But, if you are saving your money to pay the attorney’s fees and filing fees for your bankruptcy case or you just do not have the money available at this time to avail yourself of bankruptcy protection, what can you do?

The Federal Trade Commission has a nice “Frequently Asked Questions” (FAQ) detailing what creditors can and cannot do.  A link to this website is included here.   This gives you a broad scenario of what creditors can and cannot do.   While this FAQ is useful and informative, it is written broadly and for a very wide audience.

There are some limitations with this FAQ.  First, the FAQ itself references “debt collectors” and actions and limitations imposed under the Fair Debt Collections Practices Act (FDCPA).  Generally, the FDCPA is limited to “debt collectors” and does not apply to creditors collecting their own debts.  This is a very important distinction to remember.  However, most states have enacted a state law version of the FDCPA and that legislation may apply to creditors collecting their own debts, as in North Carolina.

Most importantly, as set forth in the FAQ, you have the right to write to the creditor and tell them to leave you alone.   The FAQ further advises to mail the letter by certified mail, return receipt requested so that you can document that your letter was actually received by the creditor/collection agency (they will lie and say that they never received it).  When writing your creditor or the collection agency, avoid language that acknowledges the debt–write in generalities about stopping all contacts.  This should stop the collection agency from contacting you.

By doing this, you can gain yourself some breathing room while you get your money together to file bankruptcy.  Also, if the collection agency or creditor continues to hassle you, you may have a claim against the creditor that you can then assert in your bankruptcy case.  How great would it be to have the debt discharged in bankruptcy yet the collection agency pay you some money because they violated the FDCPA.

Are you having problems paying a monthly mortgage payment?  Are you living in fear of default?  Here are some of the warning signs that your mortgage is a time bomb waiting to go off.

The first is the size of your mortgage payment.  If your payment is more than third of your monthly take-home pay, it is too large.  Most economists agree that a payment that exceeds one-third of take-home pay puts too large a strain on the monthly budget.  Here is a calculator that will allow you to determine the appropriate amount for a mortgage payment based on your income.  There is not enough room in the money that is left over to cover living expenses, other debt payments and savings for emergencies.

In this current economy, it is not uncommon for take-home pay to decrease as lay-offs and cut-backs in overtime.  That may result in the monthly mortgage payment actually growing to a greater percentage of income even though the payment is fixed.

The second is the variable rate loan. Right now interest rates are historic lows, but someday rates will increase.  When that happens, the monthly payment will increase as the interest rate increases.  If at all possible, consider what the maximum payment would be if the interest rate on your loan increases to its maximum.

The theory in making such loans was that income and real estate values always increases so that such changes would not be a problem.  Recent history shows us that this assumption is not always true.

Another waring sign is the payment option adjustable rate mortgage or POARM.  In this type of mortgage, not only does the interest rate change, but you are given the option of paying the full principle and interest, interest only, some part of the interest, or nothing at all.  The danger is in paying anything less than the full principal and interest every month.

If you pay interest only, the balance of the loan never goes down. So as the value of the property continues to decrease, your loan balance doesn’t reducing your equity in the property.  If you pay a partial payment or skip a payment, the accrued interest is added to the balance of your loan.  Instead of making the balance go down, it is going up.

Worse yet, that larger balance means a larger interest payment for the following month.  Soon, you reach the point of no return when the interest payment exceeds your ability to pay or the principal balance grows larger than the value of the property.

Another item to watch if the frequency of when interest rates change.  Most adjustable rate mortgages change rates once a year, but some change every six months or in other cases, monthly.  With a monthly change, your mortgage is essentially a credit card account backed by your home.

The difference between a 30 year mortgage payment and a 15 year mortgage payment is smaller than you think.  If you have a fixed rate loan with a 15 year life, you are probably guarded against loss of value in real estate and the fluctuations in income for your family budget.  Plus, you stand a chance of paying off that loan in your lifetime.

by Eugene S. Melchionne· Posted in Personal Finance

For the second quarter in a row, Orange County’s risk of a price decline within a two-year period ranked ninth in the nation — just behind eight other metro areas that were tied for first, according to economists at mortgage insurer PMI Group.

