruptcy Law is a Federal Law, so you'd think the practice of bankruptcy would be the same
throughout the land. Yet, that's not the case; in fact, it’s far from it.



                                   COURT DIFFERENCES

The practice of bankruptcy is divided into federal judicial areas throughout the United States and its
Territories. On a more local level there are the Bankruptcy Courts which lie under the jurisdiction of the
U.S. District Court which are within the U. S. Circuit Courts which all lie under the U. S. Supreme Court.

In the practice of bankruptcy law each Division of the Bankruptcy Courts system or even an individual
Bankruptcy Judge may have their own: Local Rules, General Orders, Procedures, Practices, Policies and
even a few specialized Forms. All of these 'local influences' cause the practice of bankruptcy law to
vary from one area to another.


                                                                                                       49
                      CLERK OF THE COURT DIFFERENCES

The Bankruptcy Clerks Offices are also federal which means they too are divided in the same manner
judicially/geographically as the Federal Courts they serve. They also have some of their own: Rules,
Practices, Procedures, Policies, Systems, Forms and Services. Consequently these differences in the
Bankruptcy Clerks Offices also cause differences from area to area in the administration and practice
of handling bankruptcy matters.



                            DIFFERENT COURT DECISIONS

Decisions made by Bankruptcy Judges, District Court Judges, Bankruptcy Appellate Court Judges or Circuit
Court Judges may have interpreted a particular contested matter one way, while another court in a different
area will have ruled on the same issue differently. Bankruptcy attorneys are most often bound to
comply with a court’s ruling when a decision was made by their court or a higher court within the
judicial territory they practice.



                       EACH AREA OF PRACTICE IS UNIQUE

Because of these variables, it's impractical or at least extremely difficult for an attorney to keep-up
with more than one or two 'local practices'. It's even more difficult to keep abreast of the different
practices, the Judges and the Trustees in different Judicial Districts. Therefore you should choose an
attorney whose major bankruptcy practice is limited to the same Division; Sacramento, Modesto or
Fresno, or at least the same Judicial District you reside… the Eastern District of California. Their
familiarity with the local practice will allow them to provide you with better representation than you would
have received had you hired someone whose main practice is out of your Division or your Judicial District.
In other words, if you live in the 22 Counties encompassing the Sacramento Division of the Eastern District
of California, I would suggest you “buy“ local and avoid attorneys whose main office is in Los Angeles, San
Francisco or anywhere other than the 22 Counties representing the Sacramento Division of the Eastern
District of California. The same holds true for the 4 Counties representing the Modesto Division and the 8
Counties representing the Fresno Division. It is these 34 Counties that make-up the Eastern District of
California. Hire from within the Eastern District and within your geographical/jurisdictional Division.
Ideally, you should choose an attorney who maintains an office in your 341 Meeting of Creditors area…
Redding, Sacramento, Modesto, Fresno or Bakersfield.




                                                                                                         50
                                   T26B   “E” is for EXPERIENCE
                   EXPERIENCE ALONE IS NOT A GUARANTEE

Experience is very important. While experience helps dramatically, experience alone isn't going to
guarantee you of having the best bankruptcy representation. I've seen too many attorneys who can't
seem to get it right even when they've been filing bankruptcy cases for 10, 20 or even 30 years. More often
than not a contributing factor is that these attorneys handle far too few filings and as a result lack the volume
of experience needed to allow them to provide the quality of representation a more experienced attorney
would provide. However, that being said, their lack of quality work can’t be solely explained away by a
lack of filings.



                                   GENERAL PRACTITIONERS

When an attorney practices in more than one or two areas of law they risk spreading themselves a
little too thin and become more of a General Practitioner. In the old days most attorneys were General
Practitioners. Over time, the practice of law has become more and more complex. Because of the
complexity attorneys face these days they can't really keep-up with more than one or two areas of law. The
practice of law becomes more specialized as matters continue to be litigated You don't want a General
Practitioner of the Law to represent you in bankruptcy any more than you'd want a doctor who's a
General Practitioner performing open heart surgery. You want an experienced bankruptcy attorney, one
with LOTS of experience in filing consumer Chapter 13 and Chapter 7 cases.




                            T26C   “S” is for the Attorneys STAFF

Most bankruptcy attorneys have one or two employees who provide support in their bankruptcy practice.
Some prefer a small operation because they feel more comfortable having personal control of all aspects of
the case. Some prefer a large operation so many aspects of a case can be compartmentalized for quality and
efficiency.

There’s quite a bit of bankruptcy work that can be confidently and economically handled by experienced
employees. Savings provided by delegating some of the non-legal aspects of putting together a bankruptcy
case can be passed on to clients, which helps keep the cost of bankruptcy down while still providing quality
service.


                                                                                                              51
Having competent employees not only provides the attorney with someone to manage the office and some
of the administrative aspects of a bankruptcy practice but those employees also develop working
relationship within the bankruptcy ‘community’ as a whole. Having a good working relationship with the
Bankruptcy Clerks Office, the U.S. Trustees’ Office, the Chapter 13 Trustees Offices, a working
relationship with Chapter 7 Panel Trustees and fellow bankruptcy practitioners and their staff is essential to
a successful law practice and most importantly for the clients they serve.

It only takes a few communications or visits to an attorneys’ office to know if the attorney has their ‘act’
together administratively. If the attorney’s office appears ‘proficient’ and ‘professional’ and the staff is
providing you with proper care, it’s likely they’ll be handling your case in the same manner.




                         T26D“S” is also for SPECIALIZATION

Any time you're hiring a professional to represent you regarding something important such as a Financial,
Medical or Legal matter, you want the best representation your money can buy. If you want one of the best
bankruptcy attorneys, you’ll want someone who specializes in and is a respected participant among
their peers whose practice emphasizes Debtor Representation in Consumer Bankruptcy Law.
Someone who has filed at least 100 Chapter 13’s and over 500 Chapter 7 consumer bankruptcy cases.




                KEEPING CURRENT WITH LOCAL PRACTICES

When an attorney specializes, they're more likely to keep current with local practices, recent case decisions,
local procedures, local policies, current forms and changes in Local Rules or the General Order. They'll
even know what a Trustees position will be and what a Judge’s decision is likely to be before the matter
goes to court. Specialization should mean they're focused, dedicated and up-to-date regarding all matters
that relate to their area of specialization. In other words, they know the ‘turf’ and are likely to be an expert
regarding the practice of Consumer Bankruptcy Law as it is practiced in your/their area. You’re looking for
an attorney who specializes in representing Debtors in their Consumer Bankruptcy Law practice. Not
Creditor Representation! Not Business Bankruptcy! That means representing INDIVIDUAL DEBTORS
(not creditors and not corporations or LLC’s) in Chapter 13’s AND Chapter 7’s.




                                                                                                             52
                             T26E   ‘C’ is for CERTIFICATION
                           CALIFORNIA STATE BAR CERTIFIED
                              BANKRUPTCY SPECIALIST


                       MAKING-UP YOUR SHORT LIST
                    T26F



There are about three hundred attorneys practicing bankruptcy law in the Eastern District of California.
However only about 25% of those Consumer Bankruptcy Attorneys who regularly represent debtors
will meet the ‘LESS’ conditions mentioned above. Finding those attorneys will make-up the majority, if
not your entire, short list.

The purpose here is to find bankruptcy attorneys who meet the ‘LESS’ (Location ~ Experience ~ Staff ~
Specialization) aspects of what I’ve described who do Consumer Bankruptcy Debtor Representation.
Although these “LESS” attorneys are not ‘C’ (California State Bar Certified Bankruptcy Specialist) many
could be, if they bothered to go through the process.

The problem is how do you find them? How do you separate the good from the bad from the ugly? If you
start off with a few hundred bankruptcy attorneys and only about 25% of them pass the ‘LESS’ test, the
logical next step would be how do you refine the list. Assuming you were able to find those who belong in
the top 25% the only logical method would be to include a credible ‘certification’ process. The California
State Bar Association is far more credible than ‘ACME’, ‘Joes’ or ‘A-1’ bankruptcy attorney certification
agencies.

I’ll show you how to locate a California State Bar Certified Bankruptcy Specialist in your area. But
first, understand that some websites are designed to direct you to an attorney who "Specializes" in
bankruptcy but are not California State Bar Certified Bankruptcy Specialist. Certification by ‘ACME’
or ‘Joes’ or ‘A-1’ Bankruptcy Certification’ does not necessarily make them a creditable consumer
bankruptcy specialist.

Even referrals by the “California State Bar Certified Referral Agencies” will refer you out to just about
anyone who has a clean state bar record, has malpractice insurance, has practiced for 5 years and has some
trial experience. Their referral system is not limited to attorneys who’ve been certified by the California
State Bar as ‘consumer bankruptcy specialist’. The list of California State Bar Certified Bankruptcy
Specialist is a separate listing and has nothing to do with the California State Bars’ Bankruptcy Referral
Programs’ from which Certified Referral Agencies refer to the public.

Most referral systems, including the California State Bars referral program has no certification requirement.
In fact the State Bar approved referral agency is not a State Bar run program. They are State Bar
Certified… the State Bar has Certified them to operate as a Referral Agency. They are ‘for profit’
independent private companies. Therefore most of their bankruptcy referrals are to a rotating list made-up
of attorneys who are licensed, insured, have trial experience, have practiced for five years and have agreed
                                                                                                          53
to the referral agencies conditions. This means they may not necessarily be experienced with Chapter 13
cases… which may be a significant issue.

Remember, you want representation from an attorney whose main bankruptcy practice consist of Debtor
Representation in Consumer Bankruptcy Cases whose practice is focused on or limited to the Sacramento’s
22 Counties, Modesto’s 4 Counties or Fresno’s 8 Counties, whichever Division you reside.




               FINDING A CALIFORNIA STATE BAR
              T26G

              CERTIFIED BANKRUPTCY SPECIALIST
                     IN THE EASTERN DISTRICT OF CALIFORNIA



1. The Bankruptcy Clerks Main Office in Sacramento encompasses the 34 Counties of the Eastern District
of California.

The Sacramento Division of the EDC represents the 22 County area of Northeast California which includes
the following counties: (ALPINE, AMADOR, BUTTE, COLUSA, EL DORADO, GLEN, LASSEN,
MODOC, MONO, NEVADA, PLACER, PLUMAS, SACRAMENTO, SHASTA, SIERRA, SISKIYOU,
SOLANO, SUTTER, TEHAMA, TRINITY, YOLO and YUBA). The Bankruptcy Clerks Office is located
at: 501 "I" Street, Room 3-200, Sacramento, CA 95814. {SBKCT}

The Modesto Division of the EDC represents the 4 County area encompassing (CALAVERAS, SAN
JOAQUIN, STANISLAUS and TUOLUMNE and the Bankruptcy Clerks Office is located at: 1130 12 th
Street, Suite ‘C’, Modesto, CA 95354. {MBKCT}

The Fresno Division of the EDC represents the 8 County area which includes (FRESNO, INYO, KING,
MADERA, MARIPOSA, MERCED, TULARE and KERN). The Bankruptcy Clerks Offices is located at
2500 Tulare Street, Suite 2501, Fresno, CA 93721. {FBKCT}


2. The U.S. Trustee Program appoints Chapter 7 Panel Trustees and Chapter 12 and 13 Standing Trustees.
The U.S. Trustees Office for the Sacramento and Modesto Divisions of the Eastern District of California is
located at: 501 "I" Street, Room 7-500, Sacramento, CA 95814 {SUST} There’s also a U.S. Trustees’
Office in Fresno which is located at 2500 Tulare Street, Suite 1401, Fresno, CA 93721 {FUST}.

The U.S. Trustee Program provides five locations within the Eastern District of California for the
Bankruptcy Trustees to conduct their 341 Meeting of Creditors. Those 5 locations are as follows:

                                                                                                       54
   2(a) SACRAMENTO ~ Those who reside in the following Counties: ALPINE, AMADOR, COLUSA,
EL DORADO, MONO, NEVADA, PLACER, SACRAMENTO, SIERRA, SOLANO, SUTTER, YOLO
and YUBA will have their 341 Meeting of Creditors held in Sacramento, California (*Sacramento County).
The 341 Meeting of Creditors rooms are held in the Federal Building located at: 501 "I" Street, 7th Floor,
Meeting Rooms 7(A), (B) or (C), Sacramento, CA 95814

    2(b) REDDING ~ Those who reside in the following Counties: BUTTE, GLEN, LASSEN, MODOC,
PLUMAS, SISKIYOU, *SHASTA, TEHAMA and TRINITY will have their 341 Meeting of Creditors held
in Redding, California (*Shasta County). The 341 Meeting of Creditors room is located at: 2986 Bechelli
Lane, 2nd Floor, Redding, CA 96002.

The Modesto 341 Meeting of Creditors room for the 4 Counties in the Modesto Annex of the
Sacramento/Modesto Division is as follows:

   2(c) MODESTO ~ Those who reside in the following 4 Counties: CALAVERAL, SAN JOAQUIN,
STANISLAUS and TUOLIMNE will have their 341 Meeting of Creditors held in Modesto, California
(*Stanislaus County). The 341 Meeting of Creditors room is located at: 1200 ‘I’ Street, Suite 4, Modesto,
CA 95354

The U.S. Trustee Program also maintains an office in Fresno. The Fresno U.S. Trustees’ Office serves the 8
County area and maintains two 341 Meeting of Creditor room locations for that area.

    2(d) FRESNO ~ Those who reside in the following Counties: FRESNO, INYO, KINGS, MADERA,
MARIPOSA, MERCED and TULARE will have their 341 Meeting of Creditors held at 2500 Tulare Street,
Suites 1450 & 1452, Fresno, CA 93721

    2(e) BAKERSFIELD ~ Those who reside in KERN County, the 341 Meeting of Creditors will be held
at 1300 18th Street, Suite ‘E’, Bakersfield, CA 93301




        T26G1   STATE BAR CERTIFIED BANKRUPTCY SPECIALIST WEB SITE
3. To find a State Bar Certified Bankruptcy Specialist go to California State Bar {CABAR} Click the
Legal Specialists section in the left-hand bar and locate Bankruptcy Law ~ there are three sections...
CLICK " Bankruptcy Law* " then look to the section regarding 'Consumers' and search by 'COUNTY' or
under 'ALL' to find the names of the currently certified California State Bar Certified Bankruptcy Specialist
(CSBCBS). Locate and make a note of those CSBCBS attorneys whose practice is convenient to: (A) your
work/home, and/or (B) where you'll have your 341 Meeting of Creditors (# 2 ‘a’ through ‘e’ above)...
(Sacramento, Redding, Modesto, Fresno or Bakersfield), and/or (C) the Bankruptcy Court House where
your Bankruptcy Petition will be filed, Sacramento (Sacramento County), Modesto (Stanislaus County) or
Fresno (Fresno County).

4. Based on my last count, you'll find about twenty California State Bar Certified Bankruptcy Specialist in
                                                                                                          55
the Eastern District of California. To become a California State Bar Certified Bankruptcy Specialist the
attorney must prove they have about twice the amount of MCLE (Continuing Educational Credits) as
required for the general ‘bar’ renewal. They must have practiced bankruptcy law for at least 5 years and
must prove they have represented a sufficient volume of Consumer Case Representations to qualify. They
must also have letters of recommendations from Bankruptcy Attorneys who represent both debtors and
creditors and from Bankruptcy Judges as well and show they have been involved in contested matters. They
must also have passed a Special California State Bar Test regarding Consumer Bankruptcy Law. The
Certification is good for 5 years and must be renewed every 5 years to retain active certification. Once you
find the attorneys who are CSBCBS, this should make-up a good portion of your short list of attorneys
you’re considering representing you.

5. Not all Certified Bankruptcy Specialist practice “Consumer Bankruptcy” Law. Some represent "Business
Bankruptcy” matters (Chapter 11’s) exclusively, others may work for the government. You're looking for
a Consumer State Bar Certified Bankruptcy Specialist… not a Business (Chapter 11) Bankruptcy
Specialist or a government employee.

6. Not all Certified Bankruptcy Specialist who practice Bankruptcy emphasize Debtor Representation.
Make sure you narrow your list down by eliminating those who emphasize Creditor Representation. Find a
Certified Bankruptcy Specialist who represents Debtors, not one who represents creditors. If you
have any questions and want to make sure you have an attorney who does Consumer and Debtor
representation either call and ask or locate their websites to insure they are State Bar Certified Bankruptcy
Specialist whose practice emphasizes the Representation of DEBTORS in CONSUMER cases (Chapter 7's
and 13's). You can also review {T25} as the attorneys on that list which have been BOLDED are the ones
who are California State Bar Certified.


NOTE I: You'll want to have about 2 or 3 attorneys on your short list. It may be necessary to take another
look at number 3 (A, B & C) above. You can add to your short list even if the attorney isn't Stare Bar
Certified if you feel confident in your reasons. Be choosy, be careful and apply the LESS criteria of the
‘LESS C Method’. Having a California State Bar Certified Bankruptcy Specialist who meets all of the other
specification set-forth above may not be a guarantee but it sure beats blind faith or ‘gut feelings’ or just
getting pulled-in by a great web site or some other promotional program. Make sure you don’t take a
shortcut and just do the ‘C’ certification part of the process. It’s important to use the LESS aspects of this
method as well. You can also refer to the ‘EASY Method’ {T25} to help you in this process.

NOTE II: Also be aware that location isn’t what it used to be (As long as they’re in your Division). Now
with; fax, email, Skype, cell phones, electronic filings and telephonic court appearances, the need to have
your bankruptcy attorney’s office down the street from you isn’t all that necessary. Yes, you’ll want to meet
your attorney and if they are doing their job, they will want to meet you as well during the pre-filing period
when your bankruptcy case is being developed and while your Petition is being prepared.




                                                                                                           56
                                   T26HTO SUMMARIZE

"Ideally what you're seeking is a Bankruptcy Specialist whose practice is mainly limited to your 341
Meeting of Creditors area: Redding, Sacramento, Modesto, Fresno or Bakersfield, whichever
encompasses the County in which you reside. An attorney whose practice emphasizes the representation
of debtors in Consumer Bankruptcy Law, someone who has a vast amount of experience because they
specialize in and regularly files both Chapter 13's and 7’s. Someone with whom you feel comfortable
and confident in them and their staff and whose fees are comparable and competitive with other quality
attorneys emphasizing Consumer Bankruptcy Law."




                  T26I THE FINAL SELECTION PROCESS


                                DO YOUR HOMEWORK

Do your homework, bone-up, spend a little time learning the basics of Consumer Bankruptcy by checking
out websites such as this one. By doing so, you'll know more, understand more and therefore be more
mindful in determining who you'll ultimately want to retain as your bankruptcy representative. This website
has a great deal of information about consumer bankruptcy (Chapter 13 and 7) and it's easy to understand (at
least that was my intention). After you have a better understanding of bankruptcy and the bankruptcy
process, you'll be better equipped to refine your shortlist.




                T26JIS A “FIELD TRIP” IN YOUR HORIZON?

Now it's time to refine your shortlist. Search the Internet. Check out their website, Google them and check
them out on the California State Bars website. Feel free to watch them in action. You’ve been provided
with links to the Bankruptcy Clerks Office, the U.S. Trustees’ Office and the Chapter 13 Trustees Offices.
                                                                                                         57
Contact them and find out when there may be a 'Court Calendar' and/or a '341 Meeting of Creditors'
calendar. Chapter 13 Section 341 Meetings of Creditors are general held each Thursday morning and early
afternoon in Sacramento and all day on the second Thursdays of each month in Redding. Modesto currently
holds there Chapter 13 341 Meeting of Creditors every Wednesday and Bakersfield has there 341 Meeting
twice monthly.

Drop by when the calendar shows some of your shortlist attorneys are scheduled to appear so you can
observe them while they’re handling other clients. Understand that the Judges in the Eastern District of
California allow "telephonic appearances" so your attorney may not physically be in court. You'll also have
a chance to see other attorneys in action and if you're impressed, ask for their business card on their way out
and chat with them for a moment if they're not occupied.

NOTE: You may be better-off attending a Chapter 13 341 Meeting of Creditors or a Chapter 13 Law and
Motion or a Dismissal Calendar. Remember, any bankruptcy attorney can handle a low or non-asset
Chapter 7. All attorneys who file Chapter 13’s can handle Chapter 7’s, but not all Chapter 7
attorneys can or will handle Chapter 13’s. So it’s wise to choose an attorney who skillfully handles
Chapter 13’s? Particularly if you may be denied the use of a Chapter 7 and ultimately have to file, or be
better off filing a Chapter 13. By seeing an attorney on your shortlist in action handling a Chapter 13 matter
you’ll know if you want them to remain on your list.




                             T26KTHE FINAL COUNTDOWN

Now that you've narrowed your list to the final few, it's time to make the final decision. Prioritize your list
and call them requesting a ‘free initial’ consultation/appointment. If the opportunity presents itself, ask a
couple of questions to see if the attorney knows their stuff. See if they can pass your ‘litmus test’ by
selecting a few of the FAQ’s {T72} from the list I’ve provided. Their response may help you see how well
they handle themselves and if they seem to know what they’re doing and if you’re comfortable with each
other.

Take what you’ve learned about bankruptcy and weigh all of what you now know including your 'LESS C'
results and any additional considerations you have after reviewing the “EASY” Method {T25} before you
make your final decision.




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               IS THIS REALLY WORTH THE EFFORT?
            T26L




This may sound like a lengthy and overwhelming process, but it truly is not. In one or two evening "without
any television" you can read most of this site, visited the California State Bar Website and compare that to
the ‘EASY Method’ and you’ll be well on your way to finalizing your ‘short list’.

When you understand the proper handling of your bankruptcy case should result in a successful discharge of
tens-of-thousands of dollars and the elimination of most, if not all, of your financial problems allowing you
to have a fresh start financially, it will have been time well spent.

When you understand that just a little tidbit of expert bankruptcy knowledge provided by a skilled attorney
can dramatically improve the ultimate outcome of your bankruptcy case, it will have been time well spent.

When you understand that having an expert attorney handling your financial problems will make the whole
process go much smoother than it would have, had you not chosen an expert, you'll know that it was time
well spent.

When you understand that you and your bankruptcy case are in the hands of an attorney who has earned a
respectable reputation in the bankruptcy community, that reputation will help your case proceed with less
scrutiny than it would have if you had chosen a less able or less reputable attorney, you’ll know that it was
time well spent.

When you consider the emotional relief you'll have knowing you've taken the time to insure you've chosen
one of the best bankruptcy specialist in your area, you'll know that it was time well spent.

Then you'll know your having gone to the time and trouble to have personally chosen one of the best
attorneys possible…that it was time well spent.




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                   BANKRUPTCY DATA, PAPERWORK AND DOCUMENTS


          T27   WHAT’S NEEDED TO FILE BANKRUPTCY?
Initially there is a great deal of information needed to complete the paperwork necessary to file bankruptcy.
My intention here is to provide a general understanding of the bankruptcy process, not the detail or the
actual forms themselves. The forms and the information necessary to file bankruptcy is extensive.
Understand that filing Bankruptcy is a Federal Court action and as such it’s important to know that to
willingly lie in the preparation of the Bankruptcy Documents is a federal offense which is punishable by
fines or incarceration or both. Therefore it’s important to be honest and do your best to comply and to be
thorough during and throughout the entire bankruptcy process. Once the Bankruptcy Petition and the
accompanying documents, Schedules, Statement of Financial Affairs, the Means Test and supporting
documents have been properly filed, most of the work is done. The actual forms themselves will be
provided and prepared by your attorney. They can also be obtained from the U.S. Bankruptcy Clerk
{BKCT} on-line. Your attorney will assist you with the process but you'll need to provide the information
and the documentation necessary to provide accurate and complete information. First, let’s take a look at
what forms are required.




                 T28   BANKRUPTCY… THE PAPERWORK

                                     T28ATHE PETITION


The Petition is a 3 page coversheet of the bankruptcy case file. The Petition is exactly that, you are
voluntarily 'Petitioning' the Bankruptcy Court to consider your filing for relief under the United States
Bankruptcy Code. The Petition shows your name(s) any aka’s used in the last 8 years, including maiden
names, current residence and mailing address, a listing of any prior bankruptcy filing within the last 8 years
and which Chapter of The Bankruptcy Code you are ‘Petitioning’ along with other information.

Upon filing, the Bankruptcy Petition will immediately be given a Bankruptcy Case Number, assigned to a
Bankruptcy Trustee, given a 341 Meeting of Creditors date/time and location, and assigned to a Bankruptcy
Judge.



                                                                                                           60
                                  T28B   THE SCHEDULES


Schedules A thru J provides a financial profile:

     A - Real Property
     B - Personal Property
     C - Property Claimed as Exempt
     D - Creditors Holding Secured Claims
     E - Creditors Holding Unsecured Priority Claims
     F - Creditors Holding Unsecured Nonpriority Claims
     G - Unexpired Leases and Executory Contracts
     H - Codebtors
     I - Current Income of Individual Debtors
     J - Current Expenditures of Individual Debtors



         T28C   THE STATEMENT OF FINANCIAL AFFAIRS

The Statement of Financial Affairs (SOFA) provides additional information regarding your financial
affairs. The SOFA has 25 questions. The first 17 questions address all petitioners while questions 18
through 25 are questions related to businesses currently operating or recently closed. You can obtain a copy
of the SOFA from the Bankruptcy Courts website {BKCT}. The questions are briefly as follows:

1.  Income from employment or operation of business (last three years).
2.  Income other than from employment or operation of business (last three years).
3.  Payment to creditors.
4.  Law suits and administrative proceedings, executions, garnishments and attachments.
5.  Repossessions, foreclosures and returns (within one year).
6.  Assignments and receiverships (within the last 120 days).
7.  Gifts and charitable contributions (aggregate less than $200 and $100 respectively within
     last year).
8. Losses (within last year).
9. Payments related to debt counseling or bankruptcy (within one year).
10. Other transfers (within last 2 years).
11. Closed financial accounts (within last year).
12. Safe deposit boxes (list all within last year).
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13.   Setoffs (within last 90 days).
14.   Property held for another person.
15.   Prior address of debtor (within last 3 years).
16.   Spouses and Former Spouses (if debtor resides in a community property state such as
       California).
17.   Environmental Information.
18.   Nature, location and name of business.
19.   Books, records and financial statements.
20.   Inventories.
21.   Current partners, officers, directors and shareholders.
22.   Former partners, officers, directors and shareholders.
23.   Withdrawals from a partnership or distributions by a corporation.
24.   Tax Consolidation Group.
25.   Pension Funds.




            T29   INFORMATION NEEDED BY ATTORNEYS

 T29A  DATA NECESSSARY TO COMPLETE THE BANKRUPTCY
                         FORMS

When filing Bankruptcy a great deal of information is necessary to complete all the documents required by
the Bankruptcy Court. Most all attorneys have Bankruptcy Software which enables them to takes the raw
data and transposes that information into various forms so everything needed is only asked ‘one time’. That
‘one time’ is the attorney’s intake form. The information will be used to complete the entire Petition, the
Schedules A through J, the Statement of Financial Affairs, the Means Test and a few other forms required as
well. Unfortunately the ‘Attorneys Intake Form’ can be up to two-dozen pages in length and requires a
pretty good chunk of time to complete. I’m not going to provide a sample of what the typical intake form
consist. I will, however, list the questions that must be answered to provide the basic information being
requested.

The information being requested would include information regarding the debtor and if married, information
regarding the spouse when they reside as husband and wife, regardless of the spouse not joining the debtor
in the filing of the bankruptcy petition. This also applies to ‘same sex partners’. If two adults reside
together and share or comingle their incomes and living expenses, the trustee will view the estate as a
couple sharing expenses when looking at the Bankruptcy Schedules even if only one of them is filing
bankruptcy.


                                                                                                        62
                         ABOUT YOU, YOUR SPOUSE
                          T29B

                      AND THOSE IN YOUR HOUSEHOLD


NAMES of those filing including any a.k.a. or maiden names, nicknames etc.
ADDRESSES of where you physically live and your mailing addresses
PRIOR ADDRESSES list any prior addresses within the last 3 years.
SOCIAL SECURITY NUMBER(S)
IDENTIFICATION INFORMATION Driver’s License.
PHONE NUMBERS all of them.
DATE OF BIRTH AND AGES of the petitioner(s).
DEPENDENTS relationship, age, claimed as dependent? location of dependent(s).
MARITAL STATUS and if you have ever been married before, the date: divorced, widowed, separated.
SPOUSES AND FORMER SPOUSES list all past spouses during the last 8 years.
PRIOR BANKRUPTCY INFORMATION including dates, case number and location.




                                      T29C   YOUR INCOME


INCOME list all incomes, all sources of income and include other revenues such as Social Security,
Pensions, Welfare, Food Stamps, Disability, Retirement, Alimony, Tips, Unemployment, Rental Income, et
cetera.
INCOME FROM BUSINESS list any income derived from Child Care, Senior Care, Internet Sales, Mary
Kay, Amway or any other source of income earned regularly or periodically?
INCOME FROM OTHER SOURCES in the last three years have you receive any other incomes or
revenues not listed above such as annuities, inheritances, thrift funds?




                                    T29DYOUR EXPENSES


EXPENSES list all expenses no matter how little, list it, but do not include any payment for any outstanding
debt… (debt are listed under ‘liabilities’)
EXPENSES OF BUSINESS list all business related expense no matter how infrequent or small.
EXPENSES NOT LISTED ABOVE

                                                                                                         63
                                        T29E   YOUR ASSETS
NOTE: Understand that the questions regarding assets is designed to cover every conceivable situation.
While some questions may seem irrelevant or even ridiculous, they may well disclose assets in other cases
where ‘the unusual’ actually exist.

REAL ESTATE (IMPROVED OR UNIMPROVED) list any and all real estate in which you have an
interest including time shares, any partial interest, showing the amount of your interest, the current value of
the property including any improvements, mineral rights, et cetera.
VEHICLES list year, make, model, miles, condition and current KBB blue book value for automobiles. Use
NADA value for other types of vehicles such as; Motorcycles, Boats, Quads, Trailers, Tractor/Trailer
Trucks, Vans, 5th Wheels, Travel Trailers, Motor Homes, ATV’s, Jet Skis, Snowmobiles, Aircraft and any
vehicle requiring a License.
CASH ON HAND
CHECKING AND SAVINGS ACCOUNTS list all that are open, there balance and list any closed within
the last 12 months.
SECURITY DEPOSITS such as a cleaning deposit with the landlord?
SAFE DEPOSIT BOXES which you have access, list any items of value and list any safe deposit boxes
closed in the last year and what contents of value were removed.
STORAGE UNITS list any storage units you have access, list any items which have a value of $100 or more
individually.
ELECTRONIC EQUIPMENT such as TV’s, Computers, Stereo, Appliances, Electronic Equipment, Tools,
Sporting Equipment. If any single item has a value of more than $500, list it separately.
HOUSEHOLD GOODS and FURNISHINGS list any single item that has a value of more than $500
separately and list all other with the current garage sale value.
BOOKS, PAINTINGS and COLLECTIONS if any item has a value of more than $500, list it separately, all
others as a group value.
CLOTHING if any item has a value of more than $500, list it separately, all others as an overall garage sale
value?
FURS and JEWELRY if any item is valued at more than $500 list it separately all others as a group value.
HOBBY EQUIPMENT, PHOTOGRAPHIC, SPORTS EQUIPMENT and FIREARMS if any item has a
value of more than $500, list it separately, all other significant items should be listed separately with a
description and value.
INSURANCE POLICIES are there any loans against them? What’s the current cash value?
ANNUITIES you have or had within the last two years.
RETIREMENT ACCOUNTS current cash value? Do you owe on them? amount owed?
STOCKS name, number of shares, current value?
PARTNERSHIPS and JOINT VENTURES who’s the partner, what’s the arrangement?
BONDS what the current cash value, how long have you had them?
ACCOUNTS RECEIVABLE what’s the face value? What’s the cash value?
ALIMONY and CHILD SUPPORT do you owe any? Current status? Recent property settlement?
TAX REFUNDS when last filed? Expected refund?


                                                                                                            64
WILLS and ESTATES has anyone died recently or is expected to die soon that you may receive a financial
benefit in cash or property?
BENEFICIARIES trust or estate, insurance policy?
LAWSUITS are you suing anyone now or in the near future?
INTELLECTUAL PROPERTY or CUSTOMER LIST that may have a marketable or resale value?
INVENTORY include any assets you have an interest that has a resale value.
ANIMALS include any pets, farm animals or livestock and their estimated value.
CROPS include any crops and the current status and estimated value.
LICIENCES such as Doctor, Liquor Licience, Sales, Franchises, et cetera along with the estimated value.
OTHER ITEMS NOT PREVIOUSLY LISTED




                                         YOUR LIABILITIES
                                      T29F




NOTE: Most all attorneys will pull your credit report to insure all publically know creditors are properly
listed in your bankruptcy schedules of debts because it’s important to list all creditors.



                             T29F1   YOUR “SECURED” CREDITORS

MORTGAGES RELATED TO ANY REAL ESTATE: List all creditors who are secured by real estate,
which real estate they have an interest, the Zillow estimated value, if the mortgage is a first, a second, a third
mortgage, the status, current or amount delinquent, notice of default, foreclosure status, sale date, if the
mortgage has been or is being modified, the balance due, the monthly payment, the late charge amount and
the total amount owed.

SECURED VEHICLE CREDITORS: List all creditors who are secured by a vehicle, list: year, make,
model, miles, the ‘Kelly Blue Book’ value or ‘NADA’ value, the amount owed, when the contract was
entered into, the monthly payment, the current status (current or number of months delinquent) and if the
debt is a loan, a contract of sale or a lease.

SECURED NON-VEHICLE CREDITORS: List and describe security, the date the security contract was
signed, the value of the merchandise and the name of the creditor secured by: Equipment, Tools, Electronic
Appliance or Devices including TV’s, Computers, Inventory, Specialty Equipment such as Tools,
Wheels/Tires/Rims, Farm, Yard or Office Equipment.




                                                                                                               65
                                         T29F2   SECURED ‘LEASES’
LEASES: List all leases and include the specific item, the date the lease was entered and the expiration
date, current status, monthly payment amount, the buy-out terms and your intention as to surrendering,
retaining or replacing the leased item(s).



                   T29F2.5   LOANS SECURED BY RETIREMENT FUNDS

LOANS SECURED BY RETIREMENT FUNDS: List any debt in which you pledged as security any
funds in any retirement account, the amount due, the monthly payments, when the debt was incurred and
when the debt is expected to be paid off.



                               T29F3   YOUR “PRIORITY” CREDITORS

TAX DEBT, DELINQUENT DOMESTIC SUPPORT: List year(s) owed, total delinquent amount and
any and all information relating to the debt including when the tax return was filed and the type of tax owed.
List any and all debts (child support, alimony or any other amount that is owed) which came about as a
result of a domestic support obligation which is delinquent at the time the bankruptcy case is filed.


                                          T29F3.5   STUDENT LOANS
STUDENT LOANS: Student loans fall into a Chapter 13 ‘void’. They should be listed because they are an
obligation but since they are not secured, not entitled to priority, not entitled to any special treatment and are
unsecured they must be listed as a ‘general unsecured creditor’. You may ‘attempt’ to provide for them as
an on-going budgetary expense, however that may be viewed as ‘preferential’ treatment of a ‘general
unsecured creditors’ and therefore be opposed by the Chapter 13 Trustee or the Court.



                          CO-SIGNED OR CO-OBLIGATION DEBT
                       T29F4

                        IN WHICH YOU RECEIVED THE BENEFIT
CO-SIGNED list any debt in which you had someone sign with you where you received the benefit of the
debt. Also list the Co-Signer or Co-Obligors names, address, et cetera.

CO-OBLIGATIONS regard any debt in which you signed for another in which you did not receive any
benefit. This obligation should be list along with the other general unsecured creditors under T29F5 below.


                                                                                                               66
                            T29F5   YOUR “UNSECURED” CREDITORS

UNSECURED CREDITORS: list any and all debts for which you could possibly be considered as being
responsible whether those debts are obligation where you co-signed for someone else, and any other
possible debts even if it’s a disputed, contingent or un-liquidated debt.


                    T29F6   OTHER “SPECIAL” INFORMATION

BUSINESSES OF WHICH YOU WERE A PARTY in the last 6 years and the current status. Plus any Tax
ID information along with any additional information that may be pertinent.
LAWSUITS AND ADMINISTRATIVE HEARINGS in the last year has anyone sued you or have you sued
anyone?
GARNISHMENTS, ATTACHMENTS and SEIZURES list all such actions during the last year.
REPOSSESSIONS, FORECLOSURES and RETURNS list all such actions during the last year.
ASSIGNMENTS and RECEIVERSHIPS list all such activities during the last year.
GIFTS (received or given) list all such items which have a value of more than $100 within the last year.
LOSSES list all losses from theft, gambolling, accident, fire, flood or any other damage or loss during the
last year.
PAYMENTS RELATED TO DEBT COUNSELLING OR BANKRUPTCY list any payments made in
relationship to these activities within the last year.
TRANSFERS OF REAL ESTATE OR VEHICLES OR OTHER MAJOR ITEMS list all property of this
nature that you used to have/own or had or have a legal interest within the last two years that you no longer
have.
TRANSFERS NOT LISTED ABOVE would include property you used to own within the last two years
that you no longer have. This would include wills, trust, annuities, accounts’ receivable et cetera, not
covered above.
SET-OFFS list any debt that has been set-off and the amount setoff within the last 90 days.
PROPERTY HELD FOR ANOTHER list any property you have in your control that is held for another.
PROPERTY HELD BY OTHERS list any property in which you have a legal interest which is not in your
possession, include the value and location of the property.
ENVIRONMENTAL INFORMATION list here any activities you now have or have had in the last year in
businesses or otherwise that have environmental considerations such as fuel, laundromat or any other
activities or products that may have environmental impacts.




