My Personal Chapter 13 Bankruptcy History

I filed for Chapter 13 bankruptcy a few months ago. I have documented the experience of sharing with the people who will find themselves in need of this information for the next few years. It’s not a topic of casual conversation for most people, and the internet is packed with ebooks, courses, services and other junk.

I am not a lawyer and I do not want to offer any advice and do not intend that this narrative persuades you to take any particular action or opinion. This is just my experience and of course my own particular perspective will shade it.

The story begins in 2005 when a business failure coincided with family illness and other non-financial problems. We struggled to cover our bills by selling personal belongings – furniture, TVs, a timeshare, tools, sporting goods and more. Finally, in early 2006, my husband found a job. At that time, we were more than 6 months back on our credit card account payments, struggling to get paid mortgage and car no more than a month late. Relatives provided us with food, and I had become depressed thinking and talking about suicide.

Depression

The financial situation was complicated and exacerbated by my depression. I felt unworthy; unable to make a decision, frustrated by my inability to find work, but at the same time conflict with the fact that I had to actually give up self-employment and find a job again. And this, my friends, was the problem. Without an element of belief that I could feel better, I was hopeless and self-defeating. Until I found the means to believe in myself again, I was unable to move away from failure.

Fortunately, I found a way out of my depression and the answer was in myself. If you feel like I was there is an answer inside you and your mission will be to find the way to connect with it. This article is not intended to help you find that answer. The path is different for everyone, and it can be in religion, renewal of physical activity, meditation, intellectual pursuits or a combination of some of these or something completely different. You know it when you find it, and if you listen, it probably already calls you.

Investigation of credit counseling / credit management options

Two weeks before my husband returned to work, I began to think that we would find a solution to our situation. Up to this point, I had screened caller IDs so that the answering machine could take all calls from bill collectors. I started talking to some of the bill collectors to see if there was any way I could negotiate this situation, but it was really serious. I started to get legal notices that we were being sued by some of the credit card companies. Just when we had a paycheck to trust, we were faced with the possibility of embellishment!

So I wrote the toll-free numbers of various credit assistance organizations that I saw advertised and made some calls. I decided to partner with a debt management company that would act as intermediary with all my creditors and try to establish payment arrangements that I could afford. I had to review my income and budget with the advisor and provide details of all the debts.

This exercise forced me to stay organized and stop avoiding the facts and details of the situation. I created charts and lists of my debts and their respective debt collection agencies and faced the bottom line. I was horrified that what might have started when about $ 35,000 of unsecured debt had now risen to over $ 55,000 due to all interest and late fees! Unfortunately, it wasn’t done putting together.

During the month in which the credit management company was involved, calls dropped, but did not stop. It turned out that there were a couple of my accounts that would not work with them and they were not lawyers and could not resolve the 2 lawsuits.

The monthly payment, although not extensive and did not cover all of our outstanding debt, was more than we could get in about a month at that time. We realized it was time to investigate filing for bankruptcy.

Bankruptcy, the last resort

I decided to search the phone book for a local bankruptcy lawyer. It was very confusing and I wasted some time calling, leaving messages and learning that it was the corporate bankruptcy they did, not personal. Finally, I went online and clicked on a Google ad for Total Bankruptcy. This site offered to connect you with a bankruptcy attorney for your area if you fill in the required info. I decided to give it a try and revealed all my detailed personal financial data.

I received an email reply that a certain lawyer would call me in the time window I had chosen the next morning. He actually called back within an hour of my closing of the inquiry and kindly offered to wait and call again later, or speak now if I had time. Since this was fresh in my mind, I liked the momentum and asked him all the questions I could think of. He was very direct and detailed and I felt very comfortable so I decided to work with him then on the spot. He was from a town over 50 miles from my home, but I assured myself that we could do everything via email and fax, and if I wanted to meet him, we could arrange the meeting half way. The federal bankruptcy court’s location was halfway between us, so it was quite usable.