The latest housing risk assessment from PMI, based largely on first quarter stats, shows …

• Orange County home prices have 99.7% chance of price loss in two years, or by the winter of 2012. PMI Group doesn’t say how big of a price drop that would be, so the declines could be small or large.
• That’s a slight improvement over the previous two quarters. In the final quarter of 2009, the probability was 99.8%. Before that, Orange County was tied for “riskiest” status at 99.9% with eight other metro areas: Miami-Dade County, Las Vegas, Fort Lauderdale, the Inland Empire, Tampa, Orlando, Jacksonville and Los Angeles County.
• Nationwide, the average risk for price drops was 51.9% — down from 53.8% the previous quarter.
• Orange County’s affordability index ran 2% above its 1995 benchmark level vs. 0.6% above it in Q4 2009.
• Despite that improvement, O.C. ranked as the “worst performing” metro area in terms of affordability among the nation’s 384 metro areas. The county was 28% less affordable than the nation’s 50 most populated metro areas.

PMI concluded:

“Across all of the nation’s MSA’s, 51.6 percent (198) ranked in the elevated and high risk (of price decline) categories, while 48.4 percent (186) had a minimal-to-moderate risk of lower prices in two years. The MSA’s in the elevated and high risk categories typically had higher unemployment rates, higher new foreclosure rates, lower affordability, a larger excess housing supply, and more volatile house prices than the MSA’s in minimal-to-moderate risk categories.”

Many People are under the impression that you can’t wipe out IRS debt in bankruptcy. The good news is YES, you can wipe out not only IRS debt, but state tax debt, as well. BUT the tax debt must meet certain criteria. Mostly, for this article, we are talking about income taxes, but some other kinds of taxes may be dischargeable as well. The requirements for discharging income tax in bankruptcy are as follows:

1. The most recent due date of the return is more than three years prior to the filing of the bankruptcy petition [the "Three-year Rule" 11 U.S.C. � 507(a)(8)(A)(i)];
2. The tax return was filed at least more than two years before the filing of the bankruptcy petition [the "Two-year Rule" 11 U.S.C. � 523(a)(1)(B)];
3. The tax was assessed more the 240 days prior to the filing of the bankruptcy petition (the “240-Day Rule” � 507(a)(8)(A)(ii));
4. The tax return was non-fraudulent [� 523(a)(1)(C)];
5. The taxpayer is not guilty of a willful attempt to evade or defeat the tax.

If you owe the IRS a significant amount of money for income tax, regardless of whether your taxes meet these requirements, you should get with a bankruptcy attorney who is familiar with the dischargeability requirements for taxes to plan how to eliminate the most tax debt that you can. You may not be able to file a bankruptcy right away, but you will know that you have a plan in place to eliminate as much tax as possible.

So what do you do? The smart move is to take an honest look at your budget and savings. Calculate the number of months you have left to burn through your cash while living and paying your debts. Contact a bankruptcy lawyer a few months before the end of this period. If bankruptcy is appropriate for you, the lawyer will be able to take his fee out of the money you would have otherwise spent on debts and help you get you relief from the ongoing need to pay debts. If bankruptcy is not a fit for you, then you can go about your regular business after talking to the lawyer.

All is not lost if you wait until you are tapped out. However, it makes the process tougher. It will extend the process by the time it takes for you to save the money for the cost of bankruptcy. Some lawyers, like myself, offer payment plans to help make this a bit easier, but you must finish the payment plan before your case is filed. This is true for all lawyers because continuing a payment plan after a Chapter 7 case is filed is illegal.

Conclusion: find a bankruptcy lawyer in your state to consult with before you run completely out of money.

You’ve seen the ads for “Debt Management Programs”–”Settle $10,000 in credit card debt for as little as $2,000!” But do they really work? Do they make sense? Or are they scams?

Yes, they work. But only rarely do they make sense. And as for whether they are scams…it depends on your definition of a scam.

First, what are they? A Debt Management Program generally has you stop paying your credit cards and instead pay them a monthly payment for a period of time, usually a couple of years, until they have a nice pot of money. Then, they work out a lump sum settlement with your creditors, often at a substantial discount from the original amount due.

“Sounds good,” you may say. “So what’s the problem?”

The problem is that the actual savings are pretty much smoke and mirrors. Here’s why:1. They don’t do anything that you can’t do yourself. Debt, particularly credit card debt, doesn’t stay with the credit card company for long. As soon as it goes into default (typically when it hits 90 days past due), it’s sold to a debt buyer for pennies on the dollar. The debt buyer then sends you a letter offering you a huge discount for a lump sum settlement of the account. You pay the amount asked (or negotiate an even lower amount), send a check, and the account is settled, all without paying the Debt Management Program a penny in fees.