                                                                                                          67
        T30   DOCUMENTS REQUIRED AS A PART OF THE
                    BANKRUPTCY PROCESS
The debtor’s attorney prepares the documents but the petitioner must review and sign them. When signing
these documents, the petitioner is attesting to their accuracy. In order to allow their attorney to accurately
complete these documents and to meet other requirements, it’s necessary to provide the information
requested above under “Information Needed by Attorneys to Complete Bankruptcy Forms”.

It’s also necessary to provide the following information, material and documents:

   1. INCOME:

        a. Six months of pay stubs representing the 6 months immediately preceding the date the Petition
           is filed.

        b. Proof of any other income and its source for the 6 months immediately preceding the date the
           Bankruptcy Petition is filed.

        c. Any income from self-employment, a month-by-month Profit & Loss statement for the 6
           months immediately preceding the date the Bankruptcy Petition is filed will be required.

   2. THE LAST TWO YEARS OF TAX RETURNS (including all attachments)

   3. COPIES OF SOCIAL SECURITY CARD(S) & GOVERNMENT ISSUED PHOTO ID(S) ie:
      State Drivers’ License (for each person filing)

   4. NOTICES OF DEFAULT, TRUSTEE'S SALES, LAW SUITS, WAGE GARNISHMENT
      ORDERS (and any other legal documents that could possibly be of interest to the estate... if in
      doubt, take it to your attorney)

   5.   REAL ESTATE

        a. A print-out value of any real estate in which the debtor has a legal interest by using
           www.zillow.com

        b. The most current statement regarding any and all mortgages that are secured by real estate.

       NOTE: If the filing of a Chapter 13 is intended to 'Lien Strip’ {G151} a mortgage that is no longer
   secured because more is owed on the 1st mortgage than what the property is currently valued (or the 1st
   and 2nd when the intent is to strip the 3rd) a Certified Appraisal may be required.


                                                                                                           68
   6. AUTOMOBILES and other VEHICLES (snowmobiles, quads, boats, jet skis, trailers,
      motorhomes, trailers, et cetera.)

       a. A print out value of any AUTOMOBILE in which the debtor has a legal interest. Use Kelly Blue
       Book for AUTOMOBILE evaluations (www.kbb.com)

        b. A print out value of any other VEHICLE the debtor has a legal interest. Use NADA for non-
       automobile vehicles (www.nada.com)

        c. The most current statement regarding any and all debts that are secured by any vehicle in which
       the debtor has a legal interest.

    NOTE: If there is a 'Leased Vehicle', provide a copy of the Lease Agreement and the most current
financial statement along with the Kelly Blue Book evaluation of any Leased Vehicle.

   7. RETIREMENT ACCOUNTS

       a. The most current statement for any and all RETIREMENT ACCOUNTS the debtor has an
          interest.

       b. If funds have been borrowed against any retirement, a copy of the most recent statement
          including payment terms and balance owed.


    8. LIFE INSURANCE policies. Do the policies (Whole Life) have any cash value? Information will
be needed to make this determination.


     9. DIVORCE agreements and any property settlement agreement regarding the divorce if within the
last 2 years.


   10. SETTLEMENT agreements regarding any action or possible action that the debtor may be a party if
within the last 2 years.


   11. PENDING OR POTENTIAL LEGAL ACTIONS that may be or has been pursued against the
debtor or by the debtor regardless of current status.


  12. BANK STATEMENTS for the past 4 months in any bank in which the debtor has or had any funds.




                                                                                                       69
  T31   INFORMATION YOU SHOULD KNOW BEFORE
                FILING BANKRUPTCY
1. Empty or close any bank or credit union account in which you have an obligation. Move the money
   to any bank in which you have no obligation. This should be done more than 90 days prior to filing
   your Petition.

2. Do not use credit cards within the 90 days preceding the filing of your Bankruptcy Petition.

3. Do not transfer any property, such as cash, vehicles, real estate, et cetera. If you do, the transfer may
   be improper and therefore revocable.

4. If you’re intentions are to keep the security in which a creditor has collateral, you’ll want to keep the
   payments current, even if you don't receive billings, invoices or statements from the secured creditor.

5. Unsecured creditors are a different matter. If you are on the verge of filing bankruptcy you don't
   need to make any payments to unsecured creditors that you expect to be discharged.

6. Bankruptcy and Real Estate Mortgages

   A. CHAPTER 7 AND MORTGAGES.

   If you're keeping your home and you’ll be filing Chapter 7 you’ll want to continue making those on-
   going mortgage payments, during and after bankruptcy even if you do not receive billings, payment
   coupons, invoices or statements from the mortgage creditor. If your mortgage payments are
   delinquent and since your financial situation will improve after filing Chapter 7 you’ll want to make
   arrangements to cure any delinquency to the satisfaction of the mortgage creditor.

   B. CHAPTER 13 AND MORTGAGES

        1. CHAPTER 13 AND UNSECURED MORTGAGES

           If you have any non-first mortgages that are no longer secured because more is owed on the
           first (or any other senior mortgage), the ‘no-longer-secured-mortgage Lien can be Stripped
           (removed) from its secured position and the debt would then be treated as an unsecured debt.
           {G151}

        2. CHAPTER 13 AND DELINQUENT MORTGAGES
                                                                                                         70
          If you’re keeping your home but you’re delinquent with the mortgage payments you’ll want
          to propose a Chapter 13 Plan that cures the delinquency through the 3 to 5 year repayment
          Plan (unless the mortgage can be ‘Stripped’ [see above] or {T37E4}) Most Chapter 13 Plans
          do not allow or provide for any interest to be paid on delinquent mortgage claims.

          Plans that propose to cure the mortgage delinquency require the Chapter 13 Plan payments to
          include the amount necessary to pay the on-going mortgage payments through the Chapter 13
          Trustee’s administration.

      3. CHAPTER 13 AND MORTGAGES GENERALLY

          If you’re keeping your home and you’re current with the mortgage (and it can’t be Stripped
          {T37E4}), you'll want to continue making those on-going mortgage payments, before, during
          and after bankruptcy, even if you do not receive billings, payment coupons, invoices or
          statements from the mortgage creditor

7. Remember, all debts must be listed even though your intention may be to continue to pay the
   creditor after the bankruptcy is concluded.




                                                                                                  71
                          WHICH CHAPTER IS BEST FOR YOU?


                         CHAPTER 7 V/S CHAPTER 13



              T32   IF I’M ELIGIBLE TO FILE CHAPTER 7,

                         WOULDN’T THAT BE BEST?

There’s significantly more information written about Chapter 13 than Chapter 7, why is that? Chapter 13 is
much more involved than Chapter 7. Unlike Chapter 13, Chapter 7 is the simplest, quickest, least expensive
and easiest way to discharge unsecured debt.

Chapter 7 Bankruptcy explained in the simplest terms is where the debtors’ intent is to:

1. Wipe-out as much debt as possible. (dischargeable unsecured creditors and secured creditors where the
debtor wants to return/surrender the secured creditors’ collateral)
2. Lose the least amount of assets to the Chapter 7 Trustee as possible. (non-exempt assets)
3. Avoid issues with the Chapter 7 Trustee regarding ‘avoidable transfers and preferences’.
4. Be held responsible for as little as possible for any debt remaining after bankruptcy. (secured, non-
dischargeable creditors and possibly co-signed obligations)

All of that’s fine when (a) the debtor 'qualifies for' Chapter 7, and (b) a Chapter 7 ‘is needed’, and (c)
the Chapter 7 will provide the ‘relief needed’. When those factors are present and:

1. The amount of dischargeable debt being wiped-out makes filing Chapter 7 worthwhile.
2. The amount of non-exempted assets seized or paid to the Chapter 7 Trustee is not significant.
3. The amount of ‘avoidable transfers and preferences’ in which the Chapter 7 Trustee may have an interest
is not a significant issue.
4. The amount still owed to secured, non-dischargeable creditors and possibly co-signed obligations can be
handled after filing Chapter 7 without difficulty and with relative ease.

When those sets of circumstances exist, Chapter 7 is likely to be a solution to the debtors’ financial
problem. To the degree any one or a combination of those circumstances becomes a bit of a concern, is to
the degree Chapter 13 may become a little more attractive as a possible alternative.

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BUT.... Just because a Chapter 7 is the simplest, least expensive, easiest and fastest way to discharge
unsecured debt, does NOT mean Chapter 13 wouldn’t discharge an even greater amount of debt.

AND ... Just because a Chapter 7 may be a solution to the financial problem, does NOT necessarily
mean it’s the best solution.



                   What’s being questioned here is when a Chapter 7
                       is a viable solution to a financial problem,
        could a Chapter 13 possibly provide an even greater benefit to the debtor?


A fair comparison requires the same set of circumstances and choices must be present. The debtor choosing
to retain or surrender the security to their secured creditors, whether to pay or not pay any co-signed
obligation, et cetera must be the same. Everything would need to be identical for comparison purposes.
Also any other debt that would remain owing after a Chapter 7 by choice or by law would also need to be
addressed from the same perspective for comparison purposes.

The comparison should be based on three factors. It’s best here to approach the three questions in reverse
order. Therefore, the third and the only non-financial question which should be taken into consideration
when comparing the filing of a Chapter 7 to a Chapter 13 bankruptcy would be:


COMPARSION # 1

“What ‘non-financial’ aspects should be considered when comparing Chapter 7 and Chapter 13 to
one another?”

After filing a Chapter 13, should some subsequent event occur that adds additional financial problems or
should a change of circumstances occur that causes the Chapter 13 Plan to become unrealistic, it’s not likely
there would be any prohibition to either convert the Chapter 13 to a Chapter 7 or to voluntarily dismiss the
Chapter 13. If the Chapter 13 were to be dismissed, the filing of a Chapter 7, without any time restraints,
would be allowed since the Chapter 13 didn’t culminate in a ‘discharge’. If the Chapter 13 Plan is
completed and the debtor receives a discharge, a subsequent Chapter 7 filing is available within 6 years of
the filing date of the Chapter 13 as opposed to 8 years if it had been a Chapter 7 {T15}.

When a debtor files Chapter 13 it’s unlikely they’ll be stuck in the bankruptcy process without any ability to
voluntarily dismiss the case, unlike it is when one files a Chapter 7. A voluntary dismissal of a Chapter 13
is rarely challenged while the voluntary dismissal of a Chapter 7 is rarely allowed. The Chapter 13 debtor
also is likely to have the option to convert the Chapter 13 to a Chapter 7.




                                                                                                           73
COMPARISON # 2

The second consideration should be “What will the debtor have to pay monthly to creditors after filing
Chapter 7 as compared to the monthly payment requirement for those same debts during the Chapter
13 Plan?”

COMPARISON #3
The last and possibly the most important consideration should be, “How much debt will the debtor be
relieved of having to pay when comparing the final net results of a Chapter 7 as compared to the final
net results of a Chapter 13?”



                                      THE ANALYSIS BEGINS
What follows is a methodology that’s helpful in analyzing the financial situation from these perspectives in
the hope of making a reasonable calculation to answer questions 2 and 3. Any analysis of the debtors’
creditors would need to separate those creditors which are affected or treated differently depending on
whether a Chapter 7 or a Chapter 13 case is filed.

What would a projection of the ‘post-bankruptcy-filing’ results be when comparing question #2 (monthly
payments) and #3 the final-final (net reduction of debt) be when all is said-and-done and nothing is owed to
anyone for anything. Not only after having completed a Chapter 7 and a Chapter 13 but after having
satisfied any balance owed possibly long after completing the bankruptcy process. The final amounts would
then need to be compared monthly and in total in order to have an idea of what the differences actually are
and what therefore may be the best alternative. These two comparisons present questions which would be
impossible to answer with total accuracy. However a rough analysis can be made by someone who
understands Chapter 7 and Chapter 13 and can follow what is presented next.

As a guide towards that analysis and in an effort to make the above comparisons, it must be understood how
each debt would be dealt as a result of a debtor having filed a Chapter 7 and a Chapter 13. Debts are treated
and affected differently depending on whether a Chapter 7 or a Chapter 13 filing takes place. Below is an
attempt to separate creditors as to how they are treated or affected differently depending on which
bankruptcy was filed. Towards that end, creditors have been divided into 39 different types of debt.

This list should, under normal circumstances, include all debts of every kind. Therefore they include debts
the debtor:

   1. chooses to retain the security,
   2. owes as a result of a deficiency balance remaining to a creditor upon the surrender of the collateral.
   3. must repay because they’re non-dischargeable debts in a bankruptcy,
   4. chooses to repay in-spite-of a bankruptcy discharge,
   5. owes to any other creditor not included in 1 through 4 above which should represent any and all
general unsecured dischargeable debt.
                                                                                                          74
                                         REAL ESTATE


1. Mortgage(s) balance(s) and monthly payment(s) owed on real estate the debtor wishes to retain
   which is not secured by any equity based on the current market value when compared to the
   amount(s) owed to any senior mortgage(s), plus any

2. Delinquency on that/those mortgage(s) in number 1 above.

3. Balance(s) and monthly payment(s) to mortgage(s) owed on real estate which is/are totally or
   partially secured by equity in real estate the debtor wishes to retain, along with any

4. Total amount of delinqueny on that/those mortgage(s) in number 3 above, and/or any

5. Total amount of delinquency to real estate property taxes on that/those property(s) in number 3
   above, and/or any

6. Total amount of delinquency to a Home Owner Association Dues on that/those property(s) in
   number 3 above.



                          CREDITORS SECURED BY VEHICLES


7. Anticipated deficiency balance owed to any debt(s) secured by a vehicle(s) to be surrendered to the
   secured creditor(s) who has a co-signer(s) on the contract and the debtor chooses to pay the
   anticipated deficiency balance to avoid the co-signer from having to pay.

8. Vehicle(s) to be surrendered to the secured creditor(s) who does not have co-signer(s).

9. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed over 2½ years ago.
   The vehicle is worth less than what’s owed and the interest is more than the Prime Rate plus 2%
   annually.

10. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed over 2½ years ago.
    The vehicle is worth less than what’s owed and the interest is less than the Prime Rate plus 2%
    annually.

11. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed over 2½ years ago.
    The vehicle is worth more than what’s owed and the interest is more than the Prime Rate plus 2%
    annually.

12. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed over 2½ years ago.
    The vehicle is worth more than what’s owed and the interest is less than the Prime Rate plus 2%
    annually.
                                                                                                   75
13. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed less than 2½ years
    ago and the interest is more than the Prime Rate plus 2% annually.

14. Balance(s) and monthly payment(s) owed on a retained vehicle contract(s) signed less than 2½ years
    ago and the interest is less than the Prime Rate plus 2% annually.

15. The estimated unsecured portion (estimated amount owed in excess of value) of a vehicle contract(s)
    in number # 9 and #10 above.

16. The amount of the monthly payment(s) on leased vehicle(s) to be retained which are current.

17. The amount of the monthly payment(s) on leased vehicle(s) to be retained which are delinquent.

18. Total amount of delinquency on lease(s) owed to leased vehicle(s) listed in number 17 above.



                               NON-VEHICLE SECURED CREDITORS


19. Anticipated deficiency balance owed to any debt(s) secured by non-vehicle merchandise/collateral to
    be surrendered to the secured creditor(s) who have a co-signer(s) on the contract and the debtor
    chooses to pay the obligation to avoid the co-signer from having to pay.

20. Non-vehicle merchandise/collateral to be surrendered to the secured creditor(s) who do not have a
    co-signer(s) on the contract.

21. Balance(s) and monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral the
    debtor intends to retain which was signed more than 365 days ago. The security/collateral is worth
    less than what’s owed and the interest is more than the Prime Rate plus 2% annually.

22. Balance(s) and monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral
    the debtor intends to retain which was signed more than 365 days ago, the security/collateral is
    worth less than what’s owed and the interest is less than the Prime Rate plus 2% annually.

23. Balance(s) and monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral the
    debtor intends to retain which was signed more than 365 days ago. The security/collateral is worth
    more than what’s owed and the interest is more than the Prime Rate plus 2% annually.

24. Balance(s) any monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral the
    debtor intends to retain which was signed more than 365 days ago. The security/collateral is worth
    more than what’s owed and the interest is less than the Prime Rate plus 2% annually.

25. Balance(s) and monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral the
    debtor intends to retain which was signed less than 365 days ago and the interest is more than the
    Prime Rate plus 2% annually.
                                                                                                     76
26. Balance(s) and monthly payment(s) owed on a contract(s) for non-vehicle merchandise/collateral the
    debtor intends to retain which was signed less than 365 days ago and the interest is less than the
    Prime Rate plus 2% annually.

27. The unsecured portion (amount owed in excess of the value of the collateral) of the non-vehicle
    consumer contract(s) of number 21 and 22 above.

28. Amount of the monthly payment(s) on leased non-vehicle goods to be retained which are current.

29. Amount of the monthly payment(s) on leased non-vehicle goods to be retained which are delinquent.

30. Total amount of delinquency owed on a lease(s) for non-vehicle goods listed in number 29 above.

31. Balance(s) and monthly payment(s) to a loan(s) secured by retirement funds.



                         PRIORITY NON-DISCHARGEABLE CREDITORS


32. Amount of total delinquency owed to Non-Dischargeable Domestic Support Obligations.

33. Total amount owed to Non-Dischargeable Priority Tax obligations.



                      NON-PRIORITY NON-DISCHARGEABLE CREDITORS


34. Balance(s) owed to other Non-Dischargeable creditors (excluding #32 and 33 above). See Non-
    Dischargeable Debt {G171}.

35. Balance(s) and monthly payment(s) owed to {Non-Dischargeable} Student Loan obligations.



                                        SPECIAL CREDITORS


36. Balance(s) and monthly payment(s) to an unsecured creditor(s) where the debtor has a co-signer and
    intends to make payment(s) to the creditor(s) to protect the co-signer(s).

37. Balance(s) and monthly payment(s) (if any) to debts owed to ‘Family, Friends or other ‘Special’
    obligations the debtor intends to repay even though they’re not legally responsible to do so.


                                                                                                      77
                             SPECIAL BANKRUPTCY RELATED LOSSES


   38. Any amount(s) the Chapter 7 Trustee has determined as being owed as a result of: non-exempt
       assets, preferences or transfers that resulted in any out-of-pocket payment from the debtor.



      GENERAL DISCHARGEABLE AND COMPROMISABLE UNSECURED CREDITORS


   39. General unsecured, non-priority, dischargeable creditors. In addition to unsecured credit card,
       medical and unsecured loans, this would include any deficiency balances owed to creditors where
       the security was surrendered unless the debtor intends to pay the deficiency balance to avoid having
       the co-signer pay the balance owed. If it’s a co-signed deficiency balance which the debtor intends
       to pay in order to protect the co-signer(s), list the amount of the debt(s) under numbers 7 or 19
       above.


CHAPTER 7 REGARDING 1 THROUGH 39 ABOVE:

Debts listed above from 1 through 38 are debts the Chapter 7 debtor must or has chosen repay after having
received a Chapter 7 discharge. Only those debts included in number 39 would not be repaid after filing
Chapter 7 bankruptcy.

The repayment of the other debts 1 through 38 above would be based on the terms of the existing
agreement. Some of the debts are already set-up for monthly payments such as numbers: 1, 3, 9, 10, 11, 12,
13, 14, 16, 17, 21, 22, 23, 24, 25, 26, 29, 31, 35 and 36. Other debts, such as numbers: 2, 4, 5, 6, 7, 18, 19,
30, 32, 33, 34, 37 and 38 are not likely to have monthly terms. Regardless, arrangements would need to be
made in the last group of numbers in order to handle the debt in some satisfactory manner. For analysis
purposes an estimate of what might be acceptable as a monthly payment arrangement for any amounts owed
to this last group of debts would need to be made for comparison purposes. All debts owed that fall into
number 26 above would be discharged and no amount would be due and owing to any of those creditors
upon receiving a Chapter 7 discharge.


CHAPTER 13 REGARDING 1 THROUGH 39 ABOVE:


Without exception, all of the above creditors are debts a Chapter 13 debtor would provide for in some
manner. Basically there are four different ways creditors are treated. 1. Inside the Plan and administered by
the Chapter 13 trustee, 2. Outside of the Plan and paid directly by the debtor out of the budget, 3. Those
which are treated differently simply because of a Chapter 13 filing, or 4. Those which are still paid after the
Plans’ completion. Below is a brief description of what effect the filing of a Chapter 13 has on the 23
different types of creditors listed above.

                                                                                                            78
A. Creditors under numbers: 1, 2, {9 & 10 = #15}} and (21 & 22 = # 27} are creditors which could be
   paid less than the full amount or possibly nothing in a Chapter 13 Composition Plan. These are
   creditors who are secured, but their secured status may be altered or removed under the special
   provisions of Chapter 13. As such, Chapter 13 has a far greater benefit to a debtor who has debt that
   falls into this category.

B. Creditors under number 3 remain unaffected. Any mortgage payment which is secured in total or
   partially (but not completely unsecured… see # 5 below) remains unchanged and will be paid
   directly by the debtor if current or if delinquent at the time the Chapter 13 case is filed, it will be
   administered by the Chapter 13 trustee.

C. Creditors under numbers: 4 and 33 are creditors where the interest rate would likely be completely
   eliminated. In a Chapter 13 filing, both Mortgage delinquencies and Tax delinquencies do not earn
   interest while a Chapter 7 filing would likely not provide any such benefit. However, these are debts
   that would be repaid in-full during the life of the 3 to 5 year Chapter 13 Plan.

D. Creditors under numbers: 9, 11 and 13 are creditors whose interest rate would likely be reduced to
   the current Prime Rate of interest plus 2% which is approximately 5% APR. A Chapter 13 filing can
   reduce interest which may provide a significant savings from what the debtor would be paying the
   creditor directly after a Chapter 7 filing.

E. Creditors under numbers: 4, 5, 6, 9, 10, 11, 12, 13, 14, 18, 21, 22, 23, 24, 25, 26, 30, 32, 33 and 36
   are creditors where the repayment of the entire debt or ‘the secured portion’ would be stretched-out
   over the life of the 3 to 5 years Chapter 13 Plan. Often the repayment of these debts through a
   Chapter 13 reduces the amount needed monthly as opposed to reaffirming the existing terms of the
   contract with those creditors directly after filing Chapter 7.

F. Creditors under numbers: 16, 17 and 31 are creditors which the debtors’ personal living expenses
   would provide for the debtor to make these payments directly out of the monthly living budget in a
   Chapter 13. Should the debt be paid-in-full prior to the completion of the Chapter 13 Plan, the
   amount which was being paid would then likely be added as an increase to the Chapter 13 Plan
   payment. Under these circumstances, it’s the same amount monthly when comparing Chapter 13 to
   Chapter 7 unless or until the debt is paid in full. The Chapter 7 likely has advantage since the
   monthly payment to the ‘paid-off-debt’ would then need to be added as an increase to the monthly
   Chapter 13 Plan payment, something the Chapter 7 debtor would not be responsible to pay.

G. Creditors under numbers: 34, 35, 37 and 38 are creditors the debtor must pay or chooses to pay after
   a Chapter 7 discharge or after a Chapter 13 ‘Composition’ Plan discharge. If any of these
   ‘unsecured’ creditors file a Proof of Claim and the Chapter 7 or the Chapter 13 trustee receives
   sufficient funds to pay a dividend to these unsecured creditors, the debt may be reduced by that
   amount. However, whatever the balance may be upon completion of the Chapter 7 or the Chapter 13
   Plan will need to be handled after the completion of the Plan. These are debts the debtor has chosen
   to repay or would have to pay directly to the creditors after having completed the bankruptcy process
   regardless of their having filed a Chapter 7 or a Chapter 13.


                                                                                                       79
   H. Creditors under number 39 are General Unsecured Creditors. They are: not secured, not priority and
      not ‘special’ (co-signed debts) creditors. While these debts are discharged in a Chapter 7 they are
      debts that are ‘compromisable’ and can therefore be settled for less than the full amount owed in a
      Chapter 13 Composition Plan. Any amount not paid through the Chapter 13 trustees administration
      is discharged upon completion of the Plans terms. The amount or percentage paid to these creditors
      is determined based on the debtors ability to pay (if anything) after consideration of secured,
      priority, special and administrative creditors when compared to the Schedule I of Income, the
      Schedule J of Expenses, Good Faith and Best Effort considerations along with the Chapter 13 Means
      Test regarding Disposable Income.



                                   A RECAP OF THE ABOVE


Debts where a Chapter 13 filing can ‘alter a secured obligation (partially or wholly) to an unsecured
obligation’ which allows the unsecured portion to be paid less than the full amount (if anything) in a
composition Chapter 13 Plan are numbers: 1, 2, 9, 10, 21 and 22 above.

Debts where a Chapter 13 filing can totally ‘eliminate future interest’ are numbers 4 and 33.

Debts where a Chapter 13 filing can ‘reduce the interest rate’ when the existing contract is more than the
current Prime Rate plus 2%, are numbers: 9, 11, 13, 21, 23 and 25 above.

Debts where a Chapter 13 filing can be ‘alter a creditors’ monthly payment and reduce the amount
needed monthly’ by extending the repayment of the debt over the life of the Chapter 13 Plan which may
result in a reduced amount needed per month compared to the existing contract requirements are numbers:
9, 10, 11, 12, 13, 14, 21, 22, 23, 24, 25, 26 and 36 above.




                                         ON A FINAL NOTE


Chapter 13 may be more complex and cost more in attorney fees, but under the right circumstances it can do
much more than a Chapter 7 Bankruptcy. Those ‘right circumstances’ are expansive and varied… but it
takes an expert Consumer Bankruptcy Attorney ‘highly skilled in Chapter 13 matters’ to grasp all of this
and to put everything into place when preparing a Chapter 13 ‘Plan’.

That’s why it’s so important to retain an attorney who can skillfully file Chapter 13 and Chapter 7 cases and
can prepare creative Chapter 13 Plans that take full advantage of the special provisions Chapter 13 has to
offer.

                                                                                                          80
                     T33   WHEN TO CHOOSE CHAPTER 7

Chapter 7 is the simplest, quickest, least expensive and easiest way to discharge unsecured debt. That
doesn’t mean it’s available and it doesn’t mean it’s necessarily the best choice. If it is available it may well
be your first choice, particularly if:

1. Your debts are ‘mostly unsecured creditors’ (credit cards, personal/signature unsecured loans, medical
obligations),

2. The amount you owe to your ‘unsecured creditors is significant enough’ to warrant filing bankruptcy,

3. You have little or nothing in the way of ‘non-exempt’ assets,

4. You have little or nothing in the way of ‘non-dischargeable’ debt,

5. You have little or nothing in the way of ‘preferences’ that will need to be resolved.

6. You have little or nothing in the way of ‘avoidable transfers’ that will need to be resolved.

7. You're basically ‘current with any secured creditors’ (including real estate mortgages) with whom you
wish to retain the security.

8. You can afford to continue making the monthly payments to the secured creditors you wish to retain the
security.

9. You can afford to satisfy the creditor(s) of any co-signed debt(s) in which you choose to protect the co-
signer, and

10. You can afford the ‘payment requirement of any other obligation remaining’ after the Chapter 7
discharge including many of the non-dischargeable debts in number 4, such as income taxes owed or
delinquent support payments, then Chapter 7 would be an obvious first choice.

It doesn’t necessarily mean it’s the best choice. Many other factors must be taken into considerations before
a final decision is made. For a more detailed review go back to {T32}. However, it is likely Chapter 7
would provide the financial relief you seek. You should still have a bankruptcy attorney determine if a
Chapter 13 would discharge more debt than a Chapter 7 and if the monthly obligation to creditors after
filing a Chapter 7 would be more or less than the monthly commitment to those same creditors in a Chapter
13. See {T32}.


                                                                                                             81
                     T34   WHEN TO CHOOSE CHAPTER 13


It’s not unusual for a petitioner who files a Chapter 13 case to pay through a 3 to 5 year ‘Plan’ of
Reorganization basically the very same debts they would be looking at after a Chapter 7 discharge. That
being the non-dischargeable priority creditors and secured creditors who have collateral the debtor wishes to
retain. However, there are differences in how some creditors are affected by the filing of a Chapter 13 or a
Chapter 7. Those differences are pointed out below.


   1. Most Chapter 13 Plans propose to pay less than the full amount and often nothing to unsecured
       creditors.

   2. Chapter 13 is a method to cure mortgage delinquency by paying a stream of monthly payments
       toward the delinquent amount over the life of the 3 to 5 year Plan to bring the mortgage totally
       current within the life of the Plan.

   3. Most all Chapter 13 Plans do not propose to pay any interest to any mortgage delinquency. This
       provides additional savings as most mortgage delinquency accrues interest for years at the mortgage
       rate until the delinquency is resolved when dealing with mortgages creditors directly.

   4. In Chapter 13 when a mortgage is owed on the family home that is not secured because the current
       market value is less than the senior mortgage(s), the Chapter 13 Plan can propose to ‘strip-off’ the
       ‘no-longer-secured’ junior mortgage(s) and treat it/them as unsecured.

   5. When a consumer secured creditors’ interest rate in more than the current Prime Rate Plus 2%, it’s
       not unusual for a Chapter 13 Plans to propose to reduce the rate of interest to such creditors.

   6. It’s not unusual to propose to pay less to the secured creditors in a Chapter 13 ‘Plan’ than they would
       have received after a Chapter 7 discharge. The ‘Cramdown’ provisions of Chapter 13. {G77}.

   7. Chapter 13 Plans often propose to reduce or eliminate interest and penalties to tax creditors entitled
       to a priority status.

   8. Chapter 13 will stretch-out or re-amortize the debt by proposing for the repayment of Secured,
       Priority and some Non-Dischargeable obligations up to the full length of a 3 to 5 year Plan including
       delinquent income taxes and delinquent Child Support.

   9. When you owe on a debt that is co-signed and you want to avoid having the co-signer pursued for
       collection, the co-signed debt can be ‘specially’ provided for in a Chapter 13 in order to avoid the
       co-signer from being’ contacted by the creditor during the life of the Chapter 13 Plan.


                                                                                                          82
10. The debtor has the availability to file a Chapter 7 after a Chapter 13 discharge much sooner than they
   would be able to obtain another discharge after a Chapter 7 discharge. {T15}.

11. If you file a Chapter 7 and change your mind, you’re likely stuck in a bankruptcy proceedings
   although you’ll likely be able to convert to Chapter 13. If you file a Chapter 13 and change your
   mind you’ll likely be able to voluntarily dismiss your Chapter 13 case or convert it to a Chapter 7.
   But if you wanted to voluntarily dismiss your Chapter 13 cases when it was originally filed as a
   Chapter 7, it’s not likely you’ll be allowed to do so. You may only be able to re-converted back to a
   Chapter 7.

   In other words if you file a Chapter 7, you’re likely stuck in a bankruptcy proceedings while on the
   other hand, if you file a Chapter 13 you’ll likely be able to get out of the bankruptcy process should
   you choose to do so.




                                                                                                       83
                                        THE CHAPTER 13 ‘PLAN’


            T35   CHAPTER 13 HAS A “MEANS TEST’ TOO
                  THE CHAPTER 13 ‘MEANS TEST’ FORM 22 ‘C’
                                                    a.k.a.

“STATEMENT OF CURRENT MONTHLY INCOME AND CALCULATION OF COMMITMENT
                    PERIOD AND DISPOSABLE INCOME”


   IN OTHERWORDS, THE CHAPTER 13 ‘MEANS TEST’ HAS A COMPLETELY DIFFERENT MEANING AND
                   INTENDED PURPOSE THAN THE CHAPTER 7 ‘MEANS TEST’


The Chapter 7 ‘Means Test’ Form 22 ‘A’ is used to determine if a debtor earns more than the States
‘Median’ Income and if they do, can they afford to repay a significant portion (25% or $10,000 over a 5
year period) to their non-priority unsecured creditors? If they can, they may be denied the use of a Chapter
7 Liquidation Bankruptcy. Therefore the Chapter 7 Means Test is used to determine IF a debtor should be
prohibited from filing a Chapter 7 Liquidation Bankruptcy.

In Chapter 13’s, the ‘Means Test’ Form 22 ‘C’ is much different. It’s used to determine WHAT MEANS
the debtor has to repay their non-priority unsecured creditors through a Chapter 13 Plan and FOR HOW
LONG the Chapter 13 Plan of reorganization should last.

Both Form 22 ‘A’ and Form 22 ‘C’s’ completion requires calculations and information from the debtors
personal records and information from the Census Bureau and the Internal Revenue Service.


COMMITMENT PERIOD ~ If the income is less than or equal to the California’s ‘Median’ income
{T70B}, a ‘Composition’ Chapter 13 Plans applicable ‘commitment period’ is a minimum of 3 years. This
means when a below ‘median’ income debtor files a Chapter 13 Plan proposing to pay less than the full
amount owed to unsecured creditors, the Plan must be a least 3 years but can be up to 5 years depending on
the Petitioners need and desire for it to be in excess of 3 years. If the income is more than the California’s
Median income and there’s ‘disposable income’ (see below) available, the Plan will be 5 years. If a more
than ‘Median’ income debtor doesn’t have any ‘disposable income’, the Plan may be allowed for a period of
as little as 3 years if the court allows.


DISPOSABLE INCOME ~ If the income is more than California’s ‘Median’ Income, the entire ‘Means
Test’ must be completed. Upon completion of the remaining portion of the Chapter 13 ‘Means Test’ Forms
22 “C’s” intent is to determine if the results show a monthly Disposable Income remaining to pay non-
priority unsecured creditors. It is that mathematical conclusion which is used to determine how much
                                                                                                           84
should be paid to non-priority unsecured creditors over the life of the Chapter 13 Plan. This is based on
Forms 22 ‘C’s analysis which is a “presumptive” starting point based in part on information from the
petitioner’s personal records and information from the Census Bureau and Internal Revenue Service.

Just because Form 22 ‘C’s calculation of ‘Disposable Income’ reflects the amount non-priority unsecured
creditors would receive over the life of the Plan doesn’t necessarily mean that amount is the amount
required to be paid to general unsecured creditors. It’s a presumption. Form 22 ‘C’ is based on the six
months income immediately preceding filing the bankruptcy petition. It’s also a combination of the debtors
personal expenses and the ‘typical’ living expenses for the county in which the debtor resides. Much may
have changed in the way of income and expenses that makes the prior six months considerably different
than the reality of the current income situation. Some expenses may justifiably be in excess of the typical
expenses in the county the debtor resides that makes the financial circumstances or a projection of the
Petitioners future financial situation in excess of the ‘norm’. If a lesser amount is proposed, be prepared to
justify and defend the reasons the amount should be less than what the Chapter 13 Means Test reflects as
available to pay non-priority unsecured creditors.

The Chapter 13 Trustee must take into account the Schedule ‘I’ of Income and the Schedule ‘J’ of Expenses,
the testimony of the petitioner at the time of the 341 Meeting of Creditors and all other information and
evidence available including the Bankruptcy Schedules, the SOFA, tax returns, pay stubs, the Chapter 13
Form 22 C’s Means Test, et cetera in order to make a complete evaluation of the petitioners proposed ‘Plan’
of reorganization. The Plan is not solely based on the Means Test any more than it’s based on any ‘one’
perspective.




                                             CHAPTER 13

                   T36   CHAPTER 13 REQUIRES A ‘PLAN’ OF
                               REORGANIZATION

When filing a Bankruptcy Petition the Petitioner must declare which Chapter of the Bankruptcy Code they
are requesting relief… Chapter 7 or Chapter 13. If the intent is to file Chapter 13, the Bankruptcy Petition
should be accompanied with a Chapter 13 Plan of Reorganization. It may, however, be filed shortly after
the filing of the Petition. A great deal of time may be required to design and prepare the Chapter 13 Plan
and any delay in filing the Plan timely will create havoc with the systems automatic setting of the 341
Meeting of Creditors and the Confirmation process. Ideally the Plan should accompany the filing of the
Petition to insure the court will be able to provide a copy of the Plan or a synopsis of the ‘Plan’ when
noticing the creditors of the Bankruptcy Petition having been filed, along with a Proof of Claim form and a
Notice regarding the 341 Meeting of Creditors, Date, Time and Location.

                                                                                                           85
A ‘Plan’ filed more than just a few days after the filing of the Petition may require the Petitioner, or their
attorney, to timely notice all creditors of the Plan and may necessitate the need to request a resetting of the
Meeting of Creditors and the Confirmation process. A costly and uncomfortable predicament.