Because of certain properties that we wanted to keep and because we thought we could afford to store our house and vehicle, we chose to file Chapter 13 where we would make monthly payments based on a means test and our assets and debt . This is all I can really say about it without getting into the kind of information that a lawyer knows, so I’ll leave it at that.

In order for my attorney to file for bankruptcy, I had to provide details about my property, debt, income, etc. For details on this process, I write more about it here: http://www.happy-after-bankruptcy.com/steps-to-filing-bankruptcy.htm

The draft petition was 40 pages long and I sent it to me in a .pdf file via email approx. 2 weeks after I gave him all the information.

Old Law – New Law

Now I can’t really talk about the old law versus the new law when it comes to the Bankruptcy Reform Act in October 2005, except for one thing. There is now a credit counseling requirement from a service approved by the U.S. Department of Justice. http://www.usdoj.gov/ust/eo/bapcpa/ccde/index.htm

This link can take you to all the approved services.

The credit counseling was the biggest waste of $ 49.95 I’ve ever spent, and a waste of 2 hours of my time. I basically had to enter all the same information that I provided to my lawyer (see above) into slow-loading online forms, then I had to attend a phone conversation with a “credit advisor” who just repeated the information we submitted. No value was added to my understanding of my finances, credit or anything at all. Enough about that.

Blessed silently

As soon as we decided to file, I gave all of my creditors the lawyer’s name and contact info and they stopped calling! It was wonderful. The mortgage company and the car rental company required a case number, but it was delivered within days of the petition being filed. All contact was stopped.

This is where a word of caution is in order. There were 2 accounts we needed to keep paying and they stopped sending us bills. They also disabled our online bill payment access. Then suddenly we had no routine method of payment. Without contact, it was easy to slip by for a few months and when I sent checks, they prepared a “Motion for Relief from Stay”. My lawyer said this was common, but I wish I had known about it and avoided it.

payment schedule

Part of my Chapter 13 filing included a plan to pay the sums I was responsible for after the mean test was addressed. I had to make monthly payments to the Bankruptcy Court Trustee using certified funds. These payments actually began before being heard or appeared in court. They were calculated based on my income and would continue for 36 months or until all amounts owed under the plan were met.

Go to Court

Part of the process of filing for bankruptcy involves going to the Federal Bankruptcy Court location – at least once in most cases. The first required appearance for me occurred 5 weeks after we officially filed. It was called Section 341 Creditors Meeting. This served two purposes: the bankruptcy trustee took a number of statements from us after checking our photo ID, and these statements were sworn to and notarized, and our conversation was recorded. This was also an opportunity for our creditors to act personally to make claims against us. In our case, no one else showed up. We arrived early and were to meet the trustee first. It was over in about 20 minutes.

About a month after the Section 341 meeting, the hearing took place to confirm our debtor’s Chapter 13 plan – which was essentially the repayment scheme. Our lawyer stated that we did not need to both be there – it would look better in court if one of us attended, but neither of us was required. I decided to attend, and this time I had to wait for my case to be called on the docket. I had time to observe hearing the hearings in the cases before mine.

What an eye-opening experience. There were people who had multiple criminal charges and / or civil lawsuits brought against them, which complicated their bankruptcy filing. There were people (not present) who had not been in contact with their lawyer for months, and the lawyer represented them blindly. There were people with injuries and health problems that seriously complicated their financial situation. When my name was called, my lawyer told the judge that I was current in my Chapter 13 plan payments, everything was in order and my plan was approved. It took about a minute.

This 40-minute period in court waiting for my turn served me very well in emphasizing that I could be so much worse off than I am! I spent most of my drive home counting my blessings.

Right now, I’m working on moving forward to get back on my financial “feet.” Looking back on the past year, I am relieved to know that there is a system in place to handle my debts and that I can see the future feeling that I am off to a fresh start. I will continue to document my experience on my site and invite you to read my articles as my future unfolds.