NOTE: There is a Standard Form “Plan” used in the Eastern District of California which should be used
when filing Chapter 13 in; the Sacramento, the Modesto and the Fresno Bankruptcy Courts. For a copy of
the Standard Chapter 13 Plan Form, contact the U.S. Bankruptcy Clerks Office {BKCT}.




               T37   DESIGNING THE CHAPTER 13 ‘PLAN’
          WHAT MUST BE TAKEN INTO CONSIDERATION



                                         T37A  TYPES OF PLANS

The best way to address how to design a Chapter 13 Plan of Reorganization (or how to complete the Eastern
District of California’s Standard ‘Plan’ Form) is to list everything that must be taken into consideration
when calculating what the Chapter 13 ‘Plan’ payment should or must be, for how long the ‘Plan’ can,
should or must last and what considerations must or should be taken into account when addressing the
creditors.




                                       T37A1   EXTENSION PLAN

There are two types of Chapter 13 Plans of reorganization. One is a Plan which proposes to pay all creditors
in full, 100% of what is owed. This is usually referred to as an ‘Extension Plan’ because it describes a
Chapter 13 Plan that’s proposing to repay all of the creditors in full, however it’s doing so over an
‘extended’ period of time.

When an ‘Extension’ Plan is filed proposing to pay all creditors in full, many of the concerns regarding the
petitioner’s expenses do not require the scrutiny that a Plan proposing to pay less than the total owed to
creditors would require. When a ‘Composition’ Plan is filed proposing to pay less than the full amount
owed to all creditors, it must meet more stringent prerequisites to gain approval from creditors, the trustee
and the court, than an ‘Extension’ Plan.



                                                                                                            86
                                   T37A2   COMPOSITION PLANS

The other type of Chapter 13 Plan is what’s referred to as a ‘Composition Plan’. A Composition Plan is a
Chapter 13 Plan proposing to pay less than the full amount owed to all creditors. The Plan is proposing to
‘compromise’ the original amount owed to general unsecured creditors by paying something less than the
full amount due and owing. There are basically two types of Composition Plans.

‘PERCENTAGE’ PLAN ~ What’s referred to as a “Percentage Plan” is a Plan proposing to pay a minimum
fixed percentage to the General Unsecured Creditors. In this manner a creditor knows specifically what
amount they will receive as a minimum because they know how much they’re owed.

‘POT’ OR ‘BASE’ PLAN ~ What’s referred to as a “Pot” or “Base Plan” is a Plan proposing to pay a fixed
minimum dollar amount in total as a settlement amount to all the General Unsecured Creditors. In this
manner the debtor knows specifically what amount they will need to pay General Unsecured creditors after
satisfying ‘Secured’, Priority’, ‘Special’ and Administrative creditors regardless of what the unsecured
creditors Proofs of Claims may total.




         T37B   LENGTH OF PLAN AND DEBTOR PLAN PAYMENT AMOUNTS

The list below is not in any particular order as some considerations play off of each other, bouncing back
and forth until everything being considered settles down to a payment structure that adequately addresses
everything which must be taken into consideration.

It’s important to understand that the amount of a Plan Payment is based on two factors. One is based on a
minimum that must be paid to properly address the Secured, Priority and Unsecured creditors.

The other is what the petitioner can, should or must pay at a minimum based on an analysis of their ability.
Ability according to who? The debtor? The Trustee? The Court? The U.S. Trustee? The Creditors? The
Bankruptcy Code? And the answer is….. yes!

Before we get into that, the initial question is “Can the petitioner realistically afford to pay the
minimum amount that must be paid to satisfy administrative, secured, priority and possibly
unsecured creditors? How that analysis is made begins with the section, “A Plans Treatment of Creditors”
{T37E}

If the answer is no, because the debtor is unable to afford the minimum amount needed for a Chapter 13
Plan payment that would be necessary to satisfy the creditors, the debtor must revisit the entire income,
expense and debt structure. Realistic adjustments will be necessary in order to present a confirmable and
workable Plan that will satisfy the minimum necessary to satisfy creditors. Also see {T68} “Nothing Seems
to Solve My Problem”.
                                                                                                         87
If the answer is yes, they can afford the minimum needed to satisfy creditors but they can’t afford to pay all
unsecured creditors in full, the question then becomes, “how much’ can the petitioner pay above the
minimum necessary after satisfying the secured, priority, administrative and ‘special’ creditors and after
appropriate consideration of the debtors income and expenses?”

In 2005 Congress amended the Bankruptcy Code to include revisions that would help insure the integrity of
the intended purpose of the law itself. The purpose of Bankruptcy is to allow honest debtors the opportunity
to have a fresh start. Unfortunately easy access to Chapter 7 was believed to had historically allowed many
individuals who could afford to pay all or a significant portion of their debt to take unfair advantage of the
discharge provisions of a Chapter 7 Bankruptcy unnecessarily.

The other intention of Congress was to encourage the use of Chapter 13 while at the same time insure that
Chapter 13 would not also be abused by allowing individuals to file a Chapter 13 Plan that was less than a
fair and reasonable effort towards paying creditors fairly. To discourage unnecessary Chapter 7’s, Congress
designed the Chapter 7 Means Test which resulted in Form 22A which was designed to filter out petitioners
whose income shows they should be in a position to pay all or a significant portion of their non-priority
unsecured debt. Congress then went on to design a Means Test in Chapter 13 cases which culminated in
Form 22C to be used when individuals filed Chapter 13. Chapter 13’s Means Test Forms 22C is Congresses
effort to insure debtors would file Chapter 13 Plans which propose to treat their creditors fairly based on
specific consideration in the Bankruptcy Code on behalf of creditors and then based on their ability.

Therefore Chapter 13 has its own Means Test Form with its own intended purposes… completely different
from the purpose of the Chapter 7 Means Test. The Chapter 13 Means Test is actually titled, “The Chapter
13 1Statement of Current Monthly Income and 2Calculation of Commitment Period and 3Disposable
Income.




                  T37B1   STATEMENT OF CURRENT MONTHLY INCOME


The first part of the Chapter 13 Means Test and the Chapter 7 Means Test are basically the same as both are
intended to determine if the petitioner earns more or less than their States Median Income {T70B}. Forms
22A and Form 22C both use the same methodology to calculate what it considers to be the petitioners’
average monthly income. Both are based on the petitioners prior six months income (both include some
types of income and excludes others) to arrive at Form 22A and Form 22C’s calculation of what it considers
to be the petitioners average monthly income. It is this calculation that answers the first question of Forms
22C’s intended purpose which is the calculation of the petitioners “Statement of Current Monthly Income”.




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                                          T37C   LENGTH OF PLAN


                       2   CALCULATION OF COMMITMENT PERIOD

Form 22C’s calculation of the petitioner’s “Statement of Current Monthly Income” is then compared to
California’s ‘Median’ Income. Whether the petitioners Form 22C’s income is more or less than the State
Median Income is also what some courts have used to determine the length of the Plan. Using these figures,
if the petitioners income is equal to or less than the States Median Income, a Chapter 13 ‘Composition’ Plan
must be at least 36 months but no longer than 60 months.

If these figures show the petitioners income is more than the States Median Income, and it’s a
‘Composition’ Plan there is an unresolved issue as to how long the Plan must last. Judges in the Eastern
District of California have ruled that if after completing Forms 22 C there is an amount that remains as
‘Disposable Income’ to pay at least something to the non-priority unsecured creditors, the Plan shall be 60
months. If there is not any amount left as ‘Disposable Income’ to pay something toward the non-priority
unsecured creditors, some courts have allowed the Chapter 13 be to be a minimum of 36 months rather than
60 month, others still require 60 months.

NOTE: The MEDIAN INCOME for the State of California is based on the number of dependents the
petitioner can claim. The California State Median income is changed annually. As of (April, 2012) the
California State Median Income levels are as follows:


1 single- individual $47,683
2 person household $61,539
3 person household $66,050
4 person household $74,806
5 person household $82,306
plus an additional $7,500 for 5th and each additional person.



                                      3   DISPOSABLE INCOME

                                       ‘FORM 22C’s INTREPERTATION’


The third intention of Form 22C’s is to determine the petitioners ‘Disposable Income’. As in the prior two
calculations, Form 22C has its own methodology and interpretation of how to arrive at what it calls
‘Disposable Income’. Firstly understand that if a petitioners’ income is less than the States Median Income,
the form doesn’t ask anything further. The form doesn’t really require a ‘Disposable Income’ calculation
for the less than ‘Median’ income petitioners. ‘Disposable Income’ is something Forms 22C wants to
determine only in cases where the petitioner makes more than the States ‘Median’ Income.

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What the form is actually trying to calculate when asking for ‘Disposable Income’ is, “What, if any, is the
monthly amount of money the debtor has left to pay their ‘non-priority’ unsecured creditors”? This is a
number arrived at after the form takes the petitioner through a series of calculations using the Census
Bureau’s and Internal Revenue Service’s statistics for the county in which the petitioner resides. After
using a combination of the petitioner’s actual figures combined with the statistics provided by those
governmental agencies, the form arrives at what ‘it’ considers ‘appropriate’ allowances for living expenses
of the petitioner and their dependents.

The form also uses information provided by the petitioner regarding debts owed to secured and priority
creditors. The ‘form’ basically takes the total owed to consumer secured and priority creditors (which have
fewer months remaining based on the existing contractual terms, than the proposed Chapter 13 Plans length)
and divides the grand total of those debts by the length of the proposed Plan (usually 60 months). Based on
that data, the form uses a methodology to determine an amount needed to satisfactorily address those
secured and priority creditors i.e. 1/60th after including any anticipated interest those creditors may earn
based on the Chapter 13 ‘Plans’ proposed rate of interest. The end calculation Form 22 ‘C’ leaves an
amount (negative or positive) remaining per month which is available to pay non-priority unsecured
creditors. This is all done after ‘appropriately’ addressing the petitioners living expenses and the payment
of secured and priority creditors (based on the forms methodology ie: 1/60th of the totals due) when
compared to the petitioners ‘Statement of Current Monthly Income’. Therefore, Forms 22C’s definition of
‘Disposable Income’ is the amount available to pay non-priority unsecured creditors per month. If the
bottom line of Form 22 C is a positive number, it is then multiplied by the number of months the Chapter 13
Plan is set to last (usually 60 months) to arrive at a total amount the Chapter 13 Plan must pay to General
(non-priority) Unsecured Creditors. If the monthly disposable income analysis results in no excess or a
negative amount remaining, the Chapter 13 Plan would likely be approved at 0%, proposing to pay nothing
to the general unsecured creditors.

Now that we know Forms 22C’s interpretation of “The Chapter 13 1Statement of Current Monthly
Income and 2Calculation of Commitment Period and 3Disposable Income”, what do we do with it?

Basically a couple of ‘things’ have been determined. One is how long the Chapter 13 Plan should last. A
minimum of 36 months for below Median Income petitioners. Sixty months for over Median Income who
have ‘Disposable Income’, and either 36 or 60 months for over Median Income petitioner who have no
‘Disposable Income’, depending on which Judge is assigned the Chapter 13 case. Secondly, Form 22C has
made a “presumption” of the amount the non-priority unsecured creditors (General Unsecured Creditors)
should receive in any proposed Chapter 13 Plan of Reorganization. Although the amount arrived at (using
Form 22 C) as being the amount necessary to pay general unsecured creditors, (non-priority unsecured
creditors) is a ‘presumption’, it’s a presumption which can be challenged. Form 22C’s entire position is
based on the six months financial statistics immediately prior to filing bankruptcy. The ‘presumptions’ are
based on; 1. The future income will be identical to the past. 2. The debtors’ reasonable expenses do not
legitimately exceed what is normal for the county in which they reside. If the actual facts based on what the
reality of the situation is, or is ‘projected to be’, or if there are ‘special’ needs, conditions or circumstances
that should be taken into consideration, then with proper evidence, Form 22C’s presumptive calculation
would likely be successfully challenged.


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                                       T37DPLAN PAYMENTS

There are a number of different considerations that go into determining what the Chapter 13 Plan payments
need to be or should be. For the most part, they are based on the following major considerations. One is
what the petitioner can ‘Afford to Pay” based on the Petitioners’ considerations, another is what the
petitioner can ‘Afford to Pay’ based on ‘other perspectives’ and then lastly it’s based on ‘What Must be Paid
to Secured, Priority and Unsecured Creditors’ at a minimum based on certain consideration as set forth
below under “A Plans Treatment of Creditors” {T37E}.

What the debtor can ‘Afford to Pay’ is based on two different factors. One is Form 22C’s opinion of what
the debtor can afford to pay by using the forms analysis of the petitioners financial affairs. The other is
arrived by using the petitioner’s opinion of what they can afford to pay based on their projection of their
Income and Expenses as listed on the Bankruptcy Schedules ‘I’ and ‘J’. Comparing the Schedule ‘I’ of
Income to the Schedule ‘J’ of Expenses sets forth the debtors projection of the future anticipated ‘Margin’
which is the amount the debtor has determined is available monthly to fund a Composition Chapter 13 Plan
of Reorganization. What the debtor can ‘Afford to Pay’ is also based on the trustee and the courts
considerations of the debtors Best Effort {T37D5} and Good Faith {T37D4} considerations.

‘What Must be Paid to Secured, Priority and Unsecured Creditors’ is based on three different factors. One
is the ‘Margin’ as listed above based on what’s left when comparing the total realizable net income
(Schedule ‘I’) to the reasonable and necessary expenses (Schedule ‘J’) of the petitioner. The second is what
must be paid to the non-priority unsecured creditors based on Form 22C’s analysis of ‘Disposable Income’
plus the amount needed to properly satisfy the Secured and Priority creditors as covered below under, “A
Plans Treatment of Creditors”. Lastly is an underlying consideration that General Unsecured creditors
should never receive anything less in a Chapter 13 Composition Plan than what they would have received in
a Chapter 7 Liquidation Bankruptcy case. Let’s take a look at these three factors or considerations in more
detail when determining what a Chapter 13 Plan payment should be.




                    T37D1   SCHEDULE “I” AND SCHEDULE “J” MARGIN



Chapter 13 Plan Payments based on Bankruptcy Schedules ‘I’ Income and ‘J’ Expenses. Note that
this method in based on the petitioner’s “projection” of disposable income… not Form 22C’s concept of
disposable income which is based in part on Form 22 ‘C’s methodology of calculating the prior six months
income.

(Also see special notes regarding Best Effort and Good Faith considerations below which must be taken
into consideration when proposing any Chapter 13 Plan)


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Besides Forms 22 C’s consideration of what “disposable income” is, there’s another understanding or
interpretation of “disposable income”. This method is determined by calculating what amount could be or
would be potentially available to be paid into a ‘Plan’ based on the figures provided in the Schedule ‘I’ of
Income and the Schedule ‘J’ of Expenses. The Schedule ‘I’ is the petitioners projection of what income
they expect to receive monthly from all sources. The Schedule ‘I’ requires the petitioner to list the ‘gross
incomes’ from all sources (not limited to just those included when completing Form 22C). It also requires
the petitioner to list all mandatory deductions from their pay to insure that the ‘net income’ reflects the total
net as it would be after the allowance of all ‘required’ deductions. The ‘potential’ net take-home-pay would
not include deductions for any voluntary contributions to or for: savings, charities, bonds, voluntary
retirement contributions, vacation funds, optional insurance policies, et cetera… also without the deduction
of any ‘consumer’ debt payment such as: credit union debt or savings payments, retirement loan repayment,
wage garnishments, pay advances or any other deduction that is not required by law. What it wants to know
is, what is The Total ‘Potential’ Net Take Home Pay as if there were no debt and no voluntary deductions…
only mandatory deductions (Federal and State Law and Employer required deductions)

NOTE: Court ordered child support and/or alimony payments and any court ordered restitutions are not
considered voluntary nor are they considered ‘consumer’ debt. Such deductions should be allowed but
special notations need to be made regarding the amount, the nature of the obligation and how long such
deductions are expected to continue.

Based on those calculations the ‘Margin’ remaining is the difference between the ‘Total ‘Potential’ Net
Take Home Pay reduced by all ‘Reasonable and Necessary’ expenses (including home mortgage payments
that cannot be ‘stripped’ {G151}… but excluding payments for any other debt) of the debtor and their
dependents. It is this amount that is the maximum amount the debtor has available after proper analysis of
the potential Net Income and after the allowance of all of the debtors necessary expenses for themselves and
those who are dependent upon the debtor. It is that ‘Margin’ which should be equal to the Chapter 13
Monthly ‘Composition’ Plan Payment. In a Chapter 13 ‘Composition Plan’ the monthly payment would be
equal to the monthly ‘Margin’. We’ll call this method of analysis, “The Schedule ‘I’ & ‘J’ Margin”. The
Margin/Plan Payment must also be viewed in relationship to meeting the minimum needed to satisfy the
requirements of secured, priority, unsecured and administrative creditors as set forth below under “A Plans
Treatment of Creditors” {T37E} as well as the ‘Liquidation Analysis {T37D3}.




                 T37D2   FORM 22C’s CALCULATION OF DISPOSABLE INCOME



Chapter 13 Plan Payments based on Form 22C’s calculation of the Petitioners Disposable Income.
(Also see special notes regarding Best Effort and Good Faith considerations below which must be taken
into consideration when proposing any Chapter 13 Plan)



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Form 22C’s calculation of “Disposable Income” is the basis for this method of calculating what a minimum
Chapter 13 Monthly Plan Payment would need to be. Remember, Form 22C’s calculation of ‘Disposable
Income’ was actually the calculation of what amount the petitioner had remaining monthly, if any, to pay
non-priority unsecured creditors. Using that monthly number, multiplied by the length of the Plan (as
defined by Form 22C’s calculation of the ‘Commitment Period”, see {T37C}) allows one to know the total
that must be paid, if anything, to the general (non-priority) unsecured creditors.

If there is a ‘positive’ remainder, that amount is then added to the amount necessary to provide payment to
Secured and Priority Creditors being paid through the Plan as administered by the Chapter 13 Trustee. The
total would therefore represent all of the ‘inside-of-the-Plan’ secured and priority creditors plus Form 22C’s
required amount to be paid to non-priority unsecured creditors. Those totals plus any interest to creditors
which the Plan may have provided, plus the anticipated administrative cost, would represent the total
amount needed to satisfy the ‘minimum’ necessary during the life of the Plan… based on Forms 22C’s
minimum to non-priority general unsecured creditors.

That amount divided by the length of the Plan would therefore represent the minimum monthly amount
necessary to satisfy non-priority unsecured creditors, priority creditors and inside-the-Plan secured creditors
plus interest and administrative cost. Remember, this is just one method… the one that’s based on the
amount that Form 22C presumes must be paid to non-priority unsecured creditors and then adds in the
secured and priority creditors and how they must be treated as explained under ‘A Plans Treatment of
Creditors’ below. We’ll call this analysis “Form 22 C’s Disposable Income Threshold”.




                                      T37D3   LIQUIDATION ANALYSIS



The Liquidation Analysis is actually a term used which refers to the amount that a Chapter 7 Trustee
would realize on behalf of the priority and unsecured creditors of the bankrupt estate. The Chapter 7
Trustees review of the non-exempt assets, preferential payments that would be collected and any fraudulent
transfers plus any other assets the trustee would seize in a Chapter 7 is what’s referred to as the Liquidation
Analysis. This is the total amount the Chapter 7 trustee would have received from the ‘liquidation’ of the
Chapter 7 Bankruptcy estate for the benefit of the priority and unsecured creditors. If after liquidating these
assets and paying towards any allowed priority claims filed, would there to be any funds left to be paid to
the General Unsecured creditors? If so, that amount would become a minimum amount necessary to be paid
to the General Unsecured creditors in a Chapter 13 Plan. That amount would have to be paid to the General
Unsecured creditors after the ‘Plan’ properly provided for the secured creditors plus their interest along with
any priority and administrative creditors. That amount divided by the number of months the Plan will last is
another way to arrive at a minimum Chapter 13 Plan of Reorganization. We’ll call this analysis the
“Liquidation Analysis Threshold”.



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                                              T37D4   GOOD FAITH



Good Faith. When a Chapter 13 ‘Plan’ proposes to pay less than the full amount due and owing to general
unsecured creditors it must pass certain standards to insure that such a filing would not be an abuse of the
Bankruptcy Code. Again, what the petitioner proposes in a Chapter 13 Plan of reorganization is supported
by the information in the Schedules, the SOFA, the Chapter 13 Means Test, the ‘Plan’, tax returns and pay
stubs/vouchers. A review of that data will show if the ‘Plan’ may have or may not have been filed in ‘Good
Faith’. Good faith is considered when looking into what secured creditors are being paid through the
Chapter 13 Composition Plan as administered by the trustee or being paid directly by the petitioner ‘Outside
of the Plan’ out of the living budget.

If a secured creditors collateral being paid ‘inside’ or ‘outside’ of the Plan could be considered excessive
(luxuries and non-necessities) merchandise in a ‘Composition Plan’, this creates a situation where the
unsecured creditors are being forced to help the petitioner finance or support “luxuries and non-necessities”.
The reality of the situation is the debtor cannot afford to keep the security without the unsecured creditors’
helping them pay the debt by receiving less than the full amount they’re owed. If a Composition Plan is
filed which proposes the payment of creditors secured by luxury or unnecessary goods, the Chapter 13
Trustee or a creditor may file an objection to confirmation of the proposed Plan.




                                          T37D5   BEST EFFORT



Best Effort. When a Chapter 13 ‘Composition Plan’ is filed, it must pass certain standards to insure that
such a filing would not be an abuse of the Bankruptcy Code. Best Effort refers to a Plan where the
petitioner is making their ‘Best Effort’ to pay as much as possible after ‘reasonable and necessary’ expenses
for themselves and their dependents. Living expenses may or may not be excessive or considered un-
necessary or un-reasonable when viewed in relationship to many factors and circumstances. Everyone is not
expected to live on the same budget even when they have the same number of dependents or even the same
income. Many factors must be taken into consideration when determining whether the Plan reflects the
petitioner Best Effort. If a Composition Plan is filed which does not represent what could be considered
something reasonably close to the petitioners Best Effort, the Chapter 13 Trustee or a creditor may file an
objection to confirmation of the proposed Plan.




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                                      T37D6   FEASIBLE AND REALISTIC



Feasible and Realistic. There’s also a concern that the proposed 'Plan' of reorganization is practical,
realistic and feasible, and is a Plan that the petitioner can 'in all likelihood' complete. Is the budget too low
and unrealistic in view of the petitioner’s responsibilities to themselves and their dependents? Does the
budget take everything that’s foreseeable into consideration? Is the income projected realistic? Is the
income likely to be realized or is it based on wishful thinking, optimism and unsubstantiated presumptions?
The trustee and the Court want to approve Chapter 13 Plans which have a likelihood of succeeding because
it’s basically sound and realistic.




                             T37E   A PLANS TREATMENT OF CREDITORS



The fair and equitable treatment of creditors is as much a consideration as a debtor being afforded financial
relief and a fresh start. The Bankruptcy Court is a court of equity and creditors must be dealt with fairly as
well. There is a Standard Chapter 13 Plan Form used throughout the Eastern District of California. The
Chapter 13 Standard Plan for the EDC requires the debtor to individually list each and every secured and
priority creditor and how the Plan proposes to treat that specific creditor. The Plan addresses most
‘unsecured creditors’ in general terms as a group classification. Each creditor’s treatment must take into
consideration certain rights afforded them in accordance with the Bankruptcy Code, Local Rules, case law
and the rights afforded the creditor based on the creditor/debtor contractual agreement and the Bankruptcy
Code. Therefore, one factor in determining how much a Plan payment must be, is based on how creditors
must be dealt.

The list below includes all of what should be considered when preparing a Plan in view of satisfying the
Bankruptcy Codes concerns from a creditors’ perspective. This list of considerations is basically identical
to what the Chapter 13 Trustee reviews at the 341 Meeting of Creditors when considering whether to
recommend confirmation of a proposed Chapter 13 Plan of reorganization or to file an objection to
confirmation of a Plan {T54}.




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                              T37E1   REAL ESTATE SECURED DEBT



Real estate debt (mortgages) must all be addressed when preparing a Chapter 13 Plan of Reorganization.
How the Plan proposes to treat secured mortgage creditors vary depending on a variety of circumstances
including whether the mortgage is owed against the petitioners residence or if it’s a non-residence mortgage.
Is the mortgage current, delinquent, in default, has a foreclosure begun, has there been a ‘sale date’ set?
How many mortgages are there on any one specific property, are they all secured or is there a mortgage that
is totally unsecured? Does the petitioner wish to keep or surrender the property? Is there equity to protect?
Is the mortgage interest only, fully amortized, adjustable and does it include an impound account? Is the
equity within the exemptable limits? Are there others who have a partial interest in the property? All of
these factors must be taken into consideration when preparing a Chapter 13 ‘Plan’. Below is a brief
description of how mortgages are addressed when a petitioner files Chapter 13.




                          T37E2   REAL ESTATE “OUTSIDE THE PLAN”



Real Estate Mortgage Payments to be paid “Outside” of the Trustees Administration by the Petitioner
Directly. Any mortgage payment which is: (1) secured by at least some equity in the petitioners real estate
that (2) is current, (3) which has a repayment period that exceeds the length of the proposed Chapter 13
'Plan', would be maintained by the petitioner and shown as an expense in the on-going living budget on the
Schedule ‘J’ of Expenses.




                           T37E3   REAL ESTATE “INSIDE THE PLAN”



Real Estate Mortgage Payments included “Inside” of the Chapter 13 Plan Payment and Administered
by the Chapter 13 Trustees. By Local Rule any mortgage that is wholly or partially secured by any
amount of equity in the real property of the estate in which the petitioner wishes to retain, which is
delinquent at the time the Bankruptcy Petition is filed must be included in the Plan and administered by the
Chapter 13 trustee. The on-going monthly payments shall be administered by the Chapter 13 Trustee and
the delinquency will be brought current during the life of the Plan through the trustee’s administration out of
the Chapter 13 'Plan' payments.


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NOTE 1. Most ‘Plans’ proposing to cure the mortgage delinquency do not propose to pay interest to the
delinquent portion of the claim… saving a significant amount of money when compared to curing the
delinquency when dealing with mortgage creditors directly.

NOTE 2. On-going mortgage payments paid through the Chapter 13 Plan Payment and administered by
the trustee are paid based on the terms of the mortgage at the time the Bankruptcy Petition is filed.
Therefore, if the on-going mortgage included or excluded property taxes and/or property insurance, the
payment would remain the same… thereby making or not making the petitioner responsible for, or not
responsible for, paying the taxes and/or insurance separately out of their Schedule ‘J’ living expenses.

NOTE 3. If a mortgage payment being paid through the ‘Plan’ changes during the life of the Plan, the
Chapter 13 Plan payment would be adjusted accordingly and proportionately after the creditor properly
complies with the local requirement for such modifications.




                         T37E4   REAL ESTATE AND “LIEN STRIPPING”



There are special provisions within the Bankruptcy Code which allows Chapter 13 Petitioners the
opportunity to remove real estate mortgages from their secured position when they are no longer secured by
any equity. When a mortgage creditor’s sole collateral is real estate which has no equity after consideration
of any senior mortgage(s), that junior mortgage creditor, in reality, has no equity to secure their mortgage
debt. There’s no security. Home values have gone down in many instances dramatically. Often home
owners borrowed second, third and fourth mortgages against their homes when the market values were
increasing. Now that property values have decreased some of these secondary mortgages are not secured
because the value of the property has decreased to the point the value of the property is actually less than the
amount owed on a senior mortgage(s).

Unsecured Junior Mortgages and ‘Lien Stripping’. Some creditors may have a mortgage against the
petitioners’ residence which is no longer secured by any equity whatsoever. In a Chapter 13 ‘Plan’ some
mortgages are subject to ‘Lien Stripping’ and consequently treated as an unsecured creditor. When there is
no-longer any equity to secure the mortgage after consideration of any senior mortgage(s), any junior or
secondary mortgage(s) are no longer, in reality, secured by any equity. Motions to ‘strip the lien’ from the
petitioners residence can become a part of the Chapter 13 ‘Plan’ of reorganization. Mortgages stripped from
the property are then treated as ‘unsecured’.




NOTE: If a Chapter 13 Plan proposes to ‘Strip’ a junior mortgage from their secured position and treat that
creditor as unsecured, the amount of the debt is added to the other unsecured creditors to determine the new

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total of unsecured debt for eligibility purposes. Remember the maximum amounts that can be owed to
secured debt is $1,081,400 and $360,475 in unsecured obligations in Chapter 13 cases.




                               T37E5   CRAMDOWN REAL PROPERTY?



It seems as though the special provisions of Chapter 13 do not prohibit a petitioner from being able to
‘cramdown’ the value of real estate that is not the petitioners’ residence. However other considerations
must be taken into account when actually attempting to file a Plan proposing to ‘cramdown’ a first mortgage
on a petitioners non-residence real estate.

Cramdown "Real Property" Mortgage Creditors? Real property in which the petitioner resides
(personal residence) is not subject to the cramdown provisions of the Bankruptcy Code. If the real estate is
not the residence of the petitioner, such as a 'rental house', the 'Plan' can propose to ‘cramdown’ the
mortgage debt to an amount equal to the value of the security (the value of the rental house). The crammed-
down mortgages reduced debt, must be paid IN-FULL through the 'Plan' and administer by the Chapter 13
Trustee. The total 'reduced' mortgage debt must therefore be paid in full during the life of the 3 to 5 year
'Plan' of reorganization.




                           T37E6   CONSUMER SECURED CREDITORS



In view of the Bankruptcy Code, the General Order and the Local Rules along with considerations of the
individual secured creditors, the priority creditors and the general unsecured creditors as a whole, each
secured creditor must be reviewed to determine if the debt is best paid directly by the petitioner out of and
from the personal (Schedule ‘J’) living budget or from and out of the ‘Plan’ payments as administered by
the Chapter 13 Trustee.



                       T37E7   CONSUMER DEBTS OUTSIDE THE PLAN



When should a consumer secured creditor be paid 'Outside’ of the Trustees Administration and
instead be paid by the Petitioner Directly? Secured creditors scheduled to be paid outside of the
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proposed Plan should be those contracts which have a repayment period remaining that exceeds the life of
the proposed Chapter 13 Plans length. To pay longer-than-the-life-of-a-Chapter-13-Plan-debt ‘inside’
through the trustees administration would allow a long term contract to be paid-in-full early. If a
‘Composition Plan’ is filed which includes the payment of a secured creditor which proposes to accelerate
the repayment of a creditor through a shorter Chapter 13 Plan, that debt is being pre-paid out of the money
that more appropriately belongs to the unsecured creditors.

EXAMPLE AS TO WHY: If the petitioner has 68 months remaining on an automobile contract and wants
to pay that debt through the trustees administration in a 36 month ‘Composition Plan', the creditor would be
receiving more per month than the original contract payment required. That extra amount paid, which
accelerates the payment of that debt, constitutes money that would have, could have and should have gone
to the unsecured creditors in a ‘Composition Plan’ rather than expediting the payment of the secured
creditor. Therefore that 'longer-than-the-life-of-the-plan-creditor' is a debt that more appropriately should
have been paid by the petitioner directly out of their Schedule 'J' Living Expenses.

NOTE: If it’s delinquent, the delinquent amount of the consumer debt can be cured through the Plan while
the on-going payments are made directly by the debtor out of the budget.




                         T37E8   CONSUMER DEBTS INSIDE THE PLAN



When should a consumer secured creditor be paid ‘Inside’ the Plan and Administered by the Chapter
13 Trustee? Secured creditors listed ‘In the Plan' are paid through the trustee’s administration and are not a
part of the petitioner’s Schedule 'J' Living Expenses. Creditors paid through/in the 'Plan' must have a
contractual repayment period that does not exceed the length of the proposed repayment period of the
'Plan'. Creditors ‘inside’ are debts administered by the Chapter 13 Trustee and paid from, or out of, the Plan
payments paid by the petitioner to the Chapter 13 Trustee. To allow the petitioner to pay ‘short-term’ debt
directly out of the living budget would allow the petitioner to keep or ‘pocket’ the excess amount after the
contract was paid off. Any extra money should be paid to unsecured creditors when the Chapter 13 Plan
does not provide for the unsecured creditors to be paid in full.




EXAMPLE AS TO WHY: If the petitioner has a car payment of $400 per month that they're paying
directly to the creditor from their household budget outside of the trustee’s administration which only has 6
months remaining, the petitioner will have reduced their living budget by $400 per month after paying it
off... after 6 months. Beginning on the seventh month the petitioner now has $400 ‘extra’ cash ‘left-over’
each month. That 'extra' $400 is money that should be made available to unsecured creditors when the
Chapter 13 'Plan' does not propose to pay the unsecured creditors in full.

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                                    T37E9   CRAMDOWN VEHCILES



Chapter 13 of the Bankruptcy Code has special provisions which allows the petitioner the opportunity to
split some secured creditors into the secured portion and the unsecured portion when the value of the
security is less than the amount owed. When secured creditors are ‘crammed-down’ by using this special
provision of Chapter 13, those claims are split into the secured portion and the unsecured portion and treated
and paid accordingly through the Plan.

‘Cramdown’ Vehicle Contracts Signed More than 910 days (2½ years) Prior to Filing. A special
provision within Chapter 13 of the Bankruptcy Code provides the petitioner the opportunity to split some
secured creditor’s claims into secured and unsecured portions. Often a debtor owes a creditor secured by a
vehicle an amount which is considerably more than the actual value of the vehicle. If the vehicle contract
was entered into more than 910 days (2½ years) prior to filing a Chapter 13 Petition, the petitioner has the
opportunity to use the ‘Cramdown’ provisions of Chapter 13 when the vehicle is worth considerably less
than the balance owed. A determination of the Kelly Blue Book ‘Retail Value’ less the cost to restore the
vehicle to bring it to the Retail Value condition, is generally the accepted method used to determine the
secured value of a vehicle when implementing the Cramdown provisions of Chapter 13.

NOTE 1: If the repayment period of the secured creditor exceeds the life of the proposed Chapter 13 ‘Plan’
the practice in this area is that the payments should be made directly by the petitioner as an allowed expense
in the Schedule ‘J’ Living Expenses. All such payments made directly by the debtor are not subject to the
‘Cramdown Provisions’ of the Bankruptcy Code. Most all debts which have more than 60 months
remaining were not purchased more than 910 (2 ½ years) prior to filing Chapter 13 anyway, so it’s unlikely
to ever be an issue.

NOTE 2. If a ‘Plan’ proposes to ‘Cramdown’ a secured creditors claim, the ‘unsecured portion’ of that debt
is added to the unsecured total when determining eligibility {T70A} based on the amounts owed to
unsecured creditors. Currently the unsecured limit is $360,475.

NOTE 3: Secured creditors being paid through the ‘Plan’ and administered by the trustee which are not
subject to the ‘cramdown’ provisions of the Bankruptcy Code must be paid in full… including interest
provided for in the Plan. Also the ‘secured value’ of any ‘crammed-down’ vehicles must be paid in full plus
interest provided for in the Plan {T37E13}. The ‘unsecured’ portion of a crammed-down creditor’s claim is
treated on a par with other general unsecured creditors.




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                   T37E10   CRAMDOWN NON-VEHICLE PERSONAL PROPERTY



Non-vehicle merchandise can be crammed-down as well. This is not used as frequently as the cramdown
provisions on vehicles even though they only require a one-year period (365 days) from purchase date
compared to the 2½ year period (910 days) for vehicles. The reason is the amount owed on non-vehicle
debt is usually too small to justify the extra expense and hassle of filing a Motion to Value regarding general
consumer goods. The provision however is there and can be used when warranted.

‘Cramdown’ Non-Vehicle ‘Consumer Goods’ Contracts Signed More than One-Year Prior to Filing.
Creditors secured by consumer goods (not vehicles) that were purchased more than one-year (365 days)
prior to the petitioner filing the Chapter 13 Petition are also subject to the ‘cram-down’ provisions when the
value of the goods are significantly less than the balance owed. This would include contracts for
merchandise such as: TV’s, Surround Sound Systems, Computers, Wheels, Tools, Furniture or any other
Non-Vehicle merchandise.

NOTE 1: If the repayment period of the secured creditor exceeds the life of the proposed Chapter 13 ‘Plan’
the practice in this area is that the payments should be made directly by the petitioner as an allowed expense
in the Schedule ‘J’ Living Expenses. All such payments made directly by the debtor are not subject to the
‘Cramddown Provisions’ of the Bankruptcy Code. Most all debts which have more than 60 months
remaining were not purchased more than 365 day prior to the Chapter 13 filing anyway, so it’s unlikely to
ever be an issue.

NOTE 2: If a ‘Plan’ proposes to ‘Cramdown’ a secured creditors claim, the ‘unsecured portion’ of that
debt is added to the unsecured total when determining eligibility {T70A} based on the amounts owed to
unsecured creditors. Currently the unsecured limit is $360,475.

NOTE 3: Secured creditors being paid through the ‘Plan’ and administered by the trustee which are not
subject to the 'cramdown' provisions of the Bankruptcy Code are creditors whose claims must be completely
paid in full… including interest provided for in the 13 Plan. Also the secured portion of a Crammed-down
creditors secured claim must also be paid in full plus interest {T37E13} at the rate provided for in the
‘Plan’. The unsecured portion of the ‘split-claim’ is treated on a par with other general unsecured creditors.




                            T37E11   SURRENDERING SECURITY IN CHAPTER 13



Sometimes, in retrospect, there are contractual obligations we regret having entered into. It can be a
‘Timeshare’, a new vehicle, a travel trailer or even something as minor as a Carving Set or that thousand
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dollar vacuum cleaner. We’ve all done it. Whether it’s just buyers’ remorse or because your priorities or
your financial situation has changed, you may have wished you had the opportunity to turn back the clock
and get out from under the obligation.

Obviously in a Chapter 7 bankruptcy it’s rather simple… you just don’t redeem or reaffirm the debt, you
don’t make payments and you declare on your ‘Statement of Intentions’ that you’ll be ‘Surrendering’ your
interest in the collateral. The creditor will likely re-possess the security, they’ll sell the security and likely
arrive at a deficiency balance. You shouldn’t be too concerned because the unsecured deficiency balance is
a debt that will in all likelihood be discharged in the Chapter 7 bankruptcy.

Similarly, in a Chapter 13 ‘Plan of Reorganization’ you can propose to ‘surrender’ your interest in a secured
creditors’ collateral. Just as in the Chapter 7, the creditor will likely re-possess the security, sell the security
and likely arrive at a deficiency balance. The creditor can then file a ‘Proof of Claim’ as an unsecured
creditor for any unpaid remaining ‘deficiency’ balance. That claim would then be added to the pool of
general unsecured creditors and be paid on a par with the other general unsecured creditors who file timely
and allowed claims. Unless you filed an Extension Plan proposing to pay all of your creditors in full 100%
the increase in the pool of unsecured debt does not change the amount the debtor has available to be paid to
that pool of unsecured debt in a Composition Plan. Therefore the amount of the Chapter 13 payment will
likely remain the same regardless of any increase in unsecured obligations as a result of a deficiency balance
being added. The increase in unsecured debt created by the deficiency balance will likely result in a
reduced percentage or smaller dividend to unsecured creditors.

When you file a Composition Plan, the amount you pay is based on the Plan meeting the thresholds needed
to satisfy: secured and priority creditors, the Schedule I and Schedule J’s Margin, the Chapter 7 Liquidation
threshold, Form 22 C’s Disposable Income (Non-Priority Unsecured Creditors) threshold plus the Best
Effort and Good Faith considerations. None of these factors change as a result of the debtor deciding to
surrender a secured creditors’ collateral or because of an increase in the amount owed to unsecured
creditors. However, a return of security in a 100% ‘Extension Plan’ would require the payment in-full of
any deficiency balance.

The only likely impact a ‘Surrender’ would have financially in a Composition Plan, would be in the debtors
favor. The elimination of a secured obligation reduces the amount needed per month because there are
fewer secured creditors to contend with in the Plan. This gives the debtor the opportunity to take a
‘healthier’ look at their on-going living expenses.

Therefore a Chapter 13 Composition Plan can propose the ‘surrender’ of a secured creditors’ collateral
without much concern of the consequences of a deficiency balance. Creditors are not paid in full in
‘composition’ Plans therefore they’ll all simply receive less than they would have receive since the same
amount is available to be paid to a larger total of unsecured debt.

NOTE: If the 'buyer’s remorse' product has become fixed to the real estate such as: siding on the house, an
installed water purification system, new dual pane windows, solar panels or other improvements which are
attached to the real estate and cannot be removed without significant damage or a great deal of difficulty and
expense, the option to surrender may not be a guaranteed alternative.

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                     T37E12   ADEQUATE PROTECTION AND DEPRECIATION



Any Plan filed must treat secured creditors in a fair and equitable manner. If the secured creditors contract
has more months remaining than the Chapter 13 Plan, the Schedule ‘J’ budget should allow for the monthly
payment necessary to pay the contractual amount directly ‘outside’ of the Chapter 13 Trustees
administration. All secured debt paid by the trustee ‘inside’ the Plan as administered by the Chapter 13
Trustee must be paid in full during the life of the Chapter 13 Plan with a stream of regular monthly
payments plus any interest the Plan has allowed.

Adequate Protection Payments. Secured creditors monthly payments should be in an amount that, at a
minimum, keeps-up with the depreciation of the collateral in which the creditor has a secured interest. As
an example, if the security is a vehicle and the value of that vehicle is depreciating at a rate of $2400
annually, the creditor should receive at least $200 monthly. Additionally, all secured creditors paid through
the trustees administration according to the 'Plans' provisions, must be completely paid in full (or the
secured portion on any ‘crammed-down’ creditor) including any interest provided during the 3 to 5 year life
of the Chapter 13 ‘Plan'. Secured creditors being paid through the ‘Plan’ are based on what the Court
approved Plan states… not based on the original contractual terms. The Plan must specifically state the
amount each listed secured creditor is scheduled to receive per month and the rate of interest the ‘Plan’
proposes to pay that specific creditor.

NOTE 1: Monthly payments paid to secured creditors through the Chapter 13 Trustees administration can
be less than the original contractual payment. It's common for secured creditors to receive payments which
are about 65% to 75% of what they were originally and it’s not unusual they could be considerably less.
Careful consideration should be given when designing a Plan which reduces the monthly payments and the
interest rate to secured creditors… particularly vehicle creditors. It’s in everyone’s best interest to avoid
creditors filing Objections to Confirmation of a proposed Chapter 13 Plan.

NOTE 2. Remember, any debt being ‘Crammed Down’ adds the unsecured portion of that debt to the total
owed to unsecured creditors for eligibility purposes. Currently it is $360,475.




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                     T37E13 INTEREST TO CONSUMER SECURED CREDITORS



The first thing to know when considering what rate of interest the proposed Plan should provide is, “What
rate of interest did the secured creditors’ contract originally provide?” Look at the contract, some contracts
were written at 0% interest, others, well into the double digits. Consider the actual contract rate and the
current market rates for contracts and how far you think you can push the rate down without drawing an
objection you might lose from the creditor or the Chapter 13 Trustee. Generally, the court would not oppose
a ‘Plan’ which provides for the current ‘Prime Rate’ plus 2%.

Interest to Secured Creditors. The amount of interest proposed to be paid to secured creditors through the
Chapter 13 Plan of Reorganization varies. Creditors have an opportunity to file a formal ‘Objection to
Confirmation of the Plan’ of reorganization. Ultimately, when a ‘Plan’ is 'confirmed' by the court it means
that all of the terms, conditions and treatment of creditors as set forth in the 'Court Approved Plan' are
binding on all parties of interest... including the creditors. If a Plan listed a secured creditor and proposed to
pay that creditor at "X" dollars per month and to provide "Y" rate of interest and the court has ‘Confirmed
the Plan’, those terms control as that is now the Federal Court Order.

NOTE: If a creditor opposes the ‘Plans Payment’ regarding how they’ll be paid or the rate of interest being
proposed in the 'Plan', they have the opportunity to ‘File an Objection’ to the proposed 'Plan'. Short of any
‘negotiations’ and any subsequent agreement to modify a Plan or any objection (from a creditor or the
trustee) the court will approve the 'Plan' unless the court, on its own, takes exception to some proposed
condition of the ‘Plan’. Bottom line is that the ‘Plan’ may propose to alter the rate of interest and the
monthly payments to a secured creditor without causing the trustee, the creditor or the court to take any
exception to the proposed Plans treatment. As long as such treatment can be considered 'reasonable' and not
‘abusive’ the creditor would likely not be inclined to go to the expense of hiring an attorney, file an
objection to the Plan, preparing for and appearing at court and possibly losing their objection regarding the
manner in which they are proposed to be treated.




                  T37E14   EXECUTORY CONTRACTS AND UNEXPIRED LEASES



Most often an Executory Contract and an Unexpired Lease in which the debtor wishes to retain the
merchandise is paid ‘Outside of the Plan’ directly by the debtor. The Schedule ‘J’ of Expenses should allow
and provide for all such contractual obligations. If the remaining terms of the lease has fewer months
remaining than the life of the proposed Plan, the Plan payment amount should increase by, and when, the
amount of the lease payment is no-longer being paid directly by the debtor. If the debtor needs to replace or
retain the merchandise upon the expiration of the lease, a declaration regarding the debtors intentions should

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be presented to explain and justify the needs of the debtor and why those funds should not be paid into the
Plan upon the expiration of the lease when designing the ‘Plan’.

If, on the otherhand, the agreement is delinquent at the time the Bankruptcy Petition is filed, the Plan must
address that delinquency. Either the executory contract/unexpired lease can be completely provided for in
the Plan as a Class 1 Creditor including the curing of any delinquency or the delinquent amount can be
provided for separately and ‘specially’ as a Class 6 creditor while the debtor pays the on-going payments as
a part of their Schedule ‘J’ of Expenses.




                     T37E15   LOANS SECURED BY RETIREMENT FUNDS



In Chapter 7, retirement loans are simply viewed as ‘secured’ obligations. Loans secured by retirement
funds need special consideration in a chapter 13 case. They are ‘secured’, but they’re loans to the debtor
themselves. When the petitioner pays a ‘secured retirement loan’, they’re actually paying themselves.
From the general unsecured creditors’ perspective they should be paid in full before the retirement loan
receives anything. On the other hand, if it’s not paid back, the debtor not only loses the retirement funds
pledged as collateral, they’ll have serious tax consequences as well.

Trustees and the courts in the Eastern District of California have allowed the Chapter 13 debtor to continue
to pay retirement loans directly outside of the Chapter 13 Plan as an allowed budgetary expense. If,
however, the retirement loan will be paid-in-full prior to the conclusion of the Chapter 13 Plans completion,
the Chapter 13 Plans monthly payment amount would increase by the amount of the monthly retirement
loan payment following the month it was paid off. Such increases in the stream of Chapter 13 payments is
not uncommon in the Eastern District of California. In this manner, the debtors is paying into the Chapter
13 Plan all available funds after consideration of necessary living expenses and after the payment of a loan
secured by the debtors retirement account.




                                       T37E16   PRIORITY CREDITORS



Priority creditors are those unsecured creditors entitled to preferential treatment according to Section 507 of
the Bankruptcy Code. All Priority creditors are non-dischargeable and must be paid in full if not through
the bankruptcy proceeding, then directly by the petitioner.


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In a Chapter 7, if the amount of money received by the Chapter 7 trustee from the liquidation of the
bankrupt estate wasn’t enough to pay the ‘priority creditor(s)’ claim in full, the balance of the priority debt
remaining is still owed by the petitioner. Priority creditors are ‘non-dischargeable’ obligations and as such
they remain the responsibility of the debtor… even after the Chapter 7 ‘discharge’.

Priority creditors are treated no worse in a Chapter 13 ‘Plan’ of reorganization than they would have been
treated in or after a Chapter 7... all ‘Priority Creditors’ must be paid in full. Therefore in a Chapter 13 Plan
all creditors entitled to a priority status are scheduled to be paid in full out of the Chapter 13 Plan payments
as administered by the Chapter 13 Trustee.

Priority Domestic Support Obligations. Any domestic support obligation owed to a spouse, a former
spouse or child of the debtors or any entity collecting of behalf of such a debt is entitled to a priority status.
Debts of this nature fall into two categories. One is the amount delinquent at the time the Chapter 13
Petition was filed, the other is the on-going spousal or child support obligations.

The delinquent amount is what should be listed on the Schedule ‘E’ of Priority creditors which will require
the Plan to provide for the full payment of any delinquent claim filed.

Any on-going amount remains the direct responsibility of the debtors. Therefore the amount of the on-
going responsibility should be included in the debtors Schedule J of Expenses or as an allowed deduction
from wages.

Priority Taxes. Most Federal or State tax obligations are likely to be entitled to a “Priority” status. Tax
obligations can be; “Secured and Priority”, some can be “Unsecured Priority” and some can be wholly
“Unsecured”. What determines which classification the tax creditor falls, depends on a number of different
factors. Has the tax creditor filed a lien? Is the lien actually secured by equity? If so, up to what amount?
Does the ‘Plan’ include a ‘Motion to Avoid Lien’ or a “Motion to Value the Collateral” regarding the tax
lien? If the tax obligation does not have a lien, is it entitled to a Priority status? What type of tax
obligation is owed? For what years are they owed? How much time has expired since the tax obligation
first came due? When was the information regarding the tax obligation submitted to the taxing entity? How
much time has transpired since the tax obligation became known to the taxing entity?

All of these factors come into play when determining if a ‘tax’ obligation should be listed in the Chapter 13
Plan as partially or wholly “Secured”, “Priority” or “Unsecured”. Consult your attorney regarding any
details and documentation that relates to tax obligations. There is a great deal of difference in what
financial effect the Chapter 13 Plan will have on tax obligations depending on the actual status and
classification the taxing agency is entitled.

NOTE: The Chapter 13 Trustee and the Court have no objections to a ‘Plan’ which does not propose to pay
any future interest or penalties to the unsecured tax creditors even if they are entitled to a priority status.




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                               T37E17   STUDENT LOANS IN CHAPTER 13



Student loans are unique in Chapter 13. They’re also mentioned in Section {T65B} Non-Dischargeable
“Student Loans” in Chapter 13. Student loans are not secured, not priority and not entitled to be treated in
any special manner such as how a co-signed debt is treated. They’re ‘unsecured’, they’re non-dischargeable
and they will likely not receive any distributions from the Chapter 13 trustee during the life of the ‘Plan’.
The Chapter 13 trustees and the courts in the Eastern District of California have a mixed view of how
Chapter 13 Plans should deal with student loans. Some trustees and some Judges will not oppose a Plan that
allows the Petitioner the budgetary expense necessary to pay the on-going student loan payment directly,
others oppose such treatment. In bankruptcy, student loans are no different than any other ‘General
Unsecured’ creditor. As such, they can’t be treated any different than other General Unsecured creditors.

This places debtors in the uncomfortable position of not being able to pay or even afford to pay student loan
payments directly while the Plan doesn’t satisfactorily address the debt either. Therefore the debtor should
let the student loan creditor know their situation and that they will address the debt once the bankruptcy case
is closed. In the meantime, interest continues to accrue and the debtor is left with an unsatisfactorily
conclusion in that they’ll need to address any balance remaining upon the completion of the Chapter 13
Plan.

The real ‘fault’ of Chapter 13 not satisfactorily dealing with ‘student loans’ lies solely on Congress. The
trustees are merely following the courts’ rulings and the judges are simply interpreting the law as written by
Congress. In Chapter 7, it’s simple, they’re non-dischargeable and the debtor must continue to deal directly
with the creditor regardless of the bankruptcy filing and the subsequent discharge. In Chapter 13 they’re not
provided for in the Plan, the debtor’s may well not be allowed the expense to make the payments directly
outside-of-the-Plan, so just as in a Chapter 7, they’ll have to address the debt after the bankruptcy case is
closed unless the trustee and the court allow otherwise.




                      T37E18   CO-SIGNED UNSECURED CREDITORS



Congress wanted to encourage debtors to file Chapter 13. This is apparent in view of the ‘lien stripping’
and the ‘cramdown provisions’ along with other incentives a Chapter 13 filing provides that Chapter 7 does
not provide. Congress also made special provisions when rewriting Chapter 13 to provide protection for co-
signers. That protection only extends to debts where the petitioner received the benefits of the indebtedness.
This special protection was included so debtors would not be discouraged from choosing Chapter 13 as a
viable or even attractive solution to their financial problem. My father, Robert E. Loheit, Chapter 13
Trustee (1962 – 1977), Deceased, introduced this possible legislation and successfully lobbied for this
provision when the Bankruptcy Code was being drafted in 1978.
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The idea is that if Chapter 13 did not extend protection to the co-signer, debtors would be less inclined to
file Chapter 13 for fear of the co-signer being pursued by the creditor’s collection efforts during the life of
the Chapter 13 Plan. It is because of these considerations that Chapter 13 not only prohibits the creditor
from collecting from the co-signer but also allows co-signed debts (where the debtor received the
consideration of the consumer debt) to be treated ‘Specially’ in a Chapter 13 Plan. A Chapter 13 Plan can
propose to pay an unsecured co-signed creditor in a preferential manner by having the Plan provide for the
creditor to be paid-in-full’ before beginning any payment to General Unsecured Creditors.




                          T37E19   GENERAL UNSECURED CREDITORS



General unsecured creditors must also be addressed and provided for within a Chapter 13 Plan of
reorganization. While secured and priority creditors and co-signed obligations are addressed individually
with specific proposals, general unsecured creditors are dealt with as a group within their own classification.
All non-priority unsecured, not co-signed (General Unsecured) creditors are paid on a par and equally on a
‘pro rata’ basis amongst themselves until: 1. they are paid in full in the case of Extension Plans, 2. They’re
paid at least a minimum of the Confirmed Plans stated and fixed Percentage in a Composition Percentage
Plan, or 3. They’re paid a minimum of a total fixed dollar amount to be paid to General Unsecured creditors
in a Composition Pot or Base Plan.

Just because most unsecured creditors are dischargeable debts doesn’t mean they have no rights or deserve
no consideration. What follows is a recap of the thresholds and considerations covered earlier under ‘Plan
Payments’ which provides the general unsecured creditors some degree of representation.




            T37E20   LIQUIDATION ANALYSIS AND UNSECURED CREDITORS



Liquidation Analysis. As in a Chapter 7 Bankruptcy, the trustee’s main duty is to discover and liquidate
non-exempt assets for the benefit of the priority and unsecured creditors. A similar consideration is true for
a Chapter 13 ‘Plan’ of reorganization in that the unsecured creditors must not be paid any less through a
Chapter 13 ‘Plan’ than what they would have received through a Chapter 7 Liquidation Bankruptcy. The
Chapter 13 Trustee won't liquidate assets… they just want to make sure the unsecured creditors will receive
no less than what they would have received in a Chapter 7 Liquidation Bankruptcy. This subject was also
touched-on when considering “Plan Payments” {T37D3}


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    T37E21   FORM 22C’S DISPOSABLE INCOME AND UNSECURED CREDITORS



The Chapter 13 Means Test Form 22C. One of the Chapter 13 Means Test purposes is to determine the
amount of ‘Disposable Income’. Form 22C’s interpretation of ‘Disposable Income’ is the amount the
petitioner is ‘presumed’ to have available to pay general (non-priority) unsecured creditors. The
‘presumption’ can be challenged, however short of any challenge, the Chapter 13 Plan should provide for a
dividend to unsecured creditors that is no less than the amount of the ‘disposable income’ remaining per
month based on the Chapter 13 Means Test Forms 22 C’s bottom line, times the number of months the Plan
is proposed to last. This subject was also touched-on when considering “Plan Payments” {T37D2}




                    T37E22   GOOD FAITH AND UNSECURED CREDITORS



Good Faith. ‘Good Faith’ considerations are on behalf of the general unsecured creditors. Just as in the
Best Effort considerations below, so too, must a Composition Plan reflect the petitioner’s good intentions
when proposing to pay less than the full amount due and owing to all creditors. If the Composition Plan is
proposing to pay or finance luxury, excessive or unnecessary goods, the Composition Plan may not
necessarily be proposed in Good Faith. If the petitioner were to surrender their interest in the ‘luxury’
secured creditors collateral, it would free-up money and increase the amount available to pay the general
unsecured creditors. The Chapter 13 Trustee and creditors may file objections to Composition Plans that do
not represent a petitioners Good Faith filing. This subject was also touched-on when considering “Plan
Payments” {T37D4}.




                   T37E23   BEST EFFORT AND UNSECURED CREDITORS



The Best Effort. Composition Plans must provide that all funds available which are in excess of the
petitioner Schedules ‘I’ of Income and ‘J’ the Living Budget be paid into the Plan… even when that amount
is more than the minimum amount necessary to satisfy secured and priority creditors. If after satisfaction of
the Composition Plans proposed specific treatment of secured and priority creditors, any remaining funds
would become available as a dividend to the general unsecured creditors. Therefore it’s important to closely
review the Schedule ‘I’ of Income and the Schedule ‘J’ of Expenses to insure that there are only ‘reasonable
and necessary’ expenses for the debtor and their dependents when determining if the Composition Plan filed

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represents the petitioners Best Effort. The Chapter 13 Trustee and creditors may file objections to
Composition Plans that do not represent the petitioners most reasonable Best Effort. This subject was also
touched-on when considering “Plan Payment” {T37D5}




                 T37E24   TRUSTEES FEES AND COMPENSATION ALLOWANCE



The Chapter 13 Trustee fees are set and allowed by the Executive Director of U.S. Trustee Program in
Washington D.C. Chapter 13 Trustees are paid a percentage of what’s distributed to creditors through the
trustee’s administration. While the maximum is 10%, the administrative and compensation fees are
hovering at about half that amount among the four Chapter 13 Trustees in the Eastern District of California.
This percentage should not be confused with annual interest charges. The fee is based on the amount of
money paid out to creditors regardless of how long it takes. As an example, if the Chapter 13 Plan called
for $500 per month for 60 months, a total of $30,000 will have been paid in. If the trustees fees were 5%,
the total trustee fee for administering the Plan would be approximately $1500. In a 5 year Plan, that’s just
$300 per year. Even more importantly, that is not an amount added to what’s paid in a Composition Plan
(unless it’s a 0% Plan), it’s less money available as a dividend to the unsecured creditors. When calculating
the overall ‘Plan’ the total monthly payment must take into account the amount needed to satisfy everything
as set-forth in the proposed Plans treatment of creditors and the amount needed to pay the allowed trustee’s
administrative fee and compensation allowance.




        T37E25   MATHEMATICALLY, DOES THE TOTALITY OF EVERYTHING
                        CONSIDERED ACTUALLY WORK?

Has everything has been taken into consideration regarding the Plan payments? The length of the Plan, the
secured creditors and any ‘lien stripping’, ‘cramdowns’, interest provided, leases, plus the ‘priority’
creditors, ‘co-signed’ creditors, any anticipated deficiency balance on ‘surrendered’ secured creditors and
the minimum necessary to pay general unsecured creditors including any balance to be paid to the
petitioners attorney out of the Plan payments plus a calculation for the trustees fees and compensation.
When all of the above has been determined and calculated it’s time to make sure that when the totality of
everything is taken into consideration, that it’s mathematically functional.




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NOTE:

   1. THE DESIGNING OF A CHAPTER 13 PLAN IS REALLY NOT AS DIFFICULT AS IT
      APPEARS… AT LEAST NOT FOR SOMEONE FAMILIAR WITH THE SYSTEM.

   2. UNDERSTAND THAT IT’S NOT UP TO YOU TO DESIGN THE ‘PLAN’... IT’S UP TO YOUR
      ATTORNEY TO WORK THEIR MAGIC.

   3. THIS IS WHY IT’S SO IMPORTANT TO FIND A CONSUMER BANKRUPTCY ATTORNEY
      WHO’S CAPABLE OF PERFORMING ‘MAGIC’ WHEN PREPARING YOUR ‘PLAN’.




         T38   IN A ‘NUTSHELL’ THIS IS WHAT’S NEEDED


The Chapter 13 Trustee and the Court want to see and approve a Chapter 13 Plan of reorganization that
‘works’. Generally, they want to see a Plan that is filed in Good Faith and represents the debtor Best Effort.
A Plan that will pay the priority creditors in full while paying the general unsecured creditors at least as
much as they would have received had the petitioner filed Chapter 7 Bankruptcy or as much as the Chapter
13 Means Test presumes they should pay to non-priority unsecured creditors unless it can be justified as
being less.

The trustee wants to know that the secured creditors who are being paid through the trustees administration
will be treated appropriately (no less and no more than what they should be allowed according to the
Bankruptcy Code in view of the special ‘cramdown’ and ‘lien stripping’ provisions of Chapter 13). The
Chapter 13 trustee also wants to know that the proposed rate of interest is appropriate and that the monthly
payments will at least keep-up with the depreciation of the security while the entire secured debt will be
paid in full during the life of the case including a reasonable rate of interest. The trustee also wants to know
that the ‘Plan’ is overall mathematically functional and that it’s realistic and livable as to the petitioner’s
actual ability.

A Consumer Bankruptcy Specialist who has a great deal of experience filing Chapter 13 cases can work
wonders putting together a ‘Plan’ that can, under the right circumstances, often be much more beneficial to
their client than a Chapter 7 Bankruptcy.

The above also explains why many Consumer Bankruptcy Attorneys are reluctant to file Chapter 13 cases.
It takes a great deal of knowledge, skill and time to put together a Plan that will utilize the special provisions
of Chapter 13 to provide their clients with the best possible results.
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                               FILING THE BANKRUPTCY CASE


                             WHEN BEST TO FILE
                               T39

                          A BANKRUPTCY PETITION

When to file the Bankruptcy Petition is extremely important and should not be taken too lightly. Below
are three different areas of concern one should consider before filing bankruptcy. Firstly would be the
fundamental question; “Is this the right time for me to consider filing bankruptcy because of my current
overall situation?” Secondly, “If I file bankruptcy, should I file a Chapter 7 or a Chapter 13… which is best
for my particular financial situation”? (This second question is not answered here, it’s covered elsewhere
under {T14} and {T32}) And thirdly, “Since I’m filing a Chapter 7/13 Bankruptcy, when would it be most
advantageous for me to file the Petition?”



        T39AFUNDAMENTAL CONSIDERATIONS OF WHEN TO FILE

Basically there are two types of debt. Secured and all others…all others are the ‘not secured’, also known
as ‘Unsecured’ debt.

An initial consideration should be, “What collection actions can the creditors take to enforce collection
of the debt against the debtor and the debtors’ assets?”

Are there any secured creditors who are delinquent and if so, are they on the verge of repossessing their
collateral? If this is a problem that can’t be dealt satisfactorily, then bankruptcy may deserve serious
consideration. If the secured creditor(s) are not an issue either because they’re in pretty good shape so
there’s no immediate concern regarding re-possession or you don’t care if they re-possess their security,
then there’s no “secured creditor” problem that’s ‘pushing’ you to frantically rush to file a bankruptcy.

Are there any unsecured creditors who have obtained a judgment which causes concern regarding wage
attachment or a lien against some asset? If this is a problem and there is serious concern because a creditor
has a judgment and there are wages or an asset that can be seized, then bankruptcy may deserve serious
consideration. If the unsecured creditors either don’t have a judgment or even if they do but there are no
wages to garnish and/or no major assets to seize then all the unsecured creditor can do is make noise… or go
to court to obtain a judgment if they haven’t already done so. If all they can do is make treats or noise,
understand that it’s mostly huff and puff. You can always turn the volume down by changing phone
numbers or whatever you need to do to turn down the stress volume. At least until you find a ‘solution’,

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whether that ‘solution’ be filing bankruptcy, improving your income/expense ratio to where you’re more
able to address your debts or you have a windfall or some other sudden and positive reversal of fortune.


The other consideration is, “If the debtor didn’t have any debt whatsoever does their current Income to
Expense ratio show a positive or a negative Margin?”

What I’m referring to here is, “Is the debtor still ‘digging the hole’? “Is their financial situation still getting
worse? “Have they ‘bottomed-out’?” I usually put the question this way, “If I were to pay off all of your
consumer debt today and you don’t owe anything to anybody except your secured home mortgage and your
regular on-going living expenses such as rent, (or mortgage payment) utilities, food, transportation,
insurance, et cetera, would that solve your problem? If I were to come back to visit you in six months or a
year after having done so, would you have some money in a savings account or would you have more
debt?”

When the financial situation is still getting worse, if at all possible it would be better to avoid filing
bankruptcy until you knew you were within a couple of months of at least being able to live within your
means. To file bankruptcy, be discharged of debt and then continue digging the hole is not a total solution...
at best, it’s a partial solution… in reality, it’s a road to disaster. File the bankruptcy when you’re through
digging. Put the debts behind you, live within your means a begin ‘rebuilding’.

It is at that point that bankruptcy would be best to file. The Chapter 7 and Chapter 13 Means Test would
show the prior six months as being a low point of income to expense ratio which will provide you with the
greatest advantage from a Means Test perspective. When you’re examined at the 341 Meeting of Creditors
within 50 days of your filing the Bankruptcy Petition you will be asked if there have been any changes of
circumstances. If you can honestly say that nothing of significance has changed and that all of the
documents, Schedules, Statement of Affairs regarding your Income, Expenses, Assets and Liabilities are
unchanged and accurate, the 341 Meeting of Creditors is likely done.

If on the otherhand, your income has changed since you filed to the point you can handle your debts and
could likely afford to avoid Chapter 7 bankruptcy, you may have some difficulty in gaining the courts
blessings regarding a Chapter 7 discharge. Therefore you should have the initial ‘ground work’ done.
That’s having your paperwork in order, having already chosen your attorney and having as much of the
money necessary to pay the courts’ filing fee and the attorneys’ retainer as possible.

Should you decide to file a bankruptcy, some ‘basic considerations’ of when to actually file the Bankruptcy
Petition can be important.




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                T39B   BASIC CONSIDERATION OF WHEN TO FILE


The ‘fundamental’ considerations relate to the ‘big picture’ while the ‘Basic’ considerations relate to the
more immediate picture. What should be taken into consideration regarding specific time related activities,
recent financial activities and the current state of affairs, such as:


     1. Any prior bankruptcy filing (to avoid a prohibition of filing or a barring of a discharge?
     2. How long ago was property transferred to another must be considered in order to avoid a transfer
         from being reversed?
     3. How long ago was a preferential payment made?
     4. Wages earned during the prior 6 months in view of the Means Test.
     5. Wages earned but not yet paid.
     6. Deferred income such as earned and unpaid vacation pay.
     7. Tax refunds received or anticipated.
     8. Commissions, a bonus or any lump-sum funds received or anticipated.
     9. Use of credit prior to filing.
     10. Money in checking or savings accounts.
     11. Pending lawsuits and settlements recently received or about to be received or filed.
     12. Inheritances or annuities recently received or about to be received.
     13. Exemptions allowed if you’ve recently moved from another state
     14. Current market value of property… in view of equity/exemptions and lien stripping.
     15. How long ago was the vehicle contract signed?.. possible ‘Cramdown’ provisions.
     16. Current status of mortgages or other secured debt… inside/outside, cure delinquency, foreclosure
         status, modification process, Lien Stripping.
     17. Promotions or demotions.
     18. Increases and decreases in income, hours or overtime.




        T40   UPON FILING THE BANKRUPTCY PETITION


Filing the Petition. Everything begins upon the filing of the Bankruptcy Petition. Preparation of the
documents needed to enable your attorney to file all the necessary documents can take anywhere from a
week to a few months.

   CHAPTER 7 PETITION: The 'average' amount of time between the initial appointment with a
bankruptcy attorney and the filing of the Chapter 7 Petition is approximately 1 to 3 months.


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   CHAPTER 13 PETITION: The 'average' amount of time between the initial appointment with a
bankruptcy attorney and the filing of the Chapter 13 Petition and Plan is approximately 1 to 5 months.

It depend on how long it takes the debtor to provide all of the information and documents required or
necessary to properly complete all of the bankruptcy requirements… how long it takes to pay the amount of
the attorneys retainer fee they require before they’ll file the Petition and when best to file in relation to those
consideration covered previously under {T39}.


When the Bankruptcy Petition is Filed:

   1. The 'Automatic Stay' immediately goes into effect.

   2. Your case is assigned to a Bankruptcy Court Judge.

   3. Your case is assigned to a Bankruptcy Trustee.

   4. Your 341 Meeting of Creditors date, location and time is assigned. The 341 Meeting of Creditors is
      generally held within 30 to 50 days of filing the Petition.

   5. Your creditors listed on the 'Creditors Matrix' will receive notice from the Bankruptcy Courts (BNC)
      ‘Bankruptcy Noticing Center’ within approximately 7 days after a Chapter 7 is filed and about 18
      days after a Chapter 13 is filed. The Notice will include information regarding the names of the
      Petitioner(s) and date the case was filed, the case number, whether it is a Chapter 7 or Chapter 13,
      the 341 Meeting of Creditors Date, Time and Location, who the bankruptcy judge and trustee are,
      and


   6. When filing a Chapter 13, the notice will also include a copy of or a synopsis of the Chapter 13
      Plan of Reorganization… if the Plan was filed within a few days of the filing of the Petition.




              T41   UPON FILING THE CHAPTER 13 ‘PLAN’
Upon the filing of the Chapter 13 Plan of reorganization, creditors receive notice of the proposed Plan. This
notice is provided along with the Notice of the 341 Meeting of Creditors and the Proof of Claim form to all
creditors listed in the schedules. The Plan sets forth the manner in which each individual creditor or each
classification of creditor will be treated should the Plan of Reorganization be Confirmed by the Court.

Each creditor has the opportunity to appear at the 341 Meeting of Creditors and examine the debtor. Such
examination would be limited to questions regarding Assets, Incomes, Expenses, Liabilities, the Plan itself,
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the Plans proposed treatment of creditors generally and specifically as it relates to that creditor and the
contractual agreement between that creditor and the debtor. Rarely do creditors appear and rarely do
creditors file formal objections to a well-constructed Chapter 13 Plan.

Creditors also receive a Proof of Claim form which provides them the opportunity to file their Proof of
Claim asserting the amount they believe they were owed as of the date of the filing of the Petition. In the
completion of the Proof of Claim they’ll also claim their status or what classification they believe they’re
entitled; secured, priority or unsecured. They’ll likely attach supporting documents substantiating their
status/classification and the amount of their claim.




                          T42   BANKRUPTCY TRUSTEE'S

The Bankruptcy Trustee assigned to a Bankruptcy Case is appointed through the U.S. Trustee Program. A
Trustee’s primary purpose is to act on behalf of the priority and unsecured creditors of the estate. A
Bankruptcy Trustee’s job is to administer the bankrupt estate in accordance with the Bankruptcy Code. The
petitioning debtor initiated the filing of the petition and they have chosen to either represent themselves
{T23} or have retained legal counsel to represent them regarding the bankruptcy proceedings {T24}. It is
the Trustees duty to represent the priority and unsecured creditors and to be the executor/administrator of
the bankruptcy estate for the benefit of the estates priority and unsecured creditors in accordance with the
Bankruptcy Code.

IN A CHAPTER 7 ~ In the performance of their duties when representing creditors of the estate, the
trustees main purpose is to discover assets that are legally accessible for the benefit of priority and
unsecured creditors of the bankrupt estate. It is from the liquidation of those assets in a Chapter 7 that the
priority and the general unsecured creditors are paid a dividend. After satisfying administrative cost and
priority creditors, should any monies be available, general unsecured creditors will receive a dividend paid
out evenly on a pro rata basis to those general unsecured creditors who have a filed and allowed Proof of
Claim.

IN A CHAPTER 13 ~ It is from a similar calculation of what the general unsecured creditors would have
received in a Chapter 7 Liquidation Bankruptcy {T37D3] that the Chapter 13 Trustee must insure the
proposed Chapter 13 ‘Plan’ will provide an equal or greater dividend to the general unsecured creditors. It’s
also their duty to insure the unsecured creditors receive the ‘Disposable Income’ as calculated when
completing the Chapter 13 Means Test Form 22 ‘C’ {T37D2} as well and the Margin that remains after
comparing the Schedule I of Income to the Schedule J of Expenses {T37D1}. Chapter 13 Trustee’s duties
also include receiving the Chapter 13 Plan payments in order to make distributions to creditors in
accordance with the court approved Plan. The Chapter 13 trustee does not liquidate assets to pay dividends
to creditors, they receive Plan Payments to make distributions to creditors.
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                                   AFTER FILING CHAPTER 7


                         T43   CHAPTER 7 ~ THE PROCESS


                 T44   DUTIES OF A CHAPTER 7 TRUSTEE
In a Chapter 7 the Trustee’s main responsibilities consist of:

       1. Conducting the 341 Meeting of Creditors and examining the Petitioner regarding their bankruptcy
documents and financial affairs in an attempt to locate assets that may be available to provide a distribution
to priority and unsecured creditors of the estate.

      2. Representing unsecured creditors.

      3. Discovering non-exempt assets.

       4. Discovering Preferences and Avoidable Transfers and reducing those to cash for the benefit of the
priority and unsecured creditors of the estate.

      5. Liquidating non-exempt assets (or receive the equivalent of that amount from the debtor).

      6. Reviewing Proofs of Claims filed by creditors (if a purpose would be served).

     7. Pay a dividend from the liquidated assets recovered from the Chapter 7 estate to firstly pay
administrative cost, then priority unsecured creditors, then general unsecured creditors.

      8. Keeping records regarding the activities and financial accountings of the case.

      9. Provide reports as required and requested by the U.S. Trustee and the Court.

NOTE: Chapter 7 Bankruptcy Trustees are paid a small amount from the filing fees. When additional
amounts from the liquidation of non-exempt assets, preferences and avoidable transfers are received, the
trustee will likely receive additional compensation as allowed by the Court and the U.S. Trustee’s Offices.
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                   T45   REAFFIRMATION AGREEMENTS

Shortly after having filed a Chapter 7 Bankruptcy, but well within the first 45 days, some secured creditors
will contact the attorney regarding a Reaffirmation Agreement. Reaffirmation Agreements apply to Chapter
7 cases, not Chapter 13 matters. Secured creditors want Chapter 7 Bankrupt debtors to enter into in a
‘Reaffirmation Agreement’ to re-obligate themselves to the creditor after the bankruptcy case is filed. By
entering into a ‘Reaffirmation Agreement’ the secured creditors would then have a contractual agreement
which is dated after the bankruptcy was filed which therefore survives the bankruptcy discharge.


                                     VEHICLE REAFFIRMATIONS

Lets’ take a secured creditor who’s secured by a vehicle based on a Contract of Sale. The debtor wants to
keep the vehicle so they continue to pay based on the contract terms. Suppose the petitioner decides they
don’t want or can’t afford to keep the vehicle any longer so they discontinue making payments. The
creditor re-possesses the vehicle and sells it, but they sell if for less than what’s owed. This creates a
‘deficiency balance’. That deficiency balance cannot be collected from the debtor because the debt was
included in the Bankruptcy Petition and no Reaffirmation Agreement was entered into. The debt was
discharged, uncollectable and unenforceable.

If the petitioner had signed a ‘Reaffirmation Agreement’ and it was approved by their attorney and the
Bankruptcy Court, the ‘deficiency balance’ would have become the financial responsibility of the debtor in
spite of the Bankruptcy filing and the subsequent discharge.

There is a bankruptcy form called the “Statement of Intentions”. The forms purpose is to let a secured
creditor know what the petitioner intends to do in relationship to the secured creditors contract. The
Statement of Intention form is a “Check the Box” multiple choice form. The choices are: Does the
Petitioner intend to [ ] RETAIN or [ ] SURRENDER the secured creditors’ collateral? If the petitioner
chooses to RETAIN the security, the form goes on to prompt the petitioner to either [ ] REDEEM (which
means the petitioner has the right to satisfy the creditor with payment in full of the debt or a lump-sum
amount approximating the current market value), or to [ ] REAFFIRM (“the Reaffirmation Agreement”)
or [ ] OTHER… which suggest the possibility to a ‘lien strip’.

Vehicle ‘Reaffirmation Agreements’ owed to banks must be signed by the debtor, the debtors attorney and
approved by the Bankruptcy Court. Most debtors’ attorneys will not sign-off on a reaffirmation agreement
as it exposes their client to a possible deficiency balance. The Bankruptcy Court will not approve any
Reaffirmation Agreement unless the Bankruptcy Schedules show the Petitioner can ‘afford’ the monthly
payments stated in the Reaffirmation Agreement and then only when the Reaffirmation Agreement is an
improvement of the original contract by reducing the monthly payments, the total amount owed or the rate
of interest.

Can the creditor repossess the vehicle if a ‘Reaffirmation Agreement’ isn’t signed when the secured
creditors’ contract payments are current? If the Petitioner wants to RETAIN the collateral but are

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unable to REDEEM it and their attorney and/or the court won’t approve or sign-off on a
REAFFIRMATION AGREEMENT it would seem as though the ball is in the creditors’ court. That’s the
‘dicey’ part. When the vehicle is insured, the contract is current and the payments are kept current, it’s
extremely unlikely the creditor will repossess the vehicle. A creditor re-possessing their collateral when all
of the terms and conditions of the contract are in compliance is not a common occurance. But there are no
guarantees.

Many Consumer Bankruptcy Attorneys discourage ‘Reaffirmation Agreements’ because it exposes their
clients to the possibility of unnecessary deficiency balances when compared to the risk of losing the vehicle
to repossession.

                                    MORTGAGE REAFFIRMATIONS

Some creditors have non-first mortgages ‘secured’ by real estate. Many of these ‘junior mortgages’ attempt
to have the debtors enter into a reaffirmation agreement. Reaffirmation agreements on Real Estate do not
require the debtors’ attorney or the court to endorse or sign-off on the agreement. Often these 2nd or 3rd
mortgages are not even secured since property values have declined to the point the amount owed to the 1st
or some other more senior mortgage leave no equity to secure the junior mortgage creditors obligation.
Some of these creditors are pressuring the debtor to enter into a ‘reaffirmation agreement’ under the threat
of foreclosure when in reality they’re not really secured by any equity in the property what-so-ever so
they’re not going to actually foreclose. In reality, they’re likely totally or partially ‘unsecured mortgages’.

If the debtor enters into the Reaffirmation Agreement, they’ve re-obligated themselves unnecessarily. Debts
of this nature are discharged in a Chapter 7 but the lien will remain and must ultimately be paid if the debtor
ever wishes to sell the propert y or if the value ever increases and/or the balance of the senior mortgage(s)
has decreased to the point where once again there is equity to secure the formerly partially or wholly
unsecured junior mortgage.

If however, should the debtor ever decide to ‘walk’ from the property, the first has the property to secure
their debt (at least to some degree), while the ‘partially or wholly unsecured’ junior mortgage only has
whatever could be realized after consideration of any senior mortgage(s)…. unless the debtor signed a
‘reaffirmation agreement’. The partially or not-secured junior mortgage won’t receive all of their money
unless or until there is enough equity to fully pay them after consideration of senior mortgage(s).

If however, the debtor decided to walk-away from the property, the debt would still be a legal obligation
owed if they signed a reaffirmation agreement. Basically, when a debtor enters into a reaffirmation
agreement they are nullified the benefits of the bankruptcy regarding that debt. Don’t sign any
‘reaffirmation agreement’ on real estate without first consulting with your bankruptcy specialist. Any ‘no-
longer-secured-by-any-equity’ mortgage creditor would not likely foreclose when there is little to no equity
after consideration of the amount(s) owed to any senior mortgage(s) and cost associated with taking the
property back and the expenses and cost expended up to the resale of the foreclosed property.




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                                    THE CHAPTER 7
                                         T46

                              341 MEETING OF CREDITORS


The Chapter 7 Section 341 Meeting of Creditors. There are approximately 8 to 12 cases set per hour
allowing an average of 5 or 7 minutes per individual case. The petitioner must attend the Section 341
Meeting of Creditors and the petitioner’s attorney of record must also appear with them. The petitioner is
given an oath by the Chapter 7 Trustee who then reviews the Schedules, the Statement of Financial Affairs,
the Means Test and other documents and evidence to insure that all is in order and that the facts as set forth
are true, complete and accurate. The petitioner’s attorney is present with the petitioner to assist their client
and the trustee in the review. The trustee may make suggestions regarding amendments to the Schedules,
require additional information or documents in their attempt to discover non-exempt assets, preferential
payments, improper transfers, tax returns and any other area of inquisition that may help the trustee discover
assets for the benefit of the priority and unsecured creditors of the estate.




                       T47   ASSET OR NON-ASSET CASE?

Most all Chapter 7 Bankruptcy cases ultimately are declared ‘Non-Asset’ cases. Statistically speaking about
94% of all Consumer Bankruptcy Cases are declared ‘Non-Asset’ Cases. This means that you have
approximately a 1 in 20 chance of losing some asset to the Chapter 7 Trustee. Conversely, 19 out of 20
Consumer Bankruptcy Cases will not have to pay anything to the Chapter 7 Trustee. The ‘Asset’ cases
usually involve assets that have been revealed by the Chapter 7 Trustee in their review of the Bankruptcy
File and the examination of the petitioner at the 341 Meeting of Creditors. Assets are usually relatively
small amounts relating to: Preferential Payments, Tax Returns, Improper Transfers and Equities in excess
of Exemptions which can sometimes be the result of improper use of Schedule ‘C’ of Exemptions.

However, there are always those occasions where the trustee discovers assets that are ultimately revealed
that can be significant and often surprising to everyone. Should a significant asset be found, the petitioner
must turn that asset over to the trustee or pay an agreed upon amount to settle the issue in lieu of
surrendering the asset to the Chapter 7 trustee. The debtor may attempt to convert the case to a Chapter 13
and repay the non-exempt amount through the Chapter 13 Plan. The petitioner may want to back out of the
Chapter 7 bankruptcy however that’s unlikely… most likely the only option would be a conversion to
Chapter 13, if indeed that would be allowed.

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                  DEBTOR EDUCATION CERTIFICATE
                T48

                 PREREQUISTITE FOR A DISCHARGE

POST-FILING 'DEBTOR EDUCATION' REQUIREMENT: The completion of the Debtor Education
course after the Petition is filed is required in order to obtain a 'Discharge Order'. A Debtor Education
Certificate must be filed with the Bankruptcy Clerks Office certifying that the post-filing education program
has been completed with a U.S. Trustee approved provider. The 'Discharge Order' is the document issued
by the Federal Bankruptcy Court granting relief to the debtor from having to pay any unsecured
dischargeable debt. This is provided after the debtor has completed the bankruptcy process to the
satisfaction of the Bankruptcy Trustee and the U.S. Bankruptcy Court in a Chapter 7 or a Chapter 13 case.
Some creditors may not be discharged upon completion of the bankruptcy process. An example of some
non-dischargeable creditors would include: some taxes, child support and alimony, debt obtain fraudulently
and debt owed as a result of malicious injury. Any unpaid non-dischargeable debt in Chapter 7 {T50} and
non-dischargeable debt in Chapter 13 {T65} will remain legally owing even though the court has issued a
'Discharge Order'.

NOTE: Both of the processes, the 'Pre-filing' Credit Counseling requirement (about 90 minutes long) and
the 'Post-filing' Debtor Education requirements (about 2 hours long) are available through a number of
U.S. Trustee approved agencies on-line. The cost is usually around $ 25 to $50 each but many attorneys
include those cost in their overall fees. The debtors’ attorney will likely have a working arrangement with
one or two approved agencies. If you would like to review these programs, visit the U.S. Trustees website
and go to the "Consumer Section" for a listing of approved Agencies {UST}.




                 T49   THE CHAPTER 7 DISCHARGE ORDER

Discharge Orders are important as this is the document that is the ‘Court Order’ relieving the
petitioner from having to pay any unsecured dischargeable debt.

No-Asset Cases. Shortly after the conclusion of the 341 Meeting of Creditors in a No-Asset case, a
Discharge Order will be prepared by the Bankruptcy Court and mailed to the Petitioner. The whole process
from the date of the filing of the Petition to the issuance of the Order of Discharge takes approximately 100
to 120 days in the typical ‘non-asset’ Chapter 7 Bankruptcy case.


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Asset Cases. An asset case is any case in which the Chapter 7 Trustee finds assets that are a sufficient
amount (more than a couple of hundred dollars) to warrant the collection and distribution of those assets.
Asset cases take longer to administer than non-asset cases which delays the closing of the estate. However
the Discharge Order will still be issued within approximately 100 to 120 days from the filing of the Petition.
When assets are collected, the U.S. Trustee must notice the creditors of the estate informing them that the
case is an Asset Case and that they therefore may want to file a Proof of Claim. Creditors are then given 90
days to file a Proof of Claim in order to participate in any dividend. This will take a few additional months
to review those claims, make distributions to those creditors and to prepare the appropriate reports before
closing the case.




       T50   NON-DISCHARGEABLE DEBT IN CHAPTER 7


Non-Dischargeable debt is debt that cannot be eliminated in bankruptcy. Examples include: Most tax debt.
Debts owed under a divorce decree or settlement. Student loans. Debts incurred within 60 days of filing
bankruptcy through the use of a credit card or cash advances. Some debt which may have been obtained
under false pretenses such as lying on a credit application. Debt resulting from a personal injury caused
while intoxicated or under the influence. Debts for restitution or a criminal fine included in a sentence
regarding a conviction of a crime. A debt owed from embezzlement, larceny or breach of trust. Debts for
fraud or defalcation while acting as a fiduciary when an objection to discharge is timely filed if the court
sustains the objection.

All non-dischargeable debt will remain the financial responsibility of the debtor in spite-of or even after the
Chapter 7 discharge.

Some non-dischargeable obligations are entitled to a ‘priority’ status such as some taxes and most all
domestic support obligations. Should any assets be collected by the Chapter 7 Trustee from the liquidation
of the bankruptcy estate, those funds may be used to pay towards any filed and allowed non-dischargeable
‘priority’ claim.

NOTE: If a debtor has a substantial amount owed to non-dischargeable ‘priority’ debt, they may want to
consider filing Chapter 13. Priority debts of this nature (most taxes and domestic support obligations) can
be repaid over the life of a 3 to 5 year Chapter 13 Plan of reorganization… often priority tax obligations are
repaid without the allowance of any future interest or penalties. See Non-Dischargeable Debt in Chapter 13
{T65}.




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                                  AFTER FILING CHAPTER 13


                        T51   CHAPTER 13 ~ THE PROCESS

                T52   DUTIES OF A CHAPTER 13 TRUSTEE
In a Chapter 13 the Trustee’s main responsibilities consist of:

       1. Conducting the 341 Meeting of Creditors and examining the Petitioner regarding their
          bankruptcy documents including the Schedules, the Statement of Financial Affairs, the Chapter
          13 Means Test and the debtors’ Plan of reorganization.


       2. A thorough review of the Proposed Plan of reorganization.


       3. Filing an objection to the Chapter 13 Plan when deemed appropriate.


       4. Representing Priority and Unsecured Creditors.


       5. Insuring secured creditors are adequately protected and properly treated.


       6. Discovering Non-Exempt Assets.


       7. Discovering Preferences and Avoidable Transfers.


       8. Receiving Plan Payments.


       9. Filing a Motion to Dismiss when deemed appropriate.


       10. Reviewing Proofs of Claims when a purpose is served.


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       11. Processing Proofs of Claims (all claims are reviewed and processed prior to their receiving any
           distributions).


       12. Making Distributions to Creditor’s in Accordance with the Confirmed Plan.


       13. Calculate the completion of the Chapter 13 Plans terms.


       14. Keeping Records Regarding the Activities and Financial Accounting of the Case.


       14. Providing Reports as Required and Requested by the U.S. Trustee and the Court.




NOTE: Chapter 13 Trustees are paid a percentage from distributions made to creditors in accordance with
the Confirmed Chapter 13 Plan of Reorganization. The maximum fee allowed is 10% although the fees are
currently hovering at about half that amount. Each individual Chapter 13 Trustee’s fee percentage is set by
the U.S. Trustee’s Offices in Washington D.C and is based on budgetary reviews of each individual Chapter
13 Trustee’s operation. There are approximately 200 Chapter 13 Trustee throughout the United States and
its Territories. There are four Chapter 13 Trustees in the 34 Counties of the Eastern District of California.
Two are located in Sacramento and one each in Modesto and Fresno.




                                  THE CHAPTER 13
                                    T53

                             341 MEETING OF CREDITORS

Approximately 8 to 12 Chapter 13 cases are set per hour allowing an average of 5 or 7 minutes per
individual case. The petitioner must attend the Section 341 Meeting of Creditors and the petitioner’s
attorney of record must appear as well. The petitioner is given an oath by the trustee who then reviews the
Schedules, the Statement of Financial Affairs, the ‘Plan’ of reorganization plus all other documents and
evidence such as pay stubs, tax returns, the Chapter 13 Means Test Form 22C, et cetera to insure that all is
in order and that the facts as set forth are true, complete and accurate. The petitioner’s attorney is present to
assist their client and the trustee in the review.

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The trustee may; make suggestions, require additional information in their attempt to discover non-exempt
assets, improper transfers, tax returns, preferential payments and any other area of inquisition that may help
the trustee discover assets. This is done in order to determine the amount a Chapter 7 Trustee would have
received for the benefit of unsecured creditors to insure that those creditors will receive no less in the
proposed Chapter 13 Plan.

The review of the documents will help steer the trustee’s examination of the petitioner during the 341
Meeting of Creditors. At the conclusion of the 341 Meeting of Creditors, the trustee will either make
recommendations for changes, amendments or modification, file a formal Objection to Confirmation or
recommend confirmation of the proposed ‘Plan’ of reorganization.

Before the Trustee can recommend Confirmation of the Plan a review of many factors must be considered.
One of first things the trustee wants to know is if the Plan were to be approved, is it a Plan that is
mathematically functional. Does the proposed monthly ‘Plan’ payment amount enable the trustee to
distribute to the creditors in the manner the Plan proposes? Is it properly ‘funded’ and mathematically
functional?

Secondly, and much more complex, is the trustee’s responsibility to determine if the proposed Plan meets all
of the requirements of the Bankruptcy Code, Local Rules and the contractual rights that should be
considered in view of what the Plan is proposing to pay each specific ‘secured and priority creditor’ and the
‘special’ and ‘general unsecured’ creditors.

A review in that regard is extensive and appears overwhelming. However it all becomes second nature after
an experienced attorney and trustee become familiar with the process. What follows is a complete list of
what the trustee should consider in regard to the amount of the Plan Payment, the proposed length or
repayment period of the ‘Plan’ and its proposed treatment to creditors specifically and generally.

This is basically a brief yet almost identical list of considerations laid-out under “DESIGNING THE
CHAPTER 13 PLAN {T37} ~ Both ‘Designing the Chapter 13 Plan’ and the Chapter 13 trustees duties as
they relate to their need to ‘Review the Chapter 13 Plan’ below, covers every detail of what must be taken
into consideration when a debtor uses Chapter 13 as a means to handle their financial problem.




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                  T54   REVIEW THE CHAPTER 13 ‘PLAN’

                                          T54A TYPE OF PLAN


EXTENSION PLAN

Does the Plan propose to pay all creditors in full, 100%?

COMPOSITION PLAN

Does the Plan propose to pay less than the full amount due and owing to the general unsecured creditors?

      PERCENTAGE PLAN ~ Does the Plan propose to pay no less than a specific percentage to the
general unsecured creditors?
Does that amount at least meet the minimum amount required?

      POT or BASE PLAN ~ Does the Plan propose to pay no less than a specific amount in total to all of
the general unsecured creditors?

Does that amount at least meet the minimum amount required?

      NOTE: The ‘Standard Chapter 13 Plan’ form used in the Eastern District of California is set-up on a
‘Percentage Plan’ system. Therefore ‘Extension Plans’ are stated as 100% while others state the minimum
percentage proposed to be paid to General Unsecured creditors.


                                       T54B   LENGTH OF PLAN

CHAPTER 13 ‘MEANS TEST’ CALCULATION OF THE COMMITMENT PERIOD

Does the Composition Plans stated length of time meet the minimum period of time based on the ‘Means
Test’ ‘Calculation of Commitment Period’?

MAXIMUM PERIOD OF TIME

Does the Plan exceed the maximum period of time allowed under the Bankruptcy Code?

MINIMUM PERIOD OF TIME
Does the Plan meet the minimum period of time as set forth in Means Test and the Bankruptcy Code?

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MATHEMATHICALLY MATCH THE ‘PLANS’ STATED LENGTH

Does the Plan mathematically match what the proposed ‘Plan’ states?

                                       T54C   PLAN PAYMENTS

THE ‘MARGIN’ LEFT AFTER COMPARING SCHEDULE ‘I’ TO SCHEDULE ‘J’

In a Composition Plan, the Plan Payment should be identical to the ‘Margin’ when comparing the Schedule
‘I’ of Income to the Schedule ‘J’ of Expenses?

CHAPTER 13 ‘MEANS TEST’ FORM 22 ‘C’s ‘DISPOSABLE INCOME’

Does the Composition Plan payment allow the non-priority unsecured creditors to receive the amount the
Means Test Form 22 C reflects as ‘Disposable Income’ per month, multiplied by the number of months the
Chapter 13 Plan is proposed to last?

LIQUIDATION ANALYSIS

Does the Composition Plan payment provide the unsecured creditors a dividend that is not less than what
they would have received in a Chapter 7 Liquidation Bankruptcy?

BEST EFFORT

Does the Composition Plan payment reflect the petitioners Best Effort in view of the Schedule ‘I’ of Income
compared to the Schedule ‘J’ of Expenses and does that budget only include those expenses that are
reasonable and necessary for the petitioner and their dependents?

GOOD FAITH

Does the Composition Plan payment reflect the petitioners Good Faith filing in that it doesn’t provide for
the payment of a debt that could be considered a luxury, excessive or unnecessary?

FEASIBLE AND REALISTIC

Is the proposed Plans payment an amount that is feasible in that it is something the petitioner can
realistically afford?




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                         T54DREAL ESTATE SECURED MORTGAGES

A number of questions may have merit in regard to a Petitioners mortgage. Is it a “fully amortized loan?”
Does the mortgage require a “lump-sum/balloon payment?” When is it all due? Is it an “interest only
loan?” Is it a “negatively amortized loan?” Is it an “adjustable mortgage rate?” When will the payment
amount adjust? When does the rate adjust? Does the payment include: principle, interest, taxes and
insurance. All of these questions and there corresponding answers may have an impact on the feasibility of
the proposed Chapter 13 Plan. In addition to the above, what is listed below are considerations that must be
taken into account when reviewing a proposed Chapter 13 Plan.

OUTSIDE THE PLAN ~ NOT ADMINISTERED BY THE TRUSTEE

Is the mortgage scheduled to be paid directly by the petitioner at least partially secured by some equity?

Is the existing repayment period longer than the life of the proposed Chapter 13 Plan?

Is the ‘longer than the life of the Chapter 13 Plan contractual payment current’?

If it’s delinquent, how does the Plan propose to address the delinquency?

INSIDE THE PLAN ~ ADMINISTERED BY THE TRUSTEE

Is the mortgage delinquent and is the proposed Chapter 13 Plan payment an amount sufficient to cover the
on-going mortgage payment?

Does the proposed Plan provide for the mortgage delinquency to be brought current during the life of the
Plan?

Does the Plan propose to pay 0% interest on the mortgage delinquency?

LIEN STRIPPING

Is the mortgage actually unsecured based on the appraised value of the Real Estate when compared to the
amount owed to any senior mortgage(s)?

Are there any mortgages that could be or should be ‘stripped’ that are not proposed to be ‘stripped’?




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                             T54E   CONSUMER SECURED CREDITORS

OUTSIDE THE PLAN ~ NOT ADMINISTERED BY THE TRUSTEE

Are there more months remaining on the contract than the proposed length of the Chapter 13 Plan?

Is the security a ‘luxury’ or an ‘excessively unnecessary’ item in view of a Composition Plan? Is it a Good
Faith filing {T37E22}?

INSIDE THE PLAN ~ AND ADMINISTERED BY THE TRUSTEE

Are there fewer months remaining on the contract than the proposed length of the Chapter 13 Plan?

Is the security a ‘luxury’ or an ‘excessively unnecessary’ item in view of a Composition Plan? Is the Plan a
Good Faith filing {T37E22}?

Does the Plan payment provide for payment in full of the secured debt (or the secured portion of a
‘crammed-down’ secured creditor) within the life of the Plan?

Does the Plan payment provide for an appropriate rate of interest {T37E13} when considering everything
including the original terms of the contract?

Is the secured creditor subject to the ‘Cramdown’ provisions of Chapter 13 and if so, is the difference
between the value and the amount owed sufficient to warrant a ‘Cramdown’ action?

               T54FEXECUTORY CONTRACTS AND UNEXPIRED LEASES

Does the Plan properly provide for leases? Are the leases current and included in the Schedule J of
Expenses? Is the Lease necessary for the debtor, their dependents or the operation of their business? Is the
lease delinquent and if so is the delinquency provided for in the Plan properly? Will the Lease expire prior
to the conclusion of the Plan? If so, is the amount no longer being paid for the lease proposed to be paid as
an increase in the amount of the Plan payment or is there some other intended and allowable use of those
funds? Will there be a need to replace the expired lease with a new lease or a purchase contract? What, if
any, are the ‘buy-out’ terms of the lease and is there equity in the leased merchandise?

                      T54GLOANS SECURED BY RETIREMENT FUNDS

Does the budget or the income deductions allow for the payment of retirement loans?

Will the retirement loans be paid-in-full prior to the completion of the Chapter 13 Plan?

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Will the Chapter 13 Plan payments increase upon the repayment of any retirement loans?

                                             PRIORITY CREDITORS
                                          T54H


Does the Plan properly provide for all creditors entitled to a priority status to be paid in full?

What rate of interest, if any, is proposed to be paid to priority creditors?

                                      STUDENT LOAN OBLIGATIONS
                                   T54I


Are the student loan payments provided for in the living budget and if so is that objectionable?

                               CO-SIGNED UNSECURED CREDITORS
                            T54J


Is the co-signed debt listed as ‘Special’ and specially provided for in the Plan?

Does the Plan propose to pay co-signed unsecured creditors in full… with or without interest?

Did the debtor receive the benefit of the co-signed debt?

Has the co-signer been listed on the Schedule ‘F’ of general unsecured creditors?

                            T54K   GENERAL UNSECURED CREDITORS

Does the Plans percentage and amount of dividend proposed to be paid to unsecured creditors meet all the
necessary requirements of: The Liquidation Analysis {T37D3}, the Chapter 13 Means Test calculation of
‘Disposable Income’ threshold {T37D2}, the Schedule ‘I’ and Schedule ‘J’ Margin considerations {T37D1}
along with the Best Effort {T37D5} and Good Faith {T37D4} considerations?

                             T54L  ATTORNEY FEE BALANCE IN PLAN

Does the Plan provide for any unpaid and allowed attorney fees to be paid from the ‘Plans’ payments in an
equitable manner?

                    T54M   TRUSTEE ADMINISTRATIVE FEE’S AND COST

Does the Plan mathematically provide for the anticipated trustee’s administrative fees?



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                                        GENERAL OVERVIEW
                                     T54N


When all is said and done, does the totality of the Plan handle and provide for all creditors properly in all
regards?

Does the Plan propose a fair and equitable treatment of all creditors based on the Plans specific treatment in
view of the Bankruptcy Code, the General Order, the Local Rules, Case Law and contractual rights?

Does the proposed Plan express a sense of fairness and equity to both the creditors and the petitioner based
on the past, present and future understandings?

                            T540   MATHEMATICALLY FUNCTIONAL

Does the monthly flow of the Plans payments properly handle the Plans proposed treatment of creditors?

Does the total amount scheduled to be paid into the Plan properly handle the creditors including the
percentage proposed to compromisable unsecured creditors within the timeframe of the Plans proposed time
period?




            T55   REVIEW PROOFS OF CLAIMS IF A PURPOSE
                           WOULD BE SERVED
The Chapter 13 Trustee must process secured and priority Proofs of Claims received from creditors. This is
done to insure they are actually entitled to be paid as secured or priority before they begin to receive
distributions in accordance with the terms of the Confirmed Plan.

Upon the review of a ‘Proof of Claim’ the trustee may need to file an objection or may defer to the
Petitioner and their attorney to file an Objection to a Proof of Claim.




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                         T56   RECEIVE PLAN PAYMENTS


The Chapter 13 Plan Payments must be received in the Chapter 13 Trustee’s Office by the 25th of each
month. The first payment is due on the 25th of the month immediately following the month in which the
Petition was filed. If the Bankruptcy Petition is filed in January (any day in January) the first payment is
due in the trustee’s office by the 25th of February.

NOTE: Any payment the Petitioner is responsible to pay directly to a creditor as a part of their living
expenses must be kept current and made timely in order to avoid risking any delinquency coming to the
attention of the Chapter 13 Trustee. Any delinquency would demonstrate that the ‘Plan’ of reorganization is
not working which may prompt the Chapter 13 Trustee to file a Motion to Dismiss the Chapter 13 case.
This may occur even though the Plan Payments to the trustee are current.

The idea is that when the petitioner is not current with a creditor’s payment that the ‘Plan’ proposed the
petitioner pay directly, it clearly states that the budget is not adequate and the petitioner cannot afford to
support both their budget (which includes the debtor direct contract payment) and the Chapter 13 Plan
payment. Therefore the court should not continue to support those conditions.




             T57   MAKE DISTRIBUTIONS TO CREDITORS


The Chapter 13 Trustee is responsible for distributing the debtors ‘Plan’ payments to creditors in accordance
with the Confirmed Chapter 13 Plan. Distributions are made based on the terms of the Confirmed Plan
itself and the Proof of Claim as filed by the creditor. Distributions are made to creditors by the Chapter 13
trustee at the end of each calendar month. The Plan specifically sets forth the monthly payment amount and
the rate of interest each creditor is scheduled to receive. The Proof of Claim filed by the creditor controls as
to the amount due and owing which should represent the balance owed as of the date the Chapter 13
Bankruptcy Petition was filed. If the creditor disagrees with the ‘Plans’ proposed monthly payments or the
interest rate they should file an ‘Objection to Confirmation’ prior to the court confirming the Chapter 13
Plan. If the petitioner disagrees with the amount of the claim as filed by the creditor, they must file an
Objection to the Claim and have the matter heard by the Bankruptcy Judge.




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           T58   MOVE TO DISMISS WHEN APPROPRIATE


The Chapter 13 Trustee is responsible for bringing to the attention of the Bankruptcy Court any significant
deficiencies in the debtors’ performance of the Plan and any Proofs of Claims that significantly deviate in
amount or in classification from what the Confirmed Plan had provided and anticipated.

    1. If after a reasonable period of time following the conclusion of the 341 Meeting of Creditors, the
Order Confirming the Plan has not been prepared by the debtors attorney and forwarded to the Chapter 13
trustee, the trustee cannot make distributions to creditors on the case without the Order Confirming. The
trustee may either file a Motion to Dismiss the case when there is an unreasonable delay in receiving the
proposed Order from a debtors attorney or prepare an Order Confirming the Plan themselves without the
allowance for any balance owed in attorneys’ fees.

   2. If the Plan payments become delinquent the trustee will likely file a Motion to Dismiss. In some
instances the trustee may choose to issue a Wage Directive to enforce all future Planpayments against the
petitioners income source(s).

    3. If, based on the claims filed and allowed (after the trustee has processed the Notice of Filed Claims
Report {T60}) shows the Plan will last more than just a couple of months beyond the Confirmed Plans
stated length of time, the trustee may file a Motion to Dismiss.

   4. If a creditor originally listed as unsecured files a ‘secured’ or ‘priority’ claim and provides evidence
which supports their entitlement to such classification, the Plan will need to be amended to properly provide
for that creditor to be treated in the manner in which their Proof of Claim shows they are entitled. If no
amendment is timely filed, the trustee may file a Motion to Dismiss.




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                               T59   ADMINISTER THE ‘PLAN’


When the Chapter 13 Trustee receives the Plan payment in a timely manner (by the 25th of each month)
distributions will be made to the creditors around the last of each month in the manner set forth in the
Confirmed Chapter 13 Plan.

When the Chapter 13 Trustee does not receive the Plan payment, receives a partial payment or receives the
payment too late to be included in the ‘end-of-the-month’ distribution to creditors, the terms of the court
approved Plan are in default as the Trustee is unable to make payments to creditors in accordance with the
court approve Plan.

The Trustee must decide whether to take action regarding that default. The only actions the trustee is likely
to take is to either issue a Wage Directive to enforce all future payments or to file a Motion to Dismiss the
case. If the delinquency is brought current in short order, the case in not likely to be dismissed. Therefore,
Trustees may delay filing a Motion to Dismiss for about 10 days to 2 weeks after the due date to see if this
delinquency is an exception and if it’s brought current within that timeframe. If late or partial payments
becomes a problem, the trustee may issue a Wage Directive or file a Motion to Dismiss in spite of the Plan
Payments being brought current. Cases that include on-going mortgages payments to be administered by
the trustee are acted upon more promptly regarding delinquency than cases that do not include on-going
mortgage creditors.




                        T60   PROVIDE A REPORT OF THE

                “NOTICE OF TIMELY FILED CLAIMS”


Creditors have a limited period of time to timely file Proofs of Claims with the Bankruptcy Court. Within
approximately 30 days of the expiration of that time, the Chapter 13 Trustee will review all claims and
produce a Report of Timely Claims Filed. This report is produced approximately 8 or 9 months after the
Chapter 13 Bankruptcy Petition was filed. The report is mailed to the Petitioner, the Petitioners Attorney of
Record, the U.S. Trustee’s Office and the Bankruptcy Clerks Office. The report reflects the Chapter 13
Trustees understanding of who filed Claims, the amount being claimed as owing to the creditor as of the
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date the Petition was filed, the classification the creditor believes they are entitled (secured, priority or
unsecured) and by deduction, who did not file a claim.

Creditors are only eligible to receive payments in accordance with the terms of the confirmed Chapter 13
Plan after they have filed a Proof of Claim. If the Proof of Claim is in agreement with what the Plan had
proposed or anticipated, the trustee will begin making distributions based on the claim as filed. The
petitioner must review this Report of Timely Filed Claims and take their findings to their attorney to resolve
any improprieties, discrepancies, inaccuracies or generally clear-up any confusion there may be in order that
the trustee ends-up-with a proper and accurate listing of the creditor’s claims. If the Petitioner or their
attorney disagree with the report, appropriate steps must be taken to insure that the trustee’s records reflect
what is proper and accurate.

Short of any Objection to Claims or a Motion to Modify the Plan being received timely from the petitioner’s
attorney, the trustee will pay the creditors based on the Notice of Timely Filed Claims report and the terms
of the Confirmed Plan.

It may be necessary for the attorney to:

A. file 'Objections to Claims' when the petitioner disagrees with the Status/Classification or the Claimed
amount as filed by the creditor.

B. file a 'Motion to Modify the Chapter 13 Plan' when:

  1. a creditor files a secured or priority claim which had not been anticipated or provided for in the
     classification asserted in the claim. The Plan will need to be modified to accommodate that ‘now
     know’ secured or priority creditors claim.

  2. the 'allowed claims' are greater than anticipated. It may be necessary to review the overall Plan to
     determine if there is a need to file a Motion to Modify the existing Plan in order to insure the 'Plan'
     will complete within an appropriate time period after having properly addressed the 'now known'
     creditors actual claim amounts and their classification/status.

C. file a claim on behalf of a creditor who did not file on their own behalf when the payment of such a
creditor would be beneficial to the debtors best interest.

D. take other steps as necessary to insure that the Chapter 13 Trustees distribution to creditor’s claims is
accurate and appropriate.




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                       T61   PROVIDE ANNUAL REPORTS


The Chapter 13 Trustee produces an Annual Report which lists all receipts from the petitioner and
distributions to creditors on each case. A paper copy of this report is sent to the debtor and the debtor’s
attorney of record. Some attorneys prefer to have the report sent electronically. The U.S. Trustee’s Office
and the Bankruptcy Clerks office receive their copy electronically. The report is usually sent in February so
the debtor can have a record of the financial activity during the life of the Plan and during the prior year
should any of that information be needed or helpful in the preparation of their annual tax returns. The report
also allows the petitioner and their attorney to review the trustee’s receipts of Plan payments and
distributions made to creditors to see if they have any disagreement, question or opposition to the trustee’s
administration of the case.




T62   CALCULATE THE COMPLETION OF THE CHAPTER
                  13 ‘PLANS’ TERMS

Each Chapter 13 ‘Plan’ proposes to pay an amount per month (some ‘Plans’ may propose payments in
addition to the monthly amounts, such as an annual payment from a bonus or a tax return, a one-time lump
sum from a settlement, proceeds from the sale of an asset, et cetera… in the amount of $$$$ to be paid by
DATE, et cetera). Additionally, each ‘Plan’ proposes to pay for a specific period of time, usually 36 to 60
months. Each ‘Plan’ also proposes to pay a set percentage or a fixed amount to the general unsecured
creditors.

It must be understood that each of these three conditions is a ‘minimum’ requirement that must be
met before the terms of the court approved ‘Composition Plan’ can be considered concluded.
Therefore the 'Plan' is completed only when:


A. The Payments Due under the terms of the Confirmed Plan have been be fully paid. The number of
months times the amount of the monthly payment plus any ‘lump sum payment’ becomes the minimum
amount necessary to meet the payment requirement. If the Plan payments were $500 monthly and the
Confirmed Plan states 36 months… a minimum of $18,000 (36 x $500) must be paid to the trustee to meet
the payment requirement. If the filed and allowed claims are more than originally scheduled, additional
funds may be needed to satisfy the increased claim amount(s) so the other terms (the length of time {so as to
not overextend the time period} and/or the percentage to be paid to unsecured creditors) of the Confirmed
Plan are properly met. If the claims allowed are less than originally scheduled, a larger than originally
anticipated percentage will be paid to the unsecured creditors in a Percentage Composition Plan.
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B. The Length of the Plan term has expired. If the Plan was for 36 or sixty months then it must remain
open and active for a minimum of the stated period of time the Confirmed Plans states. It is unlikely the
court would approve the 'pre-payment' of a Chapter 13 Plan. If the allowed claims are a little more than
originally scheduled, the length of the Plan may last a little longer. If the allowed claims are significantly
more than originally scheduled, the Plan should be Amended so as to not extend the original court approved
period of time by more than a couple of months. No Plan can be approved by the court that proposes to
exceed 60 months. If the claims filed and allowed are a little less than originally scheduled, the length of
the Plan will remain the same, allowing the unsecured creditors to receive a larger than anticipated dividend
or percentage in a Percentage Composition Plan.


C. The Composition Amount (Percentage Plan or a Base/Pot Plan) to the unsecured creditors in the
Confirmed Chapter 13 Plan is a minimum percentage or dollar amount that must be paid. There are a
couple of factors that may increase the amount paid to unsecured creditors. One is when the amount of
unsecured claims actually filed are less than originally listed. Since the same total amount which must be
paid in, is available for a lesser total of unsecured claims, each unsecured creditor will receive more than
originally stated. The other is when the secured and/or priority creditor’s claims filed are actually less than
originally listed. In either case the dividend paid to the unsecured creditors who did file claims would be
greater than the original amount provided in a Percentage Composition Plan.

If on the otherhand, the claims filed were actually more than originally anticipated, more may need to be
paid into the Plan to insure the minimum percentage approved by the court is met.




           T63   KEEP RECORDS AND PREPARE REPORTS


The Chapter 13 Trustee is responsible for the receipt of all payments and the distribution of those payments
to creditors as set forth in the Confirmed Plan. In order to properly account for these transactions the
Chapter 13 Trustee has employees and equipment in place to tract and report all activities regarding each
individual transaction on each individual case. Many reports are required by the U.S. Trustee, the
Bankruptcy Clerks Office and the Bankruptcy Judges. Other reports will also be produced for the
Petitioner, the Petitioners Attorney of Record (such as the Notice of Timely Filed Claims and the Trustee’s
Annual Report) and other reports as required, requested and appropriate.




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                   DEBTOR EDUCATION CERTIFICATE
                 T64

                  PREREQUISTITE FOR A DISCHARGE


POST-FILING 'DEBTOR EDUCATION' REQUIREMENT: The completion of the Debtor Education
course after the Petition was filed is required in order to obtain a 'Discharge Order'. A Debtor Education
Certificate must be filed with the Bankruptcy Clerks Office certifying that the post-filing Debtor Education
Program has been completed with a U.S. Trustee approved provider. The 'Discharge Order' is the document
that provides proof from the Federal Bankruptcy Court that the petitioner has been granted relief from
having to pay any unsecured dischargeable debt after having completed the bankruptcy process to the
satisfaction of the Bankruptcy Trustee and the U.S. Bankruptcy Court in a Chapter 7 or a Chapter 13 case.

Not all creditors are discharged upon completion of the bankruptcy process. An example of some non-
dischargeable {T50} creditors would include: some taxes, child support and alimony, student loans, debt
obtain fraudulently and debt owed as a result of a malicious injury. Priority taxes and Domestic Support
obligations are generally paid-in-full through a Chapter 13 Plan, however other non-dischargeable debts
remain legally owing even though the court has issued a 'Discharge Order'. The Chapter 13 Trustee is given
the responsibility to insure that the Discharge Order only goes out when the petitioner has successfully
completed the Post-Filing Debtor Education Course.

NOTE: Both of the processes, the 'Pre-filing' Credit Counseling {T16} requirement and the 'Post-filing'
Debtor Education requirements are available through a number of U.S. Trustee approved agencies on-line.
The cost is usually around $25 to $50 each but many attorneys include those cost in their overall fees. The
debtors attorney will likely have a working arrangement with one or two approved agencies, however,
should you wish to look into this subject you can go to the U.S. Trustee website and go to the "Consumer
Section" for a listing of approved Agencies {UST}.




          T65   TRUSTEES FINAL REPORT AND ACCOUNT

When the Chapter 13 Trustee is satisfied that all of the terms and conditions of the court approved Plan have
been met, a complete audit and review of the entire case is completed to insure all has been done properly
and completely. Upon satisfaction that all is well, the trustee produces a Final Report and Accounting of
everything. This report is sent to all ‘parties of interest’ so that everyone having an interest in the case has
an opportunity to see all of what has taken place and consider if they have any basis to object to the closing
of the case. Once a reasonable period of time has transpired allowing anyone the opportunity to be heard,
the final closing of the case can proceed.


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                      T66   THE CHAPTER 13 DISCHARGE


After completing all of the terms and conditions of the Confirmed Chapter 13 Plan, a Final Order, a Final
Report and an Order Discharging the debtor of having to pay any further into the Chapter 13 Plan and an
Order Discharging the Chapter 13 Trustee after properly performing their duties as trustee, an Order Closing
the Case will be entered. A Chapter 13 Discharge releases the debtor from any personal liability for
dischargeable debts. Notable exception to creditors being affected by a Chapter 7 discharge are {T50}
while Non-Dischargeable debt in Chapter 13 is covered below under {T65}. Also see Non-Dischargeable
in the Glossary {G171}. A discharge prohibits creditors from communication with the debtor regarding the
collection of a debt, including telephone calls, letters, emails and personal contact.




       T67   NON-DISCHARGEABLE DEBT IN CHAPTER 13


Non-Dischargeable debt is debt that cannot be eliminated in bankruptcy. There are certain debts that remain
owing by a debtor after filing bankruptcy despite their having received a discharge. There are Chapter 13
‘Extension’ Plans where creditors are paid in full, 100%, and there are Chapter 13 Composition Plans where
General Unsecured Creditors are paid less than the full amount due and owing. Any amount not paid
through a Chapter 13 Plan to a Non-Dischargeable unsecured creditor will leave a balance owing. Balances
owed after completing the terms of the Chapter 13 Plan of reorganizations to any Non-Dischargeable
creditor remains the financial responsibility of the debtor even after completing the terms of the Chapter 13
Plan.




   T67ADOMESTIC SUPPORT OBLIGATIONS AND MOST INCOME TAXES ARE
          PRIORITY NON-DISCHARGEABLE DEBT IN CHAPTER 13

Two types of Non-Dischargeable debts deserve special comment. Those two are ‘Priority’ non-
dischargeable debt owed as a result of 1. ‘a divorce decree or settlement’ and 2. ‘most tax obligations’.
While these two types of debts are Non-Dischargeable, they’re also usually entitled to be paid as a Priority
Creditor. Priority creditors are paid-in-full through a Chapter 13 Plan of reorganization. That being the
case, debts of this nature should not have a remaining balance outstanding upon completing the terms of the
Chapter 13 Plan.
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          T67B   NON-DISCHARGEABLE “STUDENT LOANS” IN CHAPTER 13

A special note should be made regarding Non-Dischargeable, Non-Priority Student Loans. Student Loans
are not entitled to a priority status or any other special classification or treatment. Student loans are also
mentioned in section {T37E17}.

Neither the filing of Chapter 7 or a Chapter 13 will pay anything to a Student Loan. Student Loans are not
secured, not priority, not dischargeable and the repayment terms are most often for a period that exceeds the
life of any Chapter 13 Plan. Student Loans will not be paid out of a Chapter 13 Plan of reorganization and
just like in a Chapter 7 they will remain the personal responsibility of the debtor at the conclusion of the
bankruptcy proceedings.

Student Loans cannot receive any special treatment or consideration in a Chapter 13 case. Having the
debtors Schedule ‘J’ of Expenses provide for an “unsecured ‘student loan’” to be paid directly by the debtor
‘Outside of the Plan’ is not an allowable expense according to most Chapter 13 trustees and most
Bankruptcy Court Judges. Most judges and trustees consider that to allow the payments for a student loan
to be paid out of the living expenses directly would be treating an ‘unsecured’ creditor preferentially. Their
position is that to allow that expense in the budget would be tantamount to allowing preferential treatment to
a general unsecured creditor at the expense of the other general unsecured creditors and to do so would be in
violation of the provisions of the Bankruptcy Code.

When a debtor has a Student Loan and files a Chapter 13 Bankruptcy they may want to contact the lender
and explain they’re filing a Chapter 13 Bankruptcy and request a ‘deferment’ of payments during the
pendency of the Chapter 13 case. They should understand that by law the debtor is required to list all debt
and that they may also be prohibited from paying the debt directly, as doing so would be an improper
‘preference’. They should also understand the debt will not likely be paid anything through the Chapter 13
Plan and that it’s a ‘Non-Dischargeable’ debt. As such, it will be the responsibility of the debtor to re-
address that debt after the Chapter 13 case is closed. In the meantime, interest will continue to accrue,
which will increase the principle amount owed which will need to be addressed upon completion of the
Chapter 13 Plan.




                 T67C   OTHER NON-DISCHARGEABLE DEBT IN CHAPTER 13

Other Non-Priority, Non-Dischargeable unsecured creditors in addition to any ‘Deferred Student Loans’ as
addressed above, would include: Debts incurred within 60 days of filing bankruptcy through the use of a
credit card or cash advances. Some debt which may have been obtained under false pretenses such as lying

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on a credit application. Debts resulting from a personal injury caused while intoxicated or under the
influence. Debts for restitution or a criminal fine included in a sentence regarding a conviction of a crime.
A debt owed from embezzlement, larceny or breach of trust. Debts for fraud or defalcation while acting as a
fiduciary when an objection to discharge is timely filed by the creditor and the court sustains the objection.

In a Chapter 13 ‘Composition Plan’ not all creditors are paid in full. Therefore any Non-Dischargeable,
Non-Priority debt that was not paid in full through the trustees’ administration will remain the financial
responsibility of the debtor despite their having received a Chapter 13 ‘discharge’. The Chapter 13 Plan
may have reduced the balance of a Non-Dischargeable creditors debt if the Chapter 13 Trustee made
distributions to General Unsecured creditors and the Non-Dischargeable Creditor had filed an allowed Proof
of Claim. With the exception of Priority Non-Dischargeable creditors, which are paid in full, other than
‘Student Loans, other General Non-Priority Non-Dischargeable Unsecured Creditors are paid on a par (pro
rata) with other General Unsecured Creditors who have filed and allowed claims.

Unsecured non-priority creditors who believe their debt should not be discharged would need to file an
Objection the Discharge and prevail in a hearing regarding their objection. Without a court order unsecured
creditors are discharged upon the courts issuing the debtor the discharge order.




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                                             NO SOLUTION



         T68   NOTHING SEEMS TO SOLVE MY PROBLEM


If the reality of the situation is that you’re not eligible for a Chapter 7 or if filing a Chapter 7 wouldn’t
provide the relief needed and a Chapter 13 just doesn’t give the financial relief needed either, what does one
do?

If neither Chapter 7 nor Chapter 13 will resolve the debt problem it must be understood that paying nothing
or almost nothing to unsecured creditors while stretching out the payment of consumer secured and priority
creditors for up to five years won’t solve the problem, it must understand there is a serious problem.

There’s only three areas you can turn in order resolve the financial dilemma. You must either 1. increase
your income and/or 2. reduce your expenses in order to increase your Margin so you have at least the
minimum amount needed to fund a Chapter 13 Plan. Likely a 5 year Chapter 13 Plan would be better than
dealing with the creditors directly. For some helpful information in that regard refer to {T10} ‘Alternatives
to Bankruptcy’ for starters. Refer to the Internet, the Library and various governmental programs for
additional advice.

If increasing the Margin doesn’t enable you to fund a 5 year Plan with paying little to nothing to the
unsecured creditors, the problem is “secured and priority’ debt. Nothing can be done regarding Priority debt
as long as it remains Priority. That being said, if there is not a sufficient amount remaining in the Margin
after allowing 5 years to address any Priority creditors, the problem is the amount owed to consumer
secured debt. If that’s the case, the fact of the situation is you’re attempting to hang-on to some security you
simply cannot afford to retain. If you can’t afford to repay (non-real estate) secured debt over a 5 year
period (particularly if it can be ‘crammed-down) and possibly reducing the interest rate while basically
paying nothing to unsecured creditors, you can’t afford to retain that security.




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                           T69   LINKS
                      9TH CIRCUIT COURTT69A1
                        www.ca9.uscourts.gov


              CALIFORNIA STATE BAR ASSOCIATIONT69A3
                          www.cabar.gov


CLERK OF THE BANKRUPTCY COURT EASTERN DISTRICT OF CALIFORNIAT69A5
                      www.caeb.uscourts.gov


               U.S. BANKRUPTCY COURT SACRAMENTO
                        www.caeb.uscourts.gov


            SACRAMENTO COUNTY BAR ASSOCIATIONT69A7
                        www.sacbar.gov


                    UNITED STATES COURTST69A9
                         www.uscourts.gov


               EASTERN DISTRICT OF CALIFORNIAT69A11
                       www.caeb.uscourts.gov


         U.S TRUSTEES OFFICE SACRAMENTO CALIFORNIAT69A13
                  www.justice.gov/ust/r17/sacramento.gov


            U.S.TRUSTEES OFFICE FRESNO CALIFORNIAT69A15
                    www.justice.gov/ust/r17/fresno.gov



                                                                    143
                                          T70   STATISTICS


T70ALIMITS   FOR CHAPTER 13

     MAXIMUM OWED TO SECURED CREDITORS                       $1,081,400

     MAXIMUM OWED TO UNSECURED CREDITORS                       $360,475




T70BMEDIAN   INCOME FOR THE STATE OF CALIFORNIA

     1 single – individual $47,683
     2 person household $61,539
     3 person household $66,050
     4 person household $74,806
     5 person household $82,306
       Plus an additional $ 7,500 for the 5th and each additional person




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T70CEXEMPTIONS


Exemptions are more detailed than those briefly described below. What is listed below is an approximate
grouping of amounts that will provide you with a general idea of what may be claimed as exempt when
filing a bankruptcy case. Your bankruptcy attorney will provide more detail regarding exemptions should
there be any problem exempting your assets.


               CCP 703                         ITEM                            CCP 704

                                           REAL ESTATE
         $22,075 total                                                   $75,000 single
                                                                        $100,000 joint
                                                                        $150,000 senior/disabled


                                             VEHICLES
           $3525 total                                                     $2725 total


                                      PERSONAL PROPERTY
            $550 per item                                             Reasonable & Necessary


                                             JEWELRY
           $1,425 total                                                    $7,175 total


                                           TRADE ITEMS
           $2,200 total                                                    $7,175 single filing
                                                                          $14,350 joint filing

                                         LIFE INSURANCE
         $11,800 total                                                    $11,475 total


                                  PERSONAL INJURY AWARDS
        $22,075 total                                                     $20,725 total
  excludes pain & suffering                                         excludes paid & suffering

                                            WILDCARD

          $1,175
plus any unused portion of the                                                 -0-
 $20,725 residence exemption

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                                    QUESTIONS AND REFERENCES


                             T71   DID YOU KNOW THAT:

D1. it’s not uncommon to wipe-out more debt through a Chapter 13 Plan of Reorganization than you can in
a Chapter 7? {T32}

D3. it’s not uncommon to end-up paying less per month in a Chapter 13 Plan than you would have to pay
per month towards debt after receiving a Chapter 7 discharge? {T32}

D5. the rate of interest you’d pay to a reaffirmed secured creditor after receiving a Chapter 7 discharge
could likely have been reduced had you repaid that creditor through a Chapter 13 Plan? {T37E13}

D7. if you owe more on a vehicle than it’s worth and you purchased it more than 910 days (2½ years) ago,
you can use Chapter 13 to pay the value of a secured creditors collateral as secured and treat the amount
owed in excess of the value (the not-secured portion of the debt) as unsecured even though you may be
paying less than the full amount owed or even nothing to unsecured creditors? {T37E10}

D9. if you owe more on your senior mortgage(s) than what your home is worth you can use Chapter 13 to
‘strip-off’ the not-secured junior mortgage(s) and treat it/them as unsecured even though you may be paying
less than the full amount owed or even nothing to unsecured creditors? {T37E4}

D11. if you owe non-dischargeable past due income taxes, that you would have had to pay interest and
penalty even after Chapter 7 discharge…. you’re not likely to pay any interest or penalty to it/them through
a Chapter 13 Reorganization Plan? {T37E16}




                                                                                                        146
                                               T72   FAQ's


T72ABEFORE    FILING



F1. What should be first on my list if I’m considering filing bankruptcy? Before all else, you need to
carefully chose a bankruptcy attorney. However, before you can intelligently choose an attorney you need
to learn how to make the best possible choice. Part of that process is to be sure to hire an attorney who can
handle asset Chapter 7 cases and creatively use the special provisions of a Chapter 13 when it can be to your
greatest advantage. To learn how to choose one of the best Bankruptcy Specialist in your area, see {T24}.

F2. What should I consider before hiring an attorney? You need to understand you may be denied the
use of Chapter 7 Bankruptcy or may be better off filing a Chapter 13. Therefore you may need or want to
consider a Chapter 13 filing. Knowing that, you’ll want to be sure you have an attorney who is adept at
filing Chapter 13’s as well as Chapter 7’s. Not all Consumer Bankruptcy attorneys know how to skillfully
file Chapter 13’s. Find a Consumer Bankruptcy Specialist who has a great deal of experience in filing
Chapter 13’s and 7’s and has no preference for one or the other. Someone who will represent you equally
well with either chapter. See {T24} to learn more about attorneys.

F3. What’s a retainer? A retainer is the initial payment paid to an attorney which means you have hired
(retained) that attorney to represent you regarding your bankruptcy case. See {T22} to learn more about
attorney fees.

F4. What’s needed to file a bankruptcy? A great deal of information is needed to properly prepare all of
the documents necessary to file a Bankruptcy Petition. Fortunately we have computers and Bankruptcy
Programs that make the process much simpler than it was just a few years ago. Most of the information is
only asked once and much of the information needed can be gained from other sources. However it’ll still
takes some serious time to gather everything needed. See {T27} for more information on what’s needed.

F5. When is it best to file a Bankruptcy Petition? The timing of when it may be best to file the
Bankruptcy Petition can make a significant difference in the outcome of the case. Many factors should be
taken into consideration. To learn more about timing the filing, see {T39}.

F6. What should I know before I file? There are many factors that come into play prior to your filing
bankruptcy. Some actions have a ‘look back period’ of 8 or 10 years. Some go back only 30, 60 or 90 days
prior to your filing. You should know what these factors are in order to avoid possible problems or
unnecessary losses. You should also know what they are to take the greatest advantage of your impending
filing. For more information regarding what to know before filing, see {T31}.

F7. What should I know in order to avoid hiring the wrong bankruptcy attorney? Know that you may
need an attorney who is skilled at filing Chapter 13 if it becomes necessary or if it’s more advantageous than
                                                                                                          147
a Chapter 7. Know that there are not too many skilled Chapter 13 attorneys and do your best to avoid
attorneys who haven’t filed or prefer avoiding Chapter 13 cases. This is an excellent site to help you find a
skilled Chapter 13 and Chapter 7 attorney in your area. For more information regarding attorneys, see
{T24}.



T72BDEFINING




F8. What is Bankruptcy? Bankruptcy is a legal proceedings which an individual or an entity Petitions the
Federal Bankruptcy Court for protection and relief from creditors.

F9. What is a Trustee? A trustee is assigned to each Chapter 7 and 13 Bankruptcy case to represent
creditors in the orderly administration of the Bankruptcy Estate. For more information about trustees, see
{T42}.

       The Chapter 7 (Panel) Trustee’s key responsibility is to represent the priority and unsecured
creditors. The trustee reviews the case file and the petitioner at the 341 Meeting of Creditors {G1} in an
effort to discover non-exempt assets {G173}, preferences {G201} and avoidable transfers {G93}. It is from
the recovery of those assets that allows the trustee to pay a dividend to priority and unsecured creditors who
file Proofs of Claim. For more information regarding the Chapter 7 Trustees duties, see {T42}.

       The Chapter 13 (Standing) Trustee’s key responsibility includes making a determination of the
same assets that a Chapter 7 Trustee would recover to insure the unsecured creditors will receive no less in a
Chapter13 'Plan' of reorganization. The trustee must also look to the Income and Expenses to determine if
the Plan is feasible and realistic for the debtor and their dependents. The trustee must also insure that the
creditors are being treated fairly and that the Plan is the debtor’s ‘Best Effort’ {T37D5} and that it’s been
filed in ‘Good Faith’ {T37D4}. This would include reviewing the 'Plan', the Schedules, other documents
and the proposed treatment of secured, priority and unsecured creditors {T37E}. The Chapter 13 Trustee is
also responsible for administering the Plan by receiving Plan Payments and making distributions to creditors
in accordance with the court approved Plan. For more information regarding the Chapter 13 Trustees duties,
see {T52}.

F10. What is the difference between Chapter 7 and Chapter 13? {T32}

       In a Chapter 7 the trustee identifies non-exempt assets, preferences and avoidable transfers of each
bankruptcy estate, liquidates those assets to pay a dividend to the priority and unsecured creditors who file
Proofs of Claims in the case. Chapter 7 Bankruptcy is usually filed by debtors with few, if any, non-exempt
assets. A Chapter 7 is beneficial to a petitioner who has a substantial amount of dischargeable unsecured
debt and little in the way of non-exempt assets and the amount still owed after bankruptcy is an amount that
is manageable. For more information regarding this subject, see {T33}.

      In a Chapter 13 the trustee also identifies non-exempt assets, preferences and avoidable transfers of
each bankruptcy estate to insure that the 'Plan' will pay no less than that amount to the unsecured creditors
during the life of the 3 to 5 year Plan. The trustee also reviews the income and expense schedules to insure
                                                                                                          148
that the proposed ‘Plan Payments’ are realistically affordable by the petitioner. The secured creditors being
paid through the Plan must also receive a stream of payments that will afford them adequate protection in
view of the collateral they have as security and satisfy their secured claim and any interest provided for in
the Plan during the life of the Plan. For more information regarding this subject, see {T32} or {T34}.

F11. What doesn't bankruptcy do?

Chapter 7 Bankruptcy wipes-out most unsecured debts which are ‘dischargeable’. Bankruptcy doesn't
eliminate secured debts such as mortgages, debts owed on vehicles or other creditors secured by ‘re-
sellable’ merchandise in which the debtor wishes to retain the security. Priority taxes or child support or
alimony obligations are also debts that must be paid as bankruptcy does not discharge these types of
obligations {G171}. Nor does it wipe-out student loans, court restitutions or criminal fines. Generally
speaking, Chapter 7 discharges all non-priority general unsecured creditors with the exception of non-
dischargeable {G171} creditors. For more information regarding non-dischargeable debt in a Chapter 7
read {T65}.

Chapter 13 Bankruptcy proposes a Plan to repay all or a portion of a petitioners debt as long as the Plan is
paying no less than what the unsecured creditors would have receive in a Chapter 7 Bankruptcy and as long
it is the debtors Best Effort {T37E23}. For more information regarding Non-Dischargeable debts in a
Chapter13, read {T65}. Also see Non-Dischargeable debt in the Glossary {G171}.

F12. Can the Bankruptcy Clerks Office give legal advice? No. They’re not lawyers and even if they
were they’re prohibited by law from giving legal advice {BKCT}

F13. Can the Chapter 13 Trustee’s Office give legal advice? No. They’re not lawyers and even if they
were they’re prohibited from giving legal advice. The trustee’s office will provide information regarding
the administration of the Plan and the financial activity of the case. For more information regarding the
Chapter 13 trustees duties, see {T52}.

F14. Where can I find information about the Means Test(s)? There are two Means Test, the Chapter 7
Means Test {T17} and the Chapter 13 Means Test {T35} or visit the U.S. Trustee’s website {UST} for
information regarding the Means Test.

       The Chapter 7 ‘Means Test’ is intended to determine if a debtor has the ‘means’ to repay their debts
or at least repay a significant portion of their non-priority unsecured debt (25% or $10,000 over a 5 year
period) and therefore avoid the need to resort to filing Chapter 7 Bankruptcy. If they can, they may be
denied the ability to use the provisions of Chapter 7 Bankruptcy. To learn more about the Chapter 7’s
Means Test, Form 22A, see {T17}.

      The Chapter 13 ‘Means Test’ is intended to determine how long a Chapter 13 Plan should last (3 or
5 years) and what ‘Means’ the debtor has to pay the non-priority unsecured creditors in a Chapter 13 Plan of
Reorganization. To learn more about Chapter 13 Means Test Form 22C, see {T35}.

F15. What are the Federal Rules of Bankruptcy? They are the Rules of Bankruptcy Procedures and
Official Forms. Where can I get a copy of them? The Federal Rules of Bankruptcy are available on line
at the U.S. Bankruptcy Court or Clerks Office’s web site {BKCT}.

                                                                                                         149
F16. What are the Local Rules? These are the Rules as promulgated by the Bankruptcy Court setting
forth the manner in which Bankruptcy is practiced in that specific jurisdictional district. Where can I get a
copy of them? The Local Rules are available on line at the U.S. Bankruptcy Court for the Eastern District
of California’s web site {BKCT}.

F17. What changed when Congress modified the Bankruptcy Code in 2005? Congress wanted Chapter
7 to be used less liberally and Chapter 13 to be used more liberally. In that effort the Bankruptcy Code was
amended to add the Credit Counseling Requirement {T16} and the Chapter 7 Means Test {T17} and the
Chapter 13 Means Test {T35}. Congress also added Chapter 12 for Family Farmers and Fishermen {T11D}
and Chapter 15 for Ancillary and other Cross-Border Cases {T11F}.

F18. What is a Section 341 Meeting of Creditors? The debtors have an obligation to appear and be
examined under oath at a Meeting of Creditors. The Bankruptcy Trustee conducts the 341 Meeting of
Creditors which is open to creditors who wish to examine the debtor in relationship to the Bankruptcy
Petition, the Schedules, the contractual agreement between the parties and in Chapter 13’s, the Plan. The
341 Meeting of Creditors is usually held within 25 to 50 days of the Bankruptcy Petition being filed. The
petitioner’s attorney of record is also required to appear at the 341 Meeting of Creditors in the
representation of their client.

For more information regarding Chapter 7 Section 341 Meetings of Creditors, see {T46}.

For more information regarding Chapter 13 Section 341 Meeting of Creditors, see {T53}.

F19. What's a Discharge? A Discharge Order is the order issued by the court which permanently prohibits
creditors from taking any actions to collect a ‘discharged’ debt. Some unsecured creditors may not be
discharged. See Chapter 7 ‘Non-Dischargable’ {T50} and see Chapter 13 ‘Non-Dischargeable’ {T65}.
Secured creditors in a Chapter 7 Bankruptcy are allowed to pursue their rights to the collateral in which they
have a security interest once the bankruptcy case is closed. In a Chapter 13 all secured creditors
administered by the trustee through the Plan should be paid in full prohibiting the secured creditor from any
further action upon the conclusion of the Chapter 13 case. For information regarding a bankruptcy
Discharge, see {G95}.

F20. What does it mean if a case is Dismissed? A Dismissal is the closing of a bankruptcy case prior to
its completion. Upon the dismissal of a case the 'Automatic Stay' is terminated which allows the creditors to
once again pursue the debtor or the debtors’ estate for collection of a debt based on the terms of their
contract and the state collection laws under which they must comply. A dismissal is usually the result of not
complying with the bankruptcy process or not meeting the payment terms of a Chapter 13 Plan.

F21. What is a Reaffirmation Agreement? This is an agreement where the petitioner has agreed to re-
enter into a contractual agreement in-spite of a bankruptcy filing in Chapter 7 cases. Debts which a secured
creditor wishes the petitioner to reaffirm must be approved by the debtor, their attorney and the Bankruptcy
Court. Once a 'Reaffirmation Agreement' has been signed by all parties the debt becomes non-
dischargeable since it was ‘re-enterred’ into after the filing of the bankruptcy case. Reaffirmation
Agreements are voluntary. You can also voluntarily continue to keep current any debt you wish without
entering into a Reaffirmation Agreement. For more information regarding this subject, see {T45}.


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F22. What are Claims? How are Claims Filed? A Proof of Claim is a document filed with the
Bankruptcy Court by an entity who is claiming to be a creditor owed money regarding a bankruptcy estate.
Creditors must file a Proof of Claim with the Bankruptcy Clerks Office in any bankruptcy case in which
they wish to be included in the distribution of any funds received by the Bankruptcy Trustee. Proofs of
Claims filed by creditors will state which bankruptcy estate the Proof of Claim is regarding, the balance due
as of the date the Bankruptcy Petition was filed and the type of claim or classification the creditor believes
they are entitled (secured - priority - unsecured). Proofs of Claims are usually accompanied with documents
supporting the amount and the nature of the debt.

F23. What is Redemption? Redemption allows a petitioner in Chapter 7 to keep personal property by
paying the secured creditors the amount owed or a lump-sum amount representing the fair market value of
the secured creditors collateral.

F24. What is 'Fair Market Value'? Many opinions have been presented as to the value of property in
bankruptcy cases. Most attempt to convey the value as of the date of the filing of the Bankruptcy Petition.
Replacement value, retail value, private party value, wholesale value, used market value, garage sale value
and resale value all have their own interpretation. Ultimately the courts have chosen the term 'Fair Market
Value' which loosely describes a value somewhere between the high amount being a Retail value and the
low amount being the Garage Sale value. Generally Fair Market Value is somewhere between Retail and
Wholesale value which may be reviewed by the court based on evidence and expert testimony when a
‘value’ is contested.

F25. What are Exemptions? Exemptions refer to an amount of equity in property that can be protected
from a creditor or a trustees collection actions. Exemptions are claimed on the Bankruptcy Schedule ‘C’ of
Exemptions. The Schedule A and B list property of the debtors’ estate while Schedule C list various
Exemptions which can be claimed to protect property or equity in property from being taken by a trustee for
the benefit of creditors of the bankruptcy estate. Exemptions have limits as to types of property and
amounts which can be used and claimed to protect the debtor’s assets. Most all bankruptcy cases have little
if any assets or equity in assets that are not protected through the proper utilization of exemptions available
{T70C}.

F26. Is Bankruptcy a State Law or a Federal Law? Bankruptcy is a Federal Law although some state
laws come into play when a Federal Bankruptcy Petition is filed.

F27. What is an Extension Plan? An Extension Plan is a Chapter 13 Plan proposing to pay all creditors in
full, 100% {T37A1}.

F28. What is a Composition Plan? A Composition Plan is a Chapter 13 Plan of reorganization that is
proposing to pay less than the full amount due and owing to ‘general’ unsecured creditors. For more
information regarding Chapter 13 Plans, see {T37A2}.

F29. What is a “Base” or “Pot Plan”? A Base Plan or a Pot Plan is a Chapter 13 Plan proposing to pay
the general unsecured creditors less than the full amount due and owing. The Plan is instead proposing to
pay a specific dollar amount to all unsecured creditors to be shared equally among those unsecured creditors
who have a filed and allowed claim {T37A2}.


                                                                                                           151
F30. What is a Percentage Plan? A Percentage Plan is a Chapter 13 Plan proposing to pay the general
unsecured creditors less than the full amount due and owing and is instead proposing to pay a specific
percentage of the total amount owed to each unsecured creditor who has a filed and allowed claim
{T37A2}.



T72CCHOICES




F31. What alternatives to bankruptcy are available to me? Individuals experiencing personal financial
problems who find themselves in a position of not being able to meet the creditor’s demands or are unable
to pay in accordance with the contractual terms have a limited number of alternatives. Briefly those
alternatives are: a) Increase your Income, b) Reduce your Expenses, c) Sell Assets, d) Consolidation Loans,
e) Refinance Existing Debt, f) Borrow from your Retirement Account, g) Negotiate with Creditors, h)
Consult a Credit Counseling Agency, i) Make Offers to Compromise, j) File Bankruptcy Chapter 7 or 13.
For more information regarding the matter, see {T10}.

F32. How many Bankruptcy Chapters are there? There are actually 9 Chapters utilized in the
Bankruptcy Code, Chapter 1, 3, 5, 7, 9, 11, 12, 13 and 15. To learn more about this subject, see {T11}.

F33. Who or what defines a Chapter 13 Plan? A Chapter 13 Plan of Reorganization is prepared by the
debtors attorney. There are many different factors which influence the contents of a Plan. The Chapter 13
‘Means Test’, a Chapter 7 Liquidation Analysis, the Schedules ‘I’ of Income and the Schedule ‘J’ of
Expenses along with how each specific secured, priority and general unsecured creditors must be dealt. All
these factors and more have an influence on the final design of the Chapter 13 Plan. It takes a skilled
attorney to design and file a Chapter 13 Plan that best utilizes the special advantages Chapter 13 has to offer
for the greatest benefit of their client. For more information on this subject, see {T37}.

F34. Is the Chapter 7 Means Test any different than the Chapter 13 Means Test? Most definitely.
The Chapter 7 Means Test {T17} must be taken to determine IF a debtor is eligible to file Chapter 7. The
Chapter 13 Means Test {T35} is used to determine HOW LONG the Chapter 13 Plan should last and HOW
MUCH should be paid to non-priority unsecured creditors.

F35. How do I know which Chapter is best for me? Often you won’t truly know which is available to
you or which is best for you until the numbers are ‘crunched’. That won’t happen until you’ve completed a
good majority of the paperwork. Your bankruptcy attorney will have a pretty good idea of what is likely to
be best and what the actual numbers are likely to prove out… but in reality there is no certainty until the
Chapter 7 Means Test {T17} and possibly the Chapter 13 Means Test {T35} have been completed. That’s
why it’s so important to hire a bankruptcy attorney who is adept at filing both Chapter 13 and Chapter 7.
See {T19} for more information regarding bankruptcy attorneys.

F36. Do you pay more through a Chapter 13 than you would pay if you’d filed Chapter 7? Not
necessarily. In fact it’s not unusual for a debtor to ultimately pay less to their creditors after having
completed a Chapter 13 Reorganization Plan than they would have paid to their creditors after filing Chapter
7. To find out more about this, see {T32}.
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F37. Is Chapter 13 kinda like a consolidation loan? To some degree and in many cases… Yes! It
depends on each individual set of circumstances but it’s not unusual for a Chapter 13 Plan to basically be
the same as if a debtor were to wrap-up all of their ‘must-pay’ debts, plus ‘want-to-pay’ secured debts
they’re re-committed themselves to pay after a Chapter 7 and stretch them out over a 3 to 5 year
‘loan/Chapter 13 Plan’.

F38. Why would I choose Chapter 13 if I’m eligible for a Chapter 7? You may not want to choose 13
over a Chapter 7 but there are a number of circumstances where a debtor who is eligible to file Chapter 7
would be much better off in a Chapter 13. Often Chapter 13 can do much more than a Chapter 7… the
question is “Does the debtors financial set of facts make a Chapter 13 a better choice than Chapter 7?” For
more information of this subject, see {T32}.

F39. Is Bankruptcy the best tool to resolve my financial problem? If you can afford to avoid
bankruptcy I would encourage you to do so. If however your financial obligations have become so
overwhelming that they have been seriously affecting your quality of life or you have wage attachments or a
pending foreclosure or repossession, then bankruptcy should be seriously considered. If you can resolve
your financial problems through other means you should consider alternatives that will not have as much of
a negative impact on your financial future. In your attempts to avoid bankruptcy be careful not to destroy
the benefits of a bankruptcy discharge should it ultimately become necessary to file. For more on this
subject see either {T10} or {T13}.

F40. What types of bankruptcies are there? Most bankruptcies are filed by ‘consumers’ and most all
consumers file either Chapter 7 or Chapter 13. Chapter 7 is the ‘Liquidation’ chapter and Chapter 13 is the
‘reorganization’ chapter for individuals or small proprietary businesses with regular income who owe less
than $1,081,400 in secured debt and less than $360,475 in unsecured obligations. Chapter 9 is the
reorganization of municipalities such as cities, school districts, utility companies, et cetera. Chapter 11 is
the reorganization of a business usually Corporations, LLC’s or individuals who owe amounts in excess of
the Chapter 13 Statutory Limits. Chapter 12 is the reorganization of Small Family Farmers or Fisherman.
Chapter 15 involves Ancillary or other Cross Border Cases. For more information regarding this matter, see
{T11}.

F41. What type(s) of bankruptcy are available to me? Ninety-five percent (99%) of bankruptcy cases
filed are individuals, sometimes referred to as Consumer Bankruptcy Cases. If you are an individual who
receives a regular income and whose debts are primarily ‘consumer debts’ you'd be considered a consumer
and would therefore likely file either a Chapter 7 or a Chapter 13. If you have a separate entity such as a
Corporation, an LLC, et cetera then you would likely consider a Chapter 11 or a Chapter 7 unless your
business entity fell under the perimeters of a more appropriate reorganization chapter such as Chapter 12.
For more information regard this subject, see {T11}.

F42. How do I know if I should file a Chapter 7 or a Chapter 13? Initially you don’t know IF you can
file either Chapter 7 or Chapter 13. Likely both will be available but you may have to file a Chapter 13 if
the Chapter 7 Means Test {T17} results show you earn more than the states ‘Median’ income. If you earn
more than the Median income the ‘system’ presumes you can afford to avoid the need to file Chapter 7
because the ‘system’ presumes you can afford to pay at least 25% or $10,000 to your non-priority unsecured
creditors over a 5 year period. Of course you may challenge that presumption as it is based on an average of
household expenses for the number of dependents and living expenses in your county. Your attorney will
                                                                                                          153
collect all of the data necessary to take the Chapter 7 Means Test and help guide you to what would be the
most beneficial alternative between Chapter 7 and 13 if Chapter 7 is available. You shouldn’t be expected
to make that decision without the advice of an expert Bankruptcy Attorney. That’s why it’s so important to
select a Bankruptcy Attorney who has a great deal of experience in both Chapter 13 and Chapter 7.
Someone who has no bias or preference in regard to either Chapter 7 or Chapter 13 before you pay a
retainer. For more information, see {T32}.

F43. What are the advantages of filing Chapter 7 compared to Chapter 13? Chapter 7 is the simplest,
quickest, least expensive and easiest way to discharge unsecured debt. Approximately 75 percent of the
bankruptcy cases filed are Chapter 7’s. To read more regarding this matter, see {T32}.

F44. What are the advantages of filing Chapter 13 compared to Chapter 7? Individuals and small
proprietary businesses who: 1. owe secured creditors who hold title to collateral the debtor wants to retain,
2. owe priority non-dischargeable taxes, 3. wish to cure mortgage delinquency on a home they wish to
retain, 4. have 'no-longer-secured’ (mortgages not secured ~ based on current market values) junior
mortgages against their home, 5. are delinquent on support or alimony obligations, 6. have a significant
amount of non-dischargeable debt, 7. have a significant amount of transferred property that the Chapter 7
Trustee would show an interest, 8. have a significant amount of preferences that the Chapter 7 Trustee may
want to reverse, or 9. have co-signers they wish to protect… may well be better off in a Chapter 13. For
more information on this subject, see {T32} and {T34}.

The Chapter 13 'Plan' of reorganization will provide the petitioner the opportunity to pay many of those
types of creditors listed above over an extended period of time and often pay no more to the unsecured
creditors than they would have received in a Chapter 7. It’s not unusual for a Chapter 13 Plan to require
monthly payments that are less than what the petitioner would have to pay after a Chapter 7 Bankruptcy
Discharge. In many cases they may, in the final analysis, pay less in total than what would have ultimately
been paid after a Chapter 7 discharge. For more information regarding the comparison of Chapter 13 to
Chapter 7, see {T32}

F45. Should I file on my own or with the help of a paralegal, a typing service or hire an attorney?
All too often when a petitioner files a Chapter 7 Bankruptcy without retaining a Bankruptcy Specialist
they’re more likely to miss taking full advantage of the Bankruptcy Code and may well experience
complications with the bankruptcy process itself. It's difficult to know the actual advantages or
consequences.

If the Chapter 7 case is very simple then it's possible there will not be any negative consequences. If the
case is more involved, includes ‘assets’ or the case has ‘special issues’, ‘contingent factors’, ‘extenuating
considerations’, ‘special situations’ or where a Chapter 13 would be more advantageous, then one should
more seriously consider employing a bankruptcy specialist. Even in the simplest of cases there may be a
great deal of savings by retaining a Bankruptcy Specialist who would utilize the Bankruptcy process to their
client’s greatest advantage. For more on this subject, see {T23}.

Filing a Chapter 13 without having an experienced Consumer Bankruptcy Specialist will most always
guarantee failure. Pro se and Paralegal Typing Servicers have been almost totally unsuccessful of being
able to; gain court approval of a Chapter 13 Plan of Reorganization or ultimately preparing a Plan that
would enable the debtor to obtain a Discharge Order by successfully completing the terms of the Plan. It’s
                                                                                                         154
best to hire a Consumer Bankruptcy Specialist who regularly files Chapter 13's... preferably a consumer
bankruptcy specialist who regularly represents debtors in Chapter 13 cases. For more on this subject, see
{T24}.



T72DELIGIBILITY




F46. Am I eligible to file bankruptcy? There are only a few reasons why bankruptcy wouldn't be
available: 1. If you received a discharge in a prior bankruptcy proceedings, you may be prohibited from
filing again depending on how much time has transpired and if it was a Chapter 7 or Chapter 13 {T15}. 2.
If you do not successfully complete the U.S. Trustee required Credit Counseling Program or do not file the
Certificate proving you have successfully completed this process before you file the Bankruptcy Petition,
you may be denied the benefits of a bankruptcy {T16}. 3. If you fail the Chapter 7 'Means Test' you could
be denied the use of a Chapter 7 and may need to consider Chapter 13. This test is required to determine if a
debtor actually has the 'Means' to repay all or a significant portion of their non-priority unsecured debt.
Allowing an individual to file Chapter 7 bankruptcy and avoid paying creditors when they actually have the
'Means' to repay a significant portion of their debts would be an abuse of the bankruptcy system {T17}.

F47. What’s the maximum amount I can owe in a Chapter 13? As of this writing (April 2012) the
maximum amount that can be owed to secured obligations is $1,081,400 and the maximum amount that can
be owed to unsecured debt which includes unsecured priority obligations is $360,475 {T70A}. The
amounts are adjusted periodically so if you’re close, check with your bankruptcy lawyer.

F48. I filed bankruptcy before, can I file now? A ‘discharge’ of debt in a prior bankruptcy filing can
prohibit a debtor from receiving a discharge in a subsequent filing. You may, in some circumstances, be
able to file but not receive the benefit of a discharge. The prohibition time is counted from filing date to
filing date… but whether you had received a discharge in an earlier filing or not, is the determining factor.

Filing a Chapter 7 after receiving a Chapter 7 discharge is an 8 year bar. Filing a Chapter 13 after
previously receiving a Chapter 7 discharge is a 4 year bar. Filing a Chapter 13 after having received a
discharge in a prior Chapter 13 is a 2 year bar. Filing a Chapter 7 after receiving a discharge in an earlier
Chapter 13 is a 6 years bar unless the Chapter 13 was your Best Effort, was filed in Good Faith and you paid
at least 70% of the filed and allowed unsecured claims. For more detail, see {T15}.

F49. What will bankruptcy do regarding my unfiled tax returns? You must be current with your tax
filing, it’s okay if you owe… but you must have filed the returns (unless you are exempted from filing
returns) for the last 4 taxable years (or have an unexpired extension) in order to receive the benefit of a
bankruptcy.

F50. What's the "Chapter 7 Means Test"? This is a test required by the Bankruptcy Code for all
individuals seeking a Chapter 7 Bankruptcy. The test is required in order to determine if a petitioner has the
'Means' to repay a significant portion of their unsecured creditors representing 25% or $10,000 over a 5 year
period. If they have the means to repay at least that amount, the bankruptcy system takes the position the
debtor should be prohibited from filing Chapter 7 Bankruptcy. To allow a debtor a discharge when they can
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afford to handle their financial responsibilities without the need to resort to Chapter 7 Bankruptcy would be
an abuse of the bankruptcy system. For more information on the Chapter 7 Means Test, see {T17}. For
information regarding the Chapter 13 Means Test, see {T35}.

F51. What is the Chapter 13 “Means Test”? The Chapter 13 Means Test is the test that must be taken by
anyone filing a Chapter 13 Plan of Reorganization. The Chapter 13 Means Test determines the length of the
Chapter 13 Plan and the results of the ‘Means Test’ also concludes with a presumption of what amount
should be paid to the non-priority unsecured creditors. For more information, see {T35}.

F52. What’s the difference between the Chapter 7 Means Test and the Chapter 13 Means Test? The
Chapter 7 Means Test determines IF you can afford to pay a significant portion of your debts and if the test
results show that to be the case you may be barred from filing Chapter 7 {T17}. The Chapter 13 Means
Test determines HOW LONG the Chapter 13 Plan will last and a presumption of HOW MUCH should be
paid to non-priority unsecured creditors {T35}.



T72EPROCESS




F53. How long will the bankruptcy process take? It depends on if it’s a Chapter 7 or a Chapter 13
Bankruptcy.

The filing of a typical ‘Non-Asset’ Consumer Debtor Chapter 7 Bankruptcy is usually completed within 3 to
5 months.

The typical ‘Asset’ Consumer Debtor Chapter 7 Bankruptcy is usually completed in about 5 to 9 months.

For more information regarding the Chapter 7 process, see {T43}.

Most Chapter 13 Plans last between 3 to 5 years. For more information regarding the Chapter 13 process,
see {T51}.

F54. Does my spouse have to file with me? No… but if your spouse is jointly liable for any debt, your
spouse will still be liable for those debts after your bankruptcy since they won’t receive a bankruptcy
discharge. Also note that each person filing bankruptcy is allowed certain exemptions {G115}. A single
bankruptcy filing would provide fewer exemptions than a joint (double… husband & wife) filing. Also note
that California is a ‘Community Property’ state which may cause a spouse to be jointly liable for a debt even
when the contract was not signed by both spouses. Consult your bankruptcy specialist to determine whether
you and your spouse would be better off filing a joint Bankruptcy Petition.

F55. Will I have to face my creditors? While creditors will be prohibited from having any contact with
you regarding the collection of the debt, they will have the opportunity to attend the 341 Meeting of
Creditors. Most creditors do not attend and those who do will be limited to questions regarding the
Schedules, the Statement of Affairs and other documents that are a part of the public bankruptcy file and the
contractual agreement they have with you. In a Chapter 13 case they may question you regarding the “Plan”
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as well. For more information regarding the Chapter 7 Section 341 Meeting of Creditors, see {T46}. For
more information regarding the Chapter 13 Section 341 Meeting of Creditors, see {T53}.

F56. Will I have to go to Court? In most cases you’ll only have to appear at the Section 341 Meeting of
Creditors' with the Bankruptcy Trustee, your attorney and any creditor who chooses to attend the Meeting.
Most of the 341 Meetings of Creditors are brief and rarely do creditors appear. In a ‘typical’ Chapter 7 or
Chapter 13, it’s unlikely you’ll have a need to participate in an actual court hearing.

F57. What happens when I file bankruptcy? The ‘Automatic Stay’ {G11} becomes effective which
provides immediate protection from all forms of collection activity. Creditors are noticed and informed of
the Bankruptcy Case Number, what Chapter you filed (Chapter 7 or Chapter 13) and when and where your
341 Meeting of Creditors will be held. Even though some collection actions may take place between the
filing and when the creditors have actual knowledge of your filing, any action taken (such as foreclosure –
repossession – wage garnishment) will likely be reversed.

F58. If I file, when is the best time for me to file? The timing of your bankruptcy may be extremely
important both in Chapter 7 and in Chapter 13. There are two types of considerations going on.

One involves the more general considerations such as “What can the creditors currently do to enforce
collection?”, “Am I on the road to recovery or am I still going further in debt?” and, “Are your expenses
greater than your income?”. These are questions you should know the answer before filing bankruptcy
because you want the bankruptcy filing to protect your assets and wages and to resolve past financial
problems. Your bankruptcy filing should give you the relief needed so you can go forward without the
likelihood of going back in debt.

The other involves considerations such as how long ago you entered into your automobile contract, when
you received your tax refund, where you are in the existing taxable year and if you're expecting to receive a
tax refund. Where are you in relationship to a foreclosure, a sale date, a repossession or a wage
garnishment. Even when you receive your paycheck, a bonus or a commission check influence the timing
of the filing of a Bankruptcy Petition. More importantly when you sold or transferred assets also has a
major influence on when to file or if you’d be better off delaying the filing of a Bankruptcy Petition.

Make sure you thoroughly go over these matters with your bankruptcy specialist before you file. For more
information regarding the timing of when to file bankruptcy, see {T39}

F59. Can I avoid listing some creditors? No. All creditors must be listed regardless of your intention or
how you may ultimately deal with them. Even disputed, contingent or unliquidated creditors must be listed.
So must personal loans to friends or family members, loans to co-workers or debts where you have been
listed as a co-signer or you have co-signers, list both the debt and the co-signer. You must list everyone you
could possibly owe, even if you don’t think you own them but they think you do.

F60. Where would I file bankruptcy? Electronic filings are allowed in the Eastern District of California
so a physical filing isn’t necessary. If you reside in one of the 22 Counties representing the Sacramento
Division, the Bankruptcy Petition is filed at the Bankruptcy Clerks Office in Sacramento, California. When
filing in the 4 Counties in the Modesto Division they’re filed at the Clerks’ Office in Modesto and when
filing in the 8 Counties of the Fresno Division they’re filed in Fresno. For information regarding the

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division of the 34 Counties of the Eastern District of California, where the 341 Meetings of Creditors are
held and other jurisdictional information, see {T26G}

F61. How much will it cost to file a Bankruptcy Petition? The Bankruptcy Courts filing fees for Chapter
13 is $281 and the filing fee for of a Chapter 7 is $306 at the time of this writing. I believe the extra $25 is
to help pay the Chapter 7 trustee for their time in non-asset cases.

F62. How much will it cost to hire a bankruptcy attorney? Chapter 7 attorney fees range between about
$1200 and $2500 and even more in more complex cases. Fees charged by attorneys filing a Chapter 13 are
approximately $4000 and up depending on the complexity. Some of the fees charged by a Chapter 13
attorney may be paid out of the monthly Plan Payment after an initial retainer has been paid to get the case
started. Yes, you’ll find an attorney to file your case for much less. You can also find someone who does
dental work out of their garage really cheap too. Remember hiring quality legal services will most often
provide more savings than trying to save a few dollars by finding an “inexpensive” attorney. For more
information on this subject, see {T22}.

F63. What about my ‘Payroll Deduction' Credit Union Loan? If you owe money to your credit union,
it's a debt and you must list all debts. You must list all creditors regardless of your intentions or desires.
Whether that debt is owed to family, friends, co-workers, credit unions, company stores or whatever... they
must all be listed. Even if they’re 'contingent', 'disputed' or 'unliquidated', they must be included in your
Schedules of debt. How they will be dealt with by you or the bankruptcy proceedings is another matter.

F64. What about my 401k Retirement Loan? Retirement loans must be listed in your Bankruptcy
Schedules as well. They are a secured creditor and as such they will not be discharged in your bankruptcy
proceedings unless you surrender the collateral. If you surrender the retirement funds held as security you
may well be looking at a tax issue since you now used that deferred ‘income’ to pay a debt with income you
had not previously been taxed {T37E15}.

F65. What if I don't agree with the ‘Proof of Claim’ filed by a creditor? Should it become necessary,
your attorney may file a formal Objection to a Proof of Claim so that the merits of the matter can be heard
and ruled upon by the Bankruptcy Court Judge.



T72FPROTECTION




F66. What about my co-signers? If you have a co-signer on a loan the co-signer will continue to be liable
for the obligation even if you receive a discharge in bankruptcy regarding the debt. Co-signed debts in
which the petitioner received the benefits of the debt may be treated 'specially' and provided for in a
preferential manner in a Chapter13 Plan preventing the creditor from collecting from the co-signer(s) during
the life of the Chapter 13 Plan. For more information on this matter, see {T37E18}.

F67.     Does filing bankruptcy stop collection calls, threats, foreclosures, repossessions and
harassment? Yes. The moment your Bankruptcy Petition is filed, your creditors are automatically
prohibited from attempting to collect or enforce the payment of any debt owed. Based on the list of
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creditors and the addresses provided, they will all be noticed by the court. Between the time you filed and
their having received notice you'll want to inform those who contact you that you’ve filed, the date you
filed, your bankruptcy case number and the name and number of your bankruptcy attorney. Your attorney
may want to personally provide notice to any creditor who is actively pursuing collection actions you want
to prevent.

F68. Will bankruptcy stop wage garnishments? Yes. The moment the bankruptcy petition is filed all
collection actions are 'stayed'. Even collection actions such as wage attachments, foreclosures and
repossessions which take place moments after the filing of the Petition will in all likelihood be reversed.
Your attorney may want to personally provide notice to any creditor who is actively pursuing collection
actions you want to prevent.



T72GPROPERTY




F69. Can I sell anything or transfer some of my property before filing bankruptcy? Selling or
transferring property prior to your filing bankruptcy may cause the trustee to view that transaction as an
avoidable transfer or a preference. Should that happen, the trustee would likely move to reverse the
transaction or require the amount improperly transferred to be paid into the estate for the overall benefit of
priority and unsecured creditors.

F70. Will I lose my home? Not likely. Exemptions can be claimed to protect a considerable amount of
equity in your home. By properly using allowable exemptions individuals can protect up to $75,000 in
equity, husband and wife filings can exempt up to $100,000 in equity and those over 65 years of age or are
handicapped can exempt up to $150,000 in equity when properly claimed. These exemptions protect the
debtors equity in their residence from being seized by a non-mortgage creditor. If the mortgages secured by
the residence are in default the filing of a Chapter 7 only temporarily delays the mortgage creditor from the
foreclosure process. Should you be seriously delinquent and concerned with losing your home to
foreclosure you should look into what a Chapter 13 bankruptcy filing would do to possibly help resolve
mortgage delinquency problems {T37E3}.

      In Chapter 13 it’s different. If you wish to retain your home, a Chapter 13 Plan can propose to cure
the delinquency through a 3 to 5 year Plan while the on-going mortgage payments continue to be made
timely. You can also avoid paying interest on mortgage delinquency being cured through the Chapter 13
Plan. For more information regarding this subject, see {T37E3}.

F71. Will I lose my vehicle(s)? If you have equity in a vehicle that is in excess of any allowed exemption,
the Chapter 7 Trustee would need to insure the unsecured creditors receive that non-exempt equity from the
liquidation of that asset or to receive funds equal to or near the non-exempt amount. For more information
regarding the Chapter 7 trustees duties, see {T45}.

If you owe a secured creditor on a vehicle, you’ll need to either pay the secured creditor the fair market
value to Redeem the vehicle, enter into a Reaffirmation Agreement with the approval of your attorney and
the court, re-obligating yourself to some terms which would be binding as if the Bankruptcy Petition was
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never filed or continue to keep the payments and insurance current. If you have a leased vehicle, you'll
need to state in your Bankruptcy Schedules whether you intend to ‘reject’ the lease or if you want to
‘assume’ the lease and keep the vehicle by continuing to keep current with the terms of the lease agreement.
For more information regarding Reaffirmation Agreements, see {T45}.

If you file a Chapter 13 and wish to retain your vehicle, the 'Plan' will need to state how you propose to
treat that secured creditor. If the number of months remaining on the contract are more than the life of the
proposed Chapter 13 Plan the payments would likely be paid directly by the petitioner from their living
budget outside of the Plan. If the number of months are less than the proposed life of the Chapter 13 Plan,
the debt would be part of the Chapter 13 Plan payment as administered by the Chapter 13 trustee. If the
interest rate is more than Prime Rate plus 2%, the interest may be reduced in the Plan. In some instances
your Plan may propose to pay that creditor as secured only up to the current market value of the security and
pay the amount owed in excess of the value as an unsecured creditor. See ‘Cramdown’ {G77}. The
unsecured portion would then be paid on a par with other general unsecured creditors which means it will
likely receive less than the full amount owed. For more information on this subject, {T37E13}

F72. Will I have to sell things? No. In fact you shouldn't sell anything without first checking with your
bankruptcy attorney. Also, if you are in a Chapter 13 proceedings and you wish to sell an asset which has a
value in excess of $1000 you’ll need to gain court permission.

F73. What will I lose? Assets or any equity you have in property that cannot be claimed as exempt is
subject to liquidation by the Bankruptcy Trustee in a Chapter 7. In a Chapter 13 you don’t risk losing
anything through liquidation, but you’ll need to pay any non-exempt amounts to unsecured creditors out of
the 3 to 5 year Chapter 13 Plan of reorganization.

F74. Will bankruptcy affect my on-going lawsuit or disability action? In all likelihood, the action would
continue without regard to or any interference from your having filed a bankruptcy proceedings. Regarding
any possible proceeds that may be realized, you should consult your bankruptcy specialist as depending on
the nature of law suit, the potential amount and anticipated settlement date, a Bankruptcy Trustee may take
an interest in those potential assets unless the anticipated amount can be fully exempted.

F75. Will I lose my 401k or other retirement? Most likely the Bankruptcy Trustee will not take an
interest in your retirement accounts. However there have been some very expensive exceptions. Therefore
you should consult your bankruptcy specialist to make sure you are totally aware of where you are in
relationship to your retirement accounts and how they relate to your bankruptcy case........ before you file.

F76. What property can I keep? The Bankruptcy Trustee is not interested in any property or any equity
in property that can be exempted. If you have property that has equity in excess of any exemption, you risk
loosing that property in a Chapter 7 or having to pay the non-exempt amount to the trustee. Exemptions are
used to protect assets from being seized by the Chapter 7 Trustee or having to pay the non-exemptable
portion to the Chapter 13 Trustee from the Plan payments for the benefit of your priority and unsecured
creditors {T70C}.



T72HEFFECT    ON DEBTOR

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F77. Is bankruptcy a good idea for me? Each individual set of circumstances is unique and there is no
one answer for all situations. Your financial profile consist of your income, expenses, assets, liabilities and
many other factors which must be considered by a professional before a proper analysis can be made.
Reviews of this nature should be conducted by an expert, preferably a professional who doesn’t have a
vested interest in the conclusion nor any bias towards or against Chapter 13 or Chapter 7. For more
information of this matter, see {T10}.

F78. If I file Chapter 7 am I stuck with it? You’ll likely be stuck in a bankruptcy proceedings but your
Chapter 7 may in most instances be converted to a Chapter 13. It would be highly unlikely you’d be
allowed to dismiss your Chapter 7.

F79. If I file Chapter 13 am I stuck with it? Unlikely! Unless there are some extreme circumstances that
would provoke court intervention you can voluntarily dismiss your Chapter 13 case or you can change
(convert) it to a Chapter 7 Bankruptcy. However you should also know that if the Chapter 13 case was
originally filed as a Chapter 7 and then converted to a Chapter 13, it’s unlikely your Chapter 13 would be
dismissed. Since the case originated as a Chapter 7, it’s more likely it would be reconverted back to a
Chapter 7 or remain open as a Chapter 13 to allow the Chapter 13 Plan to complete.

F80. Can the Chapter 13 Plan payment change? If your circumstances change there may be a possibility
of amending your Chapter 13 Plan payment. However, just because you may no longer be able to pay the
amount you originally were scheduled to pay doesn’t mean the Plans payment can be reduced to what your
current circumstances afford. Many other factors must be taken into consideration in addition to your
ability. In fact, pretty much the same factors that are considered when putting an original Plan together
must still be considered when requesting an amendment. For more information on what needs to be
considered when putting a Plan together, see {T37}.

NOTE: If the on-going mortgage payment is being administered by the trustee and a change in mortgage
payment takes place, it’s likely your Chapter 13 Plan payment will need to be adjusted according to the
mortgage change.

F81. Can a Chapter 13 Plan be paid off early? Difficult question to answer. Unfortunately in a
‘Composition’ Plan the actual answer is unlikely. It depends… questions such as: how much earlier?
Why? What affect will this have on the unsecured creditors? The only way to approach this ‘matter’ is to
have your attorney bring the set of circumstances and the answers to the above questions to the attention of
the Chapter 13 Trustee to see if they would object to an amended Plan proposing such a proposition. If the
Chapter 13 Plan is an ‘Extension’ Plan proposing to pay all creditors in full, the early pay off would be
acceptable without question.

F82. Will bankruptcy help me or hurt me? Both! It will eliminate most if not all of your dischargeable
unsecured debt, stop garnishments, delay or stop foreclosure on real estate, delay or stop vehicle
repossessions, debt collection efforts, wage garnishments and harassment. It will also inhibit your access to
credit while you slowly rebuild your credit worthiness. Just how much financial relief you’ll receive
depends on your particular financial situation, the type of debts you’re obligated and then whether you
choose to file Chapter 7 or Chapter 13. See {T32}.

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F83. What should I do if Chapter 7 and Chapter 13 won’t or can’t help me? If a Chapter 7 discharge
or a Chapter 13 5 year reorganization Plan proposing to pay nothing or almost nothing to unsecured
creditors won’t solve the problem then the debtor must seriously re-evaluate their financial situation. Must
they give up the home, a car, a lifestyle, free time or some combination of these factors. If the debtor
doesn’t causatively make the choice, the creditors will make the decisions for them as a result of their
collection actions. For more on this subject, see {T68}.

F84. Will I lose my job? You cannot be fired or discriminated against because of your filing bankruptcy.
However your security clearance or your ability to be bonded may be at risk.

F85. Can I get my driver’s license back? If you lost your driver’s license solely because you couldn't pay
the court-ordered fines, the filing of a bankruptcy may well allow you to get your license back. Check with
your bankruptcy specialist before you file bankruptcy to have a clear understanding.

F86. What can I do if creditors keep calling me? Creditors are noticed by the Bankruptcy Clerk (actually
the BNC ‘Bankruptcy Noticing Center’) of your filing based on the Mailing Matrix you provided when your
Petition was filed. If a creditor contacts you after they have been notified and you have also informed them
of your filing, they may well be in violation of the Automatic Stay which is a punishable action.

F87. Is a ‘Reaffirmation Agreement’ in a Chapter 7 a good thing?

VEHICLES: In all likelihood you owe more on the vehicle than it’s worth. Secondly it’s unlikely the car
creditor will repossess a vehicle that’s ‘up-side-down’ (has a negative equity) when the payments are
current. Thirdly, why would you expose yourself to a deficiency balance should the car creditor repossess
the vehicle after you’ve signed a Reaffirmation Agreement {T45}. Fourth, it’s unlikely your attorney or the
court will sign-off on a reaffirmation agreement unless it improves the contractual arrangement and your
bankruptcy schedules show you can afford the terms of the reaffirmation agreement. By NOT signing a
Reaffirmation Agreement you eliminate the possibility of your being responsible for any deficiency balance.

REAL ESTATE: Some secondary mortgage creditors may request you sign a Reaffirmation Agreement.
These are often junior mortgages that are not fully or even partially secured by any equity after considering
the current property value and the amount owed to any senior mortgages. Since most of these creditors are
either not secured or only partially secured, they are at risk of losing money on the loan. As such, they
would feel much more comfortable with a Reaffirmation Agreement which causes the debtor to re-obligate
themselves to the entire debt in-spite of the bankruptcy. If the senior mortgage forecloses they don’t have to
worry because even though they won’t be paid from the sale or a short-sale, they can turn to the debtor for
payment because they have a Reaffirmation Agreement {T45}.




T72IEFFECT   ON CREDITORS


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F88. Will bankruptcy stop a foreclosure? The Automatic Stay, which becomes effective the moment the
Bankruptcy Petition is filed, will stop the foreclosure/sale process. If the property hasn’t been sold at the
time the Petition was filed, the foreclosure is stopped. The length of time the Automatic Stay is in effect
preventing foreclosure varies depending on whether you file a Chapter 7 or a Chapter 13.

      Chapter 7 stops the foreclosure process while the Bankruptcy Case is open and active which is about
3 to 5 months. After the Chapter 7 is closed, the mortgage creditor is free to continue the foreclosure
process from where they left off. However the mortgage creditor can file a Motion with the Bankruptcy
Court asking for Relief from the Stay while the case is pending. If ‘Relief’ is granted by the court, the
mortgage creditor would be free to continue the foreclosure process before the Chapter 7 case is closed
without regard to the Automatic Stay.

       Chapter 13 stops the foreclosure process too. However the Chapter 13 Plan will likely propose to
cure the delinquency over the life of the 3 to 5 year Plan of Reorganization. As long as the on-going
mortgage payments and the Chapter 13 Plan payments are paid timely, the foreclosure cannot proceed. If a
default occurs in the Chapter 13 Plan Payment causing the case to be dismissed, foreclosure can once again
go forward. If the on-going mortgage payment becomes delinquent, the mortgage creditor could file a
Motion for Relief from the Automatic Stay and if relief is granted by the Court they could then proceed with
the foreclosure process without regard to the Automatic Stay {T37E3}.

F89. Will Chapter 13 or Chapter 7 change my mortgage payment?

      Chapter 7 will not change anything in regard to your mortgages… Chapter 7 will only delay a
foreclosure process for the period of time your bankruptcy case is open… unless the mortgage creditor files
a Motion for Relief and is granted relief to proceed with the foreclosure process without regard to the
Automatic Stay.

       Chapter 13 on the other hand is an open and active bankruptcy proceedings for 3 to 5 years. So the
situation is different. In a Chapter 13 the delinquency is brought current during the life of the Plan (usually
without any interest being added to the delinquent amount) while the Plan would ‘service’ the on-going
mortgage payment during the life of the Chapter 13 Plan. Therefore at the conclusion of the Plan your
mortgage payments would be totally current (except for possibly one months’ payment) without any
delinquency owing. For more information, see {T37E3}.

NOTE: Even more importantly, if you have a totally unsecured junior mortgage because the value of your
home is now worth less than what you own on the senior mortgage(s), the no-longer-secured junior
mortgage can be ‘stripped’ from your property and treated as a unsecured creditor. Debts of this nature are
paid on a par with your other general unsecured creditors even though they may only be paid just pennies on
the dollar or possibly nothing. For more information, see {T37E4}.

F90. I owe State and Federal taxes, will bankruptcy help me? Chapter 7 will not provide much relief
unless you have assets that will be recovered by the Chapter 7 trustee. Those assets will then be used in part
to pay toward the ‘Priority’ tax creditors if they have filed their Proof of Claim with the court. In a Chapter
13, the 3 to 5 year Plan would totally pay-off any priority tax creditors who file a claim. It should also be
pointed out that priority tax creditors are not be allowed to add, or be paid any interest after the filing of
your Chapter 13 Petition saving the debtor a great deal of money {T37E16}.

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F91. Will my utilities be cut off? Public utility companies cannot refuse to provide you utility service for
a debt owed to them which was included in your Bankruptcy Petition. They can however require a new
deposit for new service beginning the day after the date your Bankruptcy Petition was filed.

F92. Will I still owe some creditors after bankruptcy? You will not be discharged from having to pay
creditors who have collateral to secure their obligation… unless you surrender the collateral {T37E11}.
You must surrender the collateral or continue to pay secured obligations. Some unsecured creditors are not
dischargeable such as some taxes, child support and alimony, student loans and debts for personal injury or
death caused by a DUI are a few examples of non-dischargeable debts. See Non-Dischargeable in Chapter 7
{T50} and Non-Dischargeable in Chapter 13 {T65}.

F93. Will bankruptcy help me reduce or avoid alimony or child support? No. Child support and
alimony obligations are unaffected by a Bankruptcy. Debts of this nature are Non-Dischargeable. While
the filing of a Chapter 7 will unlikely address any delinquent domestic support obligations, the filing of a
Chapter 13 can propose to repay those Priority Non-Dischargeable debts over the life of the Chapter 13
Plan. For more information, see {T37E17}.

F94. Will bankruptcy handle my tax obligations? Most taxes are not dischargeable. There are
exceptions depending on the type of taxes owed, if you timely filed returns, how long ago you filed those
returns and what years were owed determines if the taxes are dischargeable or not. The most recent tax
creditor’s claims are usually entitled to a Priority status. A Chapter 13 Plan must provide for the payment in
full of all tax creditors entitled to a priority classification during the life of the 3 to 5 year reorganization
period… without interest or penalty. For more information, see {T137E16}.

F95. Will bankruptcy ‘Wipe-Out’ my Student Loans? No. Student loans are generally unaffected by
bankruptcy. Under extremely rare circumstances a student loan may be discharged but only when there is
an extreme 'hardship' that almost guarantees that the debtor would ‘never’ be able to repay the Student
Loan. Certain and specific conditions need to be met in order to gain the discharge of student loans. See
undue-hardship {G251}.

F96. I have a leased vehicle… what happens here? In a Chapter 7 you would handle a leased debt in the
same manner you handle a secured vehicle contract. You surrender the vehicle or you continue to pay if
you intend to keep the vehicle. In a Chapter 7 bankruptcy you’ll need to declare your intentions in regard to
any leased asset. In a Chapter 13 you must also declare your intention as to assuming or rejecting the lease.
If you wish to assume the lease you’ll generally continue to make the lease payments directly outside of the
Plan from your household budget. For more information, see {T37E14}.

F97. What about debts I dispute? In a Chapter 7 non-asset case it won’t make any difference when the
disputed debt is unsecured unless it is a non-dischargeable obligation. In a Chapter 13 if the disputed
creditor files a claim you can have your attorney review the Proof of Claim and decide if filing a formal
objection would be the best course of action.

F98. I owe more on my car than it’s worth… do I have to pay the whole amount? In a Chapter 7 you
have four choices. 1. Surrender the security. 2. Redeem the debt by payment in full of the balance or the
current market value. 3. Reaffirm the debts with your attorney and the courts blessings {T45}, or 4.


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Continue to keep the contract and the insurance current only a slight risk of the creditor repossessing the
vehicle in spite of it being current.

In a Chapter 13 you surrender the security or you can file a motion to have the secured creditor split their
claim into the secured portion and the unsecured portion when the contract was signed more than 910 days
(2½ years) prior to the Bankruptcy Petition being filed {T37E9}. If it was purchased less than 910 days (2½
years) prior to filing, the full balance must be paid through the Chapter 13 proceedings plus the interest
{T37E13} at the rate the Plan provided.



T72JAFTER   BANKRUPTCY



F99. Credit wise, what is my best choice? Generally individuals experiencing financial problems will not
be able to keep those problems from impacting their credit rating. While bankruptcy has a major impact
negatively, (bankruptcy is about a 300 point deduction from a credit score) trying to deal with financial
problems without filing bankruptcy will likely have a negative impact on your credit worthiness as well…
including working with a 'credit counseling agency'. If you can afford to keep your financial problem
'under-raps', by all means do so. See ‘Alternative to Resolving Financial Problems {T10}. Chapter 7
Bankruptcy stays on your record for 10 years… Chapter 13 stays for 7 years. However the most recent 2
years of credit activity has the greatest influence on your credit worthiness.

F100. What’s a discharge? A discharge is the Court Order relieving you of having to ever pay or be held
accountable for the payment of a discharged creditor. See Non-Dischargeable in Glossary {G171}.
Discharge orders are issued upon the successful conclusion of your Chapter 7 or Chapter 13 case if you have
completed the Post-Filing Debtor Education Course required by the U.S. Trustee. For more information
regarding Discharge Orders and Debtor Education regarding Chapter 7, see {T48} or regarding Chapter 13,
see {T64}.

F101. Who will know I filed? Bankruptcy filings are public records and your filing will be picked-up by
all credit reporting agencies. If you filed Chapter 7 it will remain on your record for 10 years. If you filed
Chapter 13 it will remain for 7 years.

F102. What should I expect to experience credit-wise after bankruptcy? Initially it will be difficult
obtaining credit after completing the bankruptcy process. However creditors are also aware that you are not
eligible to file bankruptcy for a number of years and that you've just been relieved of a great deal of
indebtedness. Creditors want to extend credit, that's how they make their money, so there may be some
creditors who actively solicit your business if your ‘income-to-expense-ratio’ shows you have the ability to
pay the credit being considered.

F103. How can I repair my credit after bankruptcy? Slowly and carefully! Some creditors may
actively solicit you for the extension of credit after bankruptcy since you can't file bankruptcy for a number
of years and you've just been relieved of having to pay most all of your unsecured creditors. Start
rebuilding as soon as possible but do so carefully without overextending yourself and without missing any

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payments... pay better than agreed, pay on time, never owe close to the maximum and pay down the account
frequently. Search the internet for information regarding the rebuilding of your credit after Bankruptcy.

F104. Will I be discriminated against for filing bankruptcy? Credit wise, yes. The filing of a
bankruptcy may have an effect on your ability to be Bonded or your Security Clearance. Otherwise no. The
Bankruptcy Code specifically prohibits governmental entities and private employers from discriminating
against you for filing bankruptcy or for not paying a creditor that you've discharged in bankruptcy.
However, credit reporting agencies will reduce your credit score by approximately 300 points.

F105. Can I keep a credit card? Not likely. Most all creditors make it a practice of cancelling all credit
cards held by the petitioner even if there is no balance due at the time the case is filed.

F106. Will I be able to rent after I file bankruptcy? If you are currently renting, it's unlikely your
landlord will recheck you credit in the extension of your current occupancy. Even if they did, if you’re
current I don’t believe they could evict you even if they wanted to based solely on your having filed
bankruptcy. It would depend on the terms of your lease agreement. If you are looking to relocate and need
to complete a credit application you may run into some difficulties. However, with millions of Short Sales
and about one million bankruptcies filed every year, plus folks losing their home to foreclosure, people are
still finding places to live. Seek private landlords or offering to pay one or two additional months’ rent for a
deposit may help resolve the matter or if need be, possibly a co-signer would resolve the problem.

F107. How long does the filing of bankruptcy stay on my credit report? Chapter 7 Bankruptcy stays on
your credit report for 10 years while Chapter 13 stays for 7 years.

F108. After the bankruptcy process is over, should I go to a credit repair agency? I would recommend
you do your own repair. Do a little research or buy a book on credit repair and then begin the process in a
slow, methodical and cautious manner.

F109. Is there life after bankruptcy? Definitely! Most everyone will be able to rebuild their credit, buy
vehicles and real estate.

F110. How do I clear-up a judgment? When a judgment creditor has been discharged in a Bankruptcy it
may be necessary to go to the county courthouse with the Discharge Order and other pertinent documents
including the Petition showing the listing of the judgment creditor. Upon proof that you filed and received a
Bankruptcy Discharge which included that specific creditor, the judgment should be removed.

F111. If I make a payment to a creditor after bankruptcy, have I recommitted myself to pay the
whole balance? No.




                                          T73   GLOSSARY
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G1   341 Meeting of Creditor

The U.S. Trustee Program is responsible for insuring all bankruptcy cases have a Meeting of Creditors
which allows the trustee and creditors the opportunity to examine the petitioner under oath. The Petition,
the Schedules and the Statement of Financial Affairs set forth the petitioner’s assets, liabilities, income,
expenses and other information pertinent to petitioner’s entire financial state of affairs. This information
along with the 'Plan' in Chapter 13 cases, is used to help guide the Bankruptcy Trustee’s examination of the
debtor regarding the Bankruptcy estate. For more information regarding Chapter 7 Section 341 Meetings of
Creditors, see {T46}. For more information regarding Chapter 13 Section 341 Meeting of Creditors, see
{T53}.

G3 9th   Circuit Court

The judicial area encompassing: Washington, Oregon, Idaho, Montana, California, Nevada, Arizona,
Alaska, Hawaii, Guam and the U.S. Territories of the Pacific Islands.

G5   Assets

Property of all kinds, including real restate and personal property, tangible and intangible.

G7 Assume


An agreement to continue meeting the original terms set out in a contract or lease.

G9 Avoidable    Transfers

The transferring of property which may have been an asset of the estate that can be reversed for a more
equitable allocation of the asset transferred.

G11 Automatic   Stay

An injunction that automatically stops lawsuits, foreclosures, garnishments and most collection activities
against the debtor or their property the moment a Bankruptcy Petition is filed.

G13   Bankruptcy

A legal procedure for dealing with debt problems of individuals and businesses: specifically, a case filed
under one of the chapters of Title 11 of the United States Code (the Bankruptcy Code).



G15 Bankruptcy     Code


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The name for Title 11 of the United States Code (11 U.S.C. Sections 101 -1532), the Federal Bankruptcy
Law.

G17   Bankruptcy Court

The Federal Court which is a judicial body of the United States District Court whose specific duties relate to
the handling of all Bankruptcy matters. {BKCT}

G19   Bankruptcy Estate

All interest of the debtor in property (tangible and intangible) at the time of the bankruptcy filing.

G21   Bankruptcy Judge

A judicial officer of the United States District Court who is the court official with decision-making power
over federal bankruptcy cases. The Bankruptcy Judges in regular active service in each District; a unit of the
District Court.

G23   Bankruptcy Petition

A formal request for the protection through the use of the federal bankruptcy laws {T28A}. There is an
official form for Bankruptcy Petitions.

G25   Bankruptcy Trustee

A private individual or corporation appointed in all Chapter 7, Chapter 12 and Chapter 13 cases to represent
the interest of the bankruptcy estate and the petitioners creditors. The trustee technically becomes the
temporary legal owner, custodian or executor of all of the debtor's property. {T42}

G27   Base Plan

A Chapter 13 Plan proposing to pay a fixed amount of money which is less than the total owed as a
settlement to all non-priority unsecured creditors. {T37A2}

G29   Business Bankruptcy

Usually involves a bankruptcy case in which the entity filing is a business such as a Corporation, an LLC or
some other separated Tax Identification Numbered entity. It can also refer to an individual who owes an
amount in excess of the Chapter 13 maximums who chooses a Chapter 11 to reorganize their debt.
Generally it refers to a bankruptcy case where the debts are primarily business related which usually refers
to Chapter 11 matters. {T11C}

G31   Case/File

A complete collection of every document filed at court in a bankruptcy matter.

G33   Chapter 7

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The chapter of the Bankruptcy Code providing for the "liquidation" of the Petitioners Estate. That is, the
sale of the Petitioners nonexempt property and the distribution of those and other proceeds collected by the
Chapter 7 trustee to pay a dividend to the creditors of the estate. In order to be eligible for Chapter 7
consumer debtors must satisfy a Chapter 7 "Means Test" {T17}. For more information regarding Chapter
7, see {T43}.

G35   Chapter 7 Means Test

A test required to determine if a debtor desiring to seek relief through the filing of a Chapter 7 Bankruptcy
should be prohibited from filing Chapter 7 because the Means Test has resulted in a ‘presumption’ that the
debtor has the ‘Means’ to repay all or a significant portion of their debts over a period of 5 years.

If the debtor earns more than the ‘Median’ income for the state of California, a presumption exist that they
can afford to avoid the need to file Chapter 7 Bankruptcy. The presumption is that over ‘median income’
debtors should have the means to pay 25% or at least $10,000 of the debtors non-priority unsecured
obligations over a period of 60 months. The debtor can challenge the presumption by showing evidence to
support their basis for their challenging the normal or median expenses in their county. For more
information, see {G163} and/or {T17}.

NOTE: The Income and Expense figures used is a combination of data provided by the petitioner, the
Census Bureau and the IRS based on the instructions provided when completing the Chapter 7 ‘Means Test’
Form 22A.

G37 Chapter   7 Trustee

A person or a corporation appointed in a Chapter 7 case to represent the interest of the bankruptcy estate on
behalf of the creditors. The trustee's responsibilities include reviewing the debtor's Petition, the Schedules,
the Statement of Financial Affairs, the Chapter 7 Means Test and other documents with the intent of
liquidating non-exempt assets, reversing preferences and improper transfers in the estate. The trustees’ duty
includes recovering those assets and make a distribution to priority and unsecured creditors. For more
information regarding Chapter 7 Trustees, see {T44}.

G39   Chapter 9

The chapter of the Bankruptcy Code providing for the reorganization of municipalities which includes cities
and towns, as well as villages, counties, taxing districts, municipal utilities and school districts {T11B}.

G41   Chapter 11

In Chapter 11 the Petitioning Entity or the Individual debtor proposes a Plan to reorganize the financial
affairs of the bankruptcy estate. A reorganization bankruptcy, usually involving a Corporation an LLC or
any other ‘stand-alone’ tax ID entity although individuals can also use Chapter 11 to reorganize their
financial affairs {T11C}.



G43   Chapter 12
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The chapter of the Bankruptcy Code providing for adjustment of debts of a "small family farmer or
fisherman," as the terms are defined in the Bankruptcy Code {T11D}.

G45   Chapter 13

The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income,
often referred to as a "Wage-Earner" Plan. Chapter 13 allows a debtor to keep property and use his or her
disposable income to pay all or a portion of their debts over time, usually 3 to 5 years. For more
information see {T11E}. The use of Chapter 13 is limited to those who owe no more than $1,081,400 to
secured debt and no more than $360,475 in unsecured debt.

G46   Chapter 13 Means Test

See {G165}

G47   Chapter 13 Trustee

A person appointed to administer a Chapter 13 case. A Chapter13 Trustee's responsibilities are similar to
those of a Chapter 7 trustee; however, a Chapter 13 trustee has the additional responsibilities of reviewing
and administering the debtor's Plan, receive Plan payments from the petitioner and disbursing those funds to
creditors as set-forth in a court approved Plan. For more information see {T52}.

G49   Chapter 15

The chapter of the Bankruptcy Code dealing with Ancillary or other Cross Border Cases {T11F}.

G51 Claim


A document filed with the Bankruptcy Court by a creditor asserting an obligation owed by the debtor or the
bankruptcy estate.

G53   Clerk of Court

The court officer who oversees administrative functions, especially managing the flow of cases through the
court. The administrative office of the Bankruptcy Court {BKCT}.

G55   Collateral

Property that is pledged as security for the satisfaction of a debt or merchandise held title to on a Contract of
Sale or a Purchase Money Security Agreement.

G57 Composition    Plan

A Chapter 13 Plan which proposes to pay less than the full amount due and owing to general unsecured
creditors. Composition Plans state a specific minimum amount or percentage as a settlement amount in lieu
of the full balance owed {T37A2}

G59 Confirmation
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Approval of a Chapter 13 Plan of Reorganization by the Bankruptcy Court. For more information, see
{T54}.

G61   Consumer Bankruptcy

A bankruptcy case where the debts are primarily consumer debts and/or the petitioner is a wage earner
whose debts are considered ‘consumer debts’. Generally refers to a Chapter 13 and most Chapter 7 cases.
For more information see {T12}.

G63   Consumer Debts

Debts incurred for personal/family use as opposed to debt incurred in the operation of a business.

G65   Contested Matter

Other than 'disputed claims' and 'adversary proceedings', contested matters address disputed issues.

G67   Contingent Claim

A claim that may be owed by the debtor. If the debtor is a cosigner on another person's loan and that person
continues to pay, they’ll never have to pay anything. If that person fails to pay, the co-debtor will have to
pay, so the debt is owed “contingent” upon the ‘maker’ (the original signer) paying that debt or not. When
looking at Chapter 13’s statutory limits, contingent obligations are not included in the total when
determining the amount owed for qualification purposes {T70B}.

G69   Contract

An agreement between two or more parties that creates a legal commitment.

G71 Conversion


The changing from one chapter of bankruptcy to another chapter. Such as changing the initial filing of a
Chapter 7 to a Chapter 13 or from a 13 to a 7.

G73 Counsel


Legal advice; a term also used to refer to the lawyers in a case.

G75 Court


The Governmental entity authorized to resolve legal disputes. Judges sometimes use "court" to refer to
themselves in the third person, as in "the court has read the briefs".




G77   Cramdown
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A provision of the Bankruptcy Code that allows a Chapter 13 debtor to split some consumer secured
creditors claims into the value of the collateral (the secured portion of the claim) and the remaining amount
owed on the claim (representing the unsecured portion). For more information on ‘Cramdowns’ on
‘vehicles, see {T37E9} or Non-Vehicles, see {T37E10}.

G79   Creditor

A person to whom or business to which, the debtor owes money or that claims to be owed money by the
petitioner.

G81 Credit   Counseling

Refers to the requirement a consumer debtor must complete prior to being eligible to file Bankruptcy. The
intended petitioner must be pre-screened or reviewed by a U.S. Trustee approved Credit Counseling Agency
and receive a Certificate declaring the debtors financial problems cannot be resolved by a Credit Counselor
BEFORE they should be allowed to file Chapter 7 or a Chapter 13 Bankruptcy {T16}.

G83   Creditors Meeting

See '341 Meeting of Creditors' {G1}.

G85 Current    monthly income

      1. The average monthly income based on the preceding six months income when completing the
         Chapter 7 ‘Means Test’ {T17} or the Chapter 13 'Means Test' {T35}, or

      2. The monthly income as set forth in Schedule 'I' {G103}.

G87   Debtor

A person who has filed a Petition for Relief under the Bankruptcy Code. There are 3 or 4 thresholds
regarding eligibility {T15}, {T16}, {T17} and {T18}.

G89   Debtor Education

The "instructional course regarding personal financial management". In Chapters 7 and Chapter 13 each
debtor must complete a program regarding Debtor Education provided by a U.S. Trustee approved agency
after filing the Bankruptcy Petition before the Bankruptcy Court will issue a Discharge Order in a Chapter 7
{T49} or a Chapter 13 {T64}.

G91   Debtor's Plan

A petitioners detailed description of how they ‘Plan’ or propose to reorganize their financial affairs
including their proposed treatment of creditors. The Plan must set forth how each; secured and priority
creditor will be dealt with and whether the unsecured creditors will be paid in full or ‘Compromised
{T37A2}’ by being paid less than the full amount owed through a Chapter 13 Plan of reorganization. Most


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Chapter 13 Plans are from 3 to 5 years in length. There is a standard Chapter 13 ‘Plan’ form used in the
Eastern District of California. For more information regarding Chapter 13 Plans, see {T36}.

G93   Defendant

An individual or entity who is the subject of a lawsuit filed by a plaintiff.

G95   Discharge

A release of a debtor from personal liability for certain dischargeable debts. Notable exceptions to
dischargeability are some taxes, child support and alimony and student loans. See Non-Dischargeable
{G171}. A discharge releases a debtor from personal liability for certain debts known as ‘dischargeable
debts’ and prevents the creditors owed those debts from taking any action against the debtor or the debtor's
property to collect the debt. The discharge also prohibits creditors from communicating with the debtor
regarding the collection of a debt, including telephone calls, letters, emails and personal contact.

G97 Dischargeable    debt

A debt for which the Bankruptcy Code allows the debtor's personal liability to be eliminated. Also see Non-
Dischargeable debt {G171}.

G99 Disclosure    Statement

A document used in Chapter 7 and Chapter 11 matters. The ‘Disclosure Statement’ is intended to have the
petitioning entity disclose whether they intend to Retain or Surrender a secured creditors collateral.

G101 Dismissal


A court action that removes a bankruptcy case from the bankruptcy process and the accompanying
protection, prior to discharge {T58}.

G103   Disposable Income

Disposable Income has three different meanings. 1. Based on Chapter 13’s Means Test {T35} Form 22
‘C’, Disposable Income is the amount left per month when comparing the Income to the expenses (as
defined by Form 22 ‘C’s’ calculations of income and expenses) and after providing for the payment of the
petitioners secured and priority creditors based on the methodology use by Form 22 ‘C’. 2. The total
amount of income that is at the disposal of the petitioner without regard to any expenses. It’s the amount
that is remaining after all necessary and allowed deductions required by and according to law from the
debtors’ various incomes sources. The greatest potential ‘Net’ take home pay. (i.e. income remaining after
deductions which includes tax withholdings, SSI, and other ‘required and mandatory’ deduction… it does
not include any allowance for deductions for savings, voluntary retirement or deductions for debt). 3.
Disposable income also represents what’s left ‘after necessary expenses (which would not include the
payment of any debt). It is the debtors’ total potential net take-home pay less the debtors on-going living
expenses not including or providing for any payment of any debts other than the payment of any
mortgage(s) ‘secured’, in whole or in part, by the debtors residence. If the debtor operates a business,

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disposable income is defined as those amounts left-over after paying what is necessary for the normal and
regular payment of the businesses operating expenses. For more information see {T37D1}.

G105   Disputed Claim

All creditors must be listed in the schedules of debt… even when such a debt may be disputed, contingent or
unliquidated. The listing will notice the creditor which allows them the opportunity to file a Proof of Claim,
assert their reasoning behind any debt they believe is owed and the amount and the nature of the believed
obligation. To knowingly file a false claim in bankruptcy is a punishable offense. If upon review of the
Proof of Claim and any supporting documents accompanying the claim, should the claim be disputed, a
formal Objection to the claim can be filed allowing the Bankruptcy Court to make a ruling in regard to the
disputed claim.

G107   Eligibility

Who may be a debtor in a bankruptcy case. Is the petitioner eligible to file for relief through the use of the
Bankruptcy Code and if so under which chapter of the Bankruptcy Code. There are 3 or 4 eligibility
processes. To understand those processes, review {T15}, {T16}, {T17} and {T18}.

G109   Equity

The value of a debtor's interest in property that remains after liens and other creditors' interest are
considered. Example: If a house valued at $200,000 is subject to a $150,000 mortgage, there is $50,000 in
equity.

G111   Executory Contracts

Contracts or leases under which both parties to the agreement have duties remaining to be performed. If a
contract or lease is an executory contract, a debtor may assume it (keep the contract) or reject it (terminate
the contract). Also see ‘Reaffirmation Agreements {G217}.

G113   Exempt assets

Property or equity in property that a debtor is allowed to retain free from seizure by the Bankruptcy Trustee
based on specific exemptions claimed on the Schedule ‘C’ of ‘Exemptions’, see {T70C}.

G115 Exemptions      ~ Exempt Property

Property of the estate that the Bankruptcy Code or applicable state law permits the debtor to protect
(exempt) from enforcement of judgements and from a Bankruptcy Trustee. These exemptions are provided
under the California Code of Civil Proceedure Sections 703. and Section 704. Section 703 exemptions are
more generous regarding ‘Consumer Goods’ than 704 while Section 704 exemptions are more generous in
protecting equity in a ‘Personal Residence’ than 703. Only one set of exemptions can be claimed. A very
brief listing of exemption are provided under {T70C}.




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G117 Fair     Market Value (FMV)

A term use generally to describe the value of an asset or the value of the collateral of a secured creditor.
The FMV is somewhere between Retail and Wholesale based on evidence provided to the court.

G119   File

To formally place a document in the official custody of the Clerk of the Bankruptcy Court so it becomes an
official entry in the official court records. File also refers to the ‘folder’ which contains all of the documents
related to the bankruptcy case.

G121 Filing    fee

An amount charged by the Bankruptcy Clerk for filing various documents. The initial fee for filing a
Petition in Chapter 13 is $281, slightly less than the $306 for a Chapter 7.

G123   Form 22 ’A’

See Chapter 7 Means Test Form 22’A’ {G163} and/or {T17}.

G125   Form 22 ‘C’

See Chapter 13 Means Test Form 22 ‘C’ {G165} and or {T35}.

G127   Fraudulent Transfer

A transfer of a debtor's property made with intent to defraud or for which the debtor received less than the
transferred property's actual true value.

G129   Fresh Start

The characterization of a debtor's status after bankruptcy, i.e., free of most debts. Providing debtors with a
‘Fresh Start’ is a major purpose of the Bankruptcy Code.

G131   Hardship Discharge.

A hardship discharge is when a Chapter 13 debtor meets certain and specific circumstances where they can
seek an early conclusion to the court approved Plan when a hardship has occurred. A Hardship Discharge in
a Chapter 13 would only affect the unsecured obligations. Also see ‘Undue Hardship’ as it relates to
Student Loans {G251}.

G133 Hearing


A matter brought before the court for review and adjudication by a Bankruptcy Judge.




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G135   ‘Inside’ the Chapter 13 Plan

Refers to creditors whose debts are being dealt with within the Plan and administered by the Chapter 13
Trustee. All ‘Inside the Plan’ creditors are treated in a specific manner as set forth in the 'Plan'. Creditors
paid through the trustee’s administration as opposed to being paid directly by the petitioner from their
budget as an expense. See Real Estate Inside the Plan {T37E3} and Consumer Debts Inside the Plan
{T37E8}. Also see Outside of the Chapter 13 Plan Real Estate payments {T37E2} and Consumer Debts
Outside the Plan {T37E7}.

G137   Insider

Any individual or entity, family member, partner, associate, et cetera, that has inside information or is in a
privileged position.

G139   Joint Petition

One Bankruptcy Petition which includes both the husband and the wife.

G141   Judge

An official of the judicial branch with authority to decide legal matters brought before the Bankruptcy
Court. Used generically, the term judge may also refer to all judicial officer, including Supreme Court
Justices.

G143 Judgment


The official decision of a court resolving the dispute between the parties to the lawsuit.
G145   Jurisdiction

The legal authority of a court to hear and decide a certain type of case. It also is used as a synonym for
venue, meaning the geographic area over which the court has territorial jurisdiction to decide cases. For
more information, see {T26G}.

G147   Lien

A charge or an amount owed on specific property that is designed to secure payment of a debt or
performance of an obligation. A debtor may still be responsible for a lien after a discharge.

G149   Lien Avoidance

Some liens may be avoidable by timely filing the appropriate motion as set forth in Section 724 of the
Bankruptcy Code. See Lien Strip {G151}.




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G151   Lien Strip

A term generally used to describe a lien avoidance process provided for in Chapter 13 cases which allows
the removal of a totally unsecured junior mortgage lien owed on real property where the senior mortgage(s)
are owed more than the current market value of the property. For more information see {T37E4}

G153   Liquidation

The sale of a debtor's property with the net (after payment of any secured creditors lien and after allowance
of any claimed exemption allowed) proceeds to be paid out as a dividend to priority and unsecured creditors
who file claims. See Liquidation Analysis {T37E20}.

G155 Liquidation     Analysis

A determination as to the amount the Chapter 7 trustee would receive from the liquidation of the Chapter 7
bankrupt estate. The amount used to determine one of the minimums threshold when reviewing a Chapter
13 Plan for confirmation. The amount available to be paid to priority and unsecured creditors in a Chapter 7
or as a minimum to be paid to priority and unsecured creditors in a Chapter 13 case. See Liquidation
Analysis {T37D3} or {T37E20}.

G157   Liquidation Bankruptcy

See Chapter 7 Bankruptcy {G43}. For more information regarding Chapter 7, see {T11A}.

G159   Liquidated Claim

A creditors’ claim for a fixed amount of money… the bottom line. What is due and owing after the security
has been sold (less the cost associated with liquidating the asset) reduces the debt to a final amount owed.

G161   Margin

The difference between the total net realizable income when compared to the total actual living expenses of
the debtor and their dependents without the inclusion of any payments toward debt other than any residential
(Housing Expense) real estate mortgage(s) which is/are secured by at least some equity {T37D1}.

G163   Means Test (Chapter 7)

Section 707(b)(2) of the Bankruptcy Code applies a Chapter 7 "Means Test" {T17} to determine whether an
individual debtor's Chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal
or conversion of the case (generally to Chapter 13). Abuse is presumed if the debtor's aggregate current
monthly income over 5 years, net of certain statutorily allowed expenses is more than (i) $10,000, or (ii)
25% of the debtor's non-priority unsecured debt, as long as that amount is at least $6,000. The debtor may
rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or
adjustments of current monthly income.

What the Chapter 7 Means Test is intended to accomplish is prohibit any individual who earns more than
California’s Median Income from being able to use the provisions of Chapter 7 of the Bankruptcy Code if
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the petitioner can afford to avoid Chapter 7 when comparing the income to the expenses to pay $10,000
towards their debt over a period of 5 years ($167.00 per month) or 25% of their general unsecured creditors
(non-priority) if that 25% is at least $6000. In other words, can the petitioner afford to repay a substantial
portion of their debt after taking care of their Secured and Priority creditors in that same 5 year period. For
more information, see {T17}.

G165   Means Test (Chapter 13)

The actual name of the Chapter 13 Means Test is “The Chapter 13 Statement of Current Monthly Income
and Calculation of Commitment Period and Disposable Income”. The intent of the Chapter 13 Means Test
is to determine if the Petitioner’s Chapter 13 Plan should be a minimum of 3 years or 5 years. It is also used
to arrive at an initial presumption of how much should ultimately be paid to non-priority unsecured creditors
over the life of the Chapter 13 Plan. In Chapter 13, the Means Test is basically used to determine ‘for how
long’ and ‘to what Means’ the debtor has the ability to repay their non-priority unsecured debt. For more
information, see {T35}.

G167   Motion

A request by a litigant to a Judge for a decision on an issue relating to the case.

G169   No-Asset or Non-Asset Case

A bankruptcy case where there are no assets available for a Bankruptcy Trustee to pay a dividend to the
priority or unsecured creditors of the estate {T47}.

G171   Non-Dischargeable Debt

A debt that cannot be eliminated in bankruptcy. Examples include: certain taxes, domestic support
obligations, debts for most government funded or guaranteed educational loans or benefit overpayments,
debts arising from death or personal injury caused by driving while intoxicated or under the influence of
drugs and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a
crime. Debts from embezzlement, larceny or breach of trust. Debts for fraud or defalcation while acting in
a fiduciary capacity may be declared non-dischargeable only if a creditor timely files and prevails in a non-
dischargeability action. Some debts, such as debts for money or property obtained by false pretenses, such
as lying on a credit application and credit card purchases approximating $1225 or more for luxury goods or
services made within 60 days of filing or for loans or cash advances approximating $1225 or more taken
within 60 days of filing. See Non-Dischargeable debts in a Chapter 7 {T50} and Non-Dischargeable debts
in a Chapter 13 {T65}.

G173   Non-Exempt Assets

Property of a debtor that cannot be exempted and is therefore likely to be sold by the Chapter 7 trustee to
enable to the Chapter 7 Trustee to pay a dividend to priority and unsecured creditors Proofs of Claims filed
and allowed in the estate.



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G175   Objection to Dischargeability

A trustees’ or creditors’ objection to the debtor being released from personal liability for certain
dischargeable debts. Common reasons include allegations that the debt was incurred by false pretenses or
arose because of the debtor's fraud while acting as a fiduciary. Such debts may be declared as not
dischargeable when the matter is heard by the Bankruptcy Court Judge. The means used to bring the matter
to the Courts attention is for the creditor to file an “Objection to Discharge”. See Non-Dischargeable Debt
{G171}.

G177   Objection to Exemptions

A trustee or a creditor's objection to the petitioners claimed exemptions as set forth on the Schedule 'C' of
Exemptions.

G179   “Outside” of the Plan

Creditors in a Chapter 13 are either paid directly by the petitioner as an allowed expense included in their
Schedule 'J' Expenses or out of the Plan payments as administered by the Chapter 13 Trustee. Outside of
the Plan’ payments, are payments to creditors that are not administered by the Chapter 13 Trustee. Outside
of the Plan debts are paid directly by the petitioner. See Outside of the Plan Real Estate debts {T37E2} and
Outside the Plan Consumer Creditors {T37E7}. Also see Inside of the Plan Real Estate debts {T37E3} and
Inside the Plan Consumer debts {T37E8}.

G181   Party in/of Interest

Any person who has standing to be heard regarding a matter involving the bankruptcy estate. All parties of
interest must be noticed regarding any matter that may effect or concern them in the bankruptcy case. The
debtor, the U.S. Trustee, the Bankruptcy Court Clerk, the Case Trustee and some or all creditor(s) may be a
party of interest.

G183   Percentage Plan

The percentage proposed to be paid to the unsecured creditors in a Chapter 13 Plan of Reorganization.
Once the 'Plan' is confirmed by the court the percentage becomes a minimum dividend required to be paid to
all unsecured creditors allowed claims. One of three conditions that must be met to complete the Chapter 13
'Plan' of Reorganization {T62}. Chapter 13 Plans can propose to pay any amount from 0% to 100%
{T37A}. It is up to the trustee, the creditors and the court to determine if that amount meets all of the
requirements necessary for confirmation. For more information, see {T54}.

G185   Petition

The document that initiates the filing of a Bankruptcy Proceedings, setting forth basic information regarding
the debtor, including name, address, which chapter of the Bankruptcy Code the debtor is petitioning for
relief and estimated amounts of assets and liabilities. For more information, see {T28A}.



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G187   Petition Preparer

A business not authorized to practice law that prepares Bankruptcy Petitions.

G189   Plaintiff

A person or entity that files or initiates a formal legal action or complaint with the court.

G191 Plan


A debtor's detailed description of how the debtor proposes to treat creditors specifically and generally over a
fixed period of time as set forth in the standard Chapter 13 Plan form used in the Eastern District of
California. For more information see {T37}

G193 Post-Petition


Any action that transpires after the commencement of the case.

G195   Pot Plan

A term used to describe the specific amount of money that will be paid as a minimum to the general
unsecured creditors in a Chapter 13 Plan of reorganization. Rarely used in the Eastern District of California
as Plans filed in the Eastern District of California prefer to use a Percentage Plan proposing to pay a
minimum percentage to general unsecured creditors rather than a Pot Plan’s fixed amount of money
{T37A2}.

G197   Pre-Bankruptcy Planning

The transferring or movement of the debtors property prior to the filing of a bankruptcy in order to take
advantages of exemptions or other preventative actions to avoid losses during the impending filing. Before
a debtor transfers, sells or pays more than normal amounts towards debts they should consult their
Bankruptcy Attorney.

G199   Preferential Transfers

Any mode or means by which a debtor disposes of, or parts with, property within various timeframes prior
to the filing of a bankruptcy, that unfairly favors a creditor or the debtor at the detriment of other creditors.
Such transfers can be reversed by the trustee, allowing those funds, or the liquidation of the transferred
asset, to make a greater and more equitable distribution to unsecured creditors.

G201   Preferences

A payment made to a creditor within various time frames (anywhere from 60 days to 4 years prior to filing)
before the filing of a bankruptcy that gave a creditor an unfair and favorable treatment. Preferences can be
considered assets of the bankrupt estate causing the trustee to reverse the transaction, demand those
preferential payments and redistribute those funds for the benefit of the priority and unsecured creditors.

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G203   Priority

Specially treated unsecured creditors. Creditors entitled to a Priority Status as defined in the Bankruptcy
Code, such as debts owed to most taxes obligations, domestic support obligation some unpaid wages and
other less common indebtednesses. Unsecured ‘Priority’ Creditors are non-dischargeable debts. Priority
creditors are also paid from any assets collected by the Chapter 7 Trustee before any distribution is made to
the General Unsecured creditors. Priority creditors are paid in full in Chapter 13 cases. All Priority debts
are non-dischargeable… however, not all Non-Dischargeable debt are entitled to a priority status {T37E16}.

G205   Priority Claim

An unsecured claim that is entitled to be paid ahead of other general unsecured claims which are not entitled
to a priority status. Priority refers to the order in which these unsecured claims are to be paid in preference
to other general unsecured claims. Priority claims are usually state and federal taxes, child support and
alimony claims, some unpaid wages, et cetera. Within the group of ‘priority’ claims, there is a priority of
which is first priority, second priority, et cetera. See more about priority creditors {T37E16}.

G207   Procedure

The ‘rules’ for conducting legal actions such as a lawsuit; there are rules of civil procedure, criminal
procedure, evidence, bankruptcy and appellate procedures.

G209   Proof of Claim

A document filed with the Bankruptcy Court by a creditor asserting an indebtedness is owed setting forth
the amount owed as of the date the bankruptcy case was filed. The Proof of Claim should also assert the
status or classification they believe they are entitled; secured, priority or unsecured. Most claims are
accompanied by documents supporting the creditors’ claims. There is an official ‘Proof of Claim’ Form.

G211   Pro Per

A slang expression often used to refer to a pro se litigant. It is a corruption of the Latin phrase "in propria
persona". This refers to an individual who is representing themselves without a lawyer. Read about self-
representation {T23}.

G213   Property of the Estate

All legal or equitable interest in which the petitioner has or may have at the time the Bankruptcy Petition is
filed.

G215   Pro Se

Representing oneself. Serving as one's own lawyer. Also referred to as Pro Per. Learn more about self-
representation {T23}.




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G217   Reaffirmation Agreement

An agreement by a debtor to continue paying a secured creditor based on new terms set-forth in the
reaffirmation agreement, in spite of the debtor having filed and having received a discharge in bankruptcy.
Reaffirmation agreements must be approved by the debtors’ attorney and the Bankruptcy Court. Once
approved, the secured creditor once again basically has all contractual rights afforded them in the original
contract that were not modified by the Reaffirmation Agreement. It’s as if no bankruptcy had ever been
filed since a Reaffirmation Agreement replaced the contract and it’s dated after the filing of the bankruptcy.
See {T45} for more information regarding Reaffirmation Agreements.

G219   Redeem

The debtors’ right to redeem property by paying the holder of the lien or security agreement the current
value of the allowed claim or an agreed upon amount at the time of the redemption.

G221   Region 17

A U.S. Trustee’s geographical separation using and including various judicial territories. There are 21 U.S.
Trustee Regions in all of the United States and its' Territories. Region 17 consist of the Northern and
Eastern Districts of California and the District of Nevada. Region 17 U.S. Trustee headquarters is based in
San Francisco with assistant trustee annex offices located in: San Jose, Oakland, Fresno, Las Vegas and
Sacramento {UST}.

G223   Reorganization

Refers to Chapters 9, 11, 12 & 13 of the Bankruptcy Code. Reorganization chapters require the filing of a
'Plan' setting forth the manner the Petitioner proposes to restructure their debts showing how they will treat
creditors of the bankrupt estate over an extended period of time. To learn more of what each chapter of
bankruptcy encompasses, see {T11}.

G225   Schedules

Lists submitted by the debtor along with the Petition showing the debtor's Assets, Exemptions, Liabilities,
Income, Expenses and other financial information. Bankruptcy Schedules A through J are one set of
specific and official forms required when filing bankruptcy. The Petition and the Statement of Financial
Affairs and other official forms will also be required for a complete filing of a bankruptcy proceedings. For
more information, see {T28B}.

G227   Secured Creditor

A secured creditor is an individual or business that is owed monies by the petitioner wherein that creditor
has a legal right to collateral (security) which the petitioner also has a legal interest. Secured creditors must
be paid in order for the debtor to continue to retain the security. Also look into ‘cram-down’ {G77} and
‘lien stripping’ {G151} as some secured creditors rights can be compromised through the use of Chapter 13
bankruptcy. Also see Redeem (G219} and Re-Affirmation Agreements {G217}. Also for more information
regarding Secured creditors in Chapter 13, see {T37E}.

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G229 Secured   Debt

Debt that is backed-up by; a mortgage, a pledge of collateral, contractual rights to goods sold by a creditor
or a lien; debt for which the creditor has the right to pursue specific pledged or sold property upon default.
Examples include home mortgages, auto loans, electronic equipment contracts and tax liens. For
information regarding treatment of secured creditors in a Chapter 13 Plan, see {T37E}.

G231   Statement of Financial Affairs (SOFA)

An official bankruptcy form required with the filing of a Bankruptcy Petition which includes 25 questions
that must all be answered by the debtor concerning sources of income, transfers of property, lawsuits by
creditors, et cetera. For more information regarding the SOFA, see {T28C}.

G233   Statement of Intention

A declaration made by a petitioner concerning their intention of dealing with debts that are secured by
property of the estate. Their ‘intention’ to either Retain or Surrender the creditors’ collateral. Most often
used in Chapter 7 and Chapter 11 cases.

G235   Substantial Abuse

The characterization of a bankruptcy case filed by an individual whose debts are primarily consumer debts
where the court finds that the granting of relief through a bankruptcy would be an abuse of the Bankruptcy
Code because the debtor can pay all or a significant portion of their debts. Also See Chapter 7 Means Test
{T17}.

G237   Surrender

A petitioner in a Chapter 7 Bankruptcy can choose not to redeem or reaffirm a secured creditor and
discontinue payments. This allows the secured creditor the right to reclaim their security thus either
eliminating that debt or reducing the debt to an unsecured deficiency balance remaining after the sale of the
security. Unsecured ‘deficiency balance’ claims are generally dischargeable debt in a Chapter 7 bankruptcy.

A Chapter 13 Plan proposing to 'Surrender the Collateral' to a secured creditor does basically the same thing
as a Chapter 7. The petitioners ‘Plan’ can propose to surrender the collateral which reduces the creditor to a
unsecured debt after the creditor has liquidated the security by applying the proceeds of the sale to the
balance of the debt to arrive at the unsecured deficiency balance. Should the creditor file their unsecured
(deficiency balance) claim, it will be treated on a par with all other general unsecured creditors who file
claims in the Chapter 13 bankruptcy estate {T37E11}.

G239   Temporary Restraining Order

Akin to a preliminary injunction, it is a judge's short-term order forbidding certain actions until a full
hearing can be conducted. Often referred to as a TRO.




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G241   Trustee

The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the
priority and unsecured creditors, under the general supervision of the court and the direct supervision of the
U.S. Trustee or Bankruptcy Administrator. The trustee is a private individual or corporation appointed in all
Chapter 7, Chapter 12 and Chapter 13 cases and in some Chapter 11 cases. The trustee's responsibilities
include reviewing the Petitioners’ Schedules, SOFA and other documents and bringing actions against
creditors or the debtors to recover property of the bankruptcy estate. In Chapter 7, the trustee liquidates
property of the estate and from the liquidation of those assets makes distributions to creditors. Trustees in
Chapter 12 and 13 do not liquidate assets but have similar duties to a Chapter 7 Trustee and the additional
responsibilities of overseeing the debtor's Plan, receiving payments from debtors’ and disbursing Plan
payments to creditors in accordance with the court approved Plan. For more information regarding Chapter
7 Trustees, see {T44}. For more information regarding Chapter 13 Trustees, see {T52}.

G243   Trustees Annual Report

An annual report produced by the Chapter 13 trustee is mailed to the petitioner and other parties of interest
which sets forth the financial activity of the case from its inception and during the preceding year.

G245   Typing service

A business not authorized to practice law that prepares Bankruptcy Petitions. Also referred to a Petition
Preparers. Also read about self-representation {T23}.

G247   U.S. Trustee

An officer of the U.S. Department of Justice responsible for supervising the administration of bankruptcy
cases, estates and trustees; monitoring Plans and Disclosure Statements; monitoring creditors' committees;
monitoring fee applications; and performing other statutory duties {UST}.

G249   Under-Secured Claim

A debt secured by property that has a value which is less than the total amount owed to the secured creditor.
Read about Under-Secured vehicles {T37E9} and Under-Secured Non-Vehicle creditors {T37E10}.

G251   Undue Hardship

The most widely used test for evaluating undue hardship is the dischargeability of a student loan which
includes three conditions: (1) the debtor cannot maintain - based on current income and expenses - a
minimal standard of living if forced to repay the loan(s); (2) there are indications that the state of affairs is
likely to persist for a significant portion of the repayment period; and (3) the debtor has made good faith
efforts to repay the loan(s).




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G253   Unliquidated Claim

A claim for which a specific value has not been determined. An example would be a secured creditor who
repossessed their collateral but they haven’t sold the collateral nor have they paid all of the cost involved in
repossessing and selling the merchandise. The collateral hasn’t been ‘liquidated’ yet.

G255   Unscheduled debt

A debt that should have been listed by the debtor in the schedules filed with the court but was not.
Unscheduled unsecured debt in a Chapter 7 non-asset case may still be dischargeable since they would not
have been paid anything anyway. Unlisted secured debt in a Chapter 7 would simply revert to their secured
rights to the collateral after the Chapter 7 discharge. In a Chapter 13 an unscheduled creditor in all
likelihood has an adequate period of time in which to timely file a Proof of Claim with the Bankruptcy
Court thusly allowing them to participate in any distribution of funds. If, in a Chapter 13, the unscheduled
creditors claim is secured, the Plan would need to be modified to provide for and set-forth the manner the
unanticipated and unscheduled secured creditors will be treated. For information regarding secured creditor
treatment, see {T37E}.

G257   Unsecured

An unsecured creditor is a creditor that does not have any contractual right to any collateral. The unsecured
creditor has a 'promise' to pay or an instrument showing a legal obligation is owed. Typical non-priority
unsecured debt would be a credit card, a personal loan, medical obligations, debts owed for services
rendered, et cetera. For more information regarding unsecured creditors and their rights in a Chapter 13, see
{T37E19}.




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