2. You may have to pay 1099-C taxes on the amount of forgiven debt. So if you have a $10,000 account and settle it for $4,000, you’ll be issued a 1099-C and have to pay taxes on the $6,000 in “income” you received.

3. By the time the firm has been paid enough to work out lump sum settlements, the additional interest, overlimit fees and late fees charged between when things start and when there is a settlement usually are about the same as the “savings”.

4. The overwhelming majority of folks never stick with the payments for long enough, which means that the debt management program charges obscene fees for doing *nothing*.

5. Creditors trash the client’s credit and often sue; none of this is stopped during the payment period.

I have had clients pay tens of thousands of dollars to these companies and ended up with very little benefit, when for a fraction of the cost they could have filed for bankruptcy, stopped the calls, letters and suits, and moved on with their lives.

If you are considering bankruptcy, mortgage modification, debt relief, debt settlement, debt management (credit counseling) or debt consolidation, you should look at all of them to be sure you are making the right decision for you and that you have all the facts.

If you are in financial trouble there are many different options to consider but many people miss the opportunity because they don’t have all the facts or they try the wrong solution first.

If you were buying a house or a car, you would compare several different models before you buy.  You wouldn’t buy the first one that you saw advertised, would you?  No!  This is a big decision and one that could cause you harm if you made the wrong decision to begin with.  It is the same with financial problems.  Making the wrong decision can potentially cost you time, money, assets and stress.

Filing for bankruptcy should not be the first thing you try and it isn’t the right option for everyone, but consulting an attorney doesn’t mean you will file for bankruptcy.   When a client comes in for a consultation with me, I go over any options that I feel could help them, including non-bankruptcy ones.   Seeing a lawyer means that you can get the facts about all your legal options since only a lawyer can discuss legal options and any good attorney will also answer your questions about non-bankruptcy alternatives or avoiding bankruptcy.

I have said this before, but it bears repeating:  considering Bankruptcy should not be the last resort, with the important word being “considering”.  It often isn’t until a person is considering bankruptcy that they actually speak to a lawyer for the first time.

I have met with many clients who thought that they are working with a lawyer, or with a company where an attorney was overseeing their case.  In reality no attorney was involved and in many cases, the actions taken by the company made the situation worse since clients were calling me after learning that lawsuits had been filed against them, or that judgments had already been taken.

When you see a company for mortgage modifiation, debt settlement, credit counseling or consolidation, they normally just discuss how their particular program works for you.  Even if the company has the words like law, legal, legal group or such in their name, unless the company has an attorney licensed in your state, they are not allowed to discuss your legal options  with you.  I have seen disclaimers and contracts which state that no attorneys are involved, but nonetheless, clients are lead to believe that they are being looked after … until they find out that the suit is served, judgment entered, or foreclosure looming.

I think two worst scenarios I see are where someone has paid thousands of dollars into a payment program that was doomed to fail and they still have to declare bankruptcy, or where someone works on mortgage modification so long that either they get so far behind even bankruptcy can’t help them or they find out on the eve of foreclosure (or after it occurred) that the modification isn’t going to happen.

by Susanne Robicsek, North Carolina Bankruptcy Attorney · Posted in *Bankruptcy Information,Benefits of Bankruptcy

A bankruptcy trustee might be able to take your income tax refund whether you have filed a chapter 7 or chapter 13 bankruptcy case. Some courts say that this procedure is improper – but it happens every day in many places.   How can this be?  Well, income tax refunds in chapter 13 are “property of the estate” so your chapter 13 trustee will want to apply this money toward payment of your plan in many cases.  Different chapter 13 trustees handle income tax returns differently around the country, so discuss this with your bankruptcy trustee before you file your case. You may want to adjust your withholding to avoid this issue.

On the other hand, in chapter 7, only the part of your income tax refund for the time before you file the bankruptcy case is considered.  Make sure your lawyer schedules your income tax refund on lines B-18 or B-21 of your Schedules.  And make sure that your attorney claims the maximum exemption possible for you.

Otherwise, the chapter 7 trustee has the right to ask the Internal Revenue Service to send the tax refund directly to the trustee. And it will!  You may get some back but you may not.  Every case is different.  In any event, if you and your lawyer don’t handle this correctly, you run the risk of a long delay before you see your income tax refund.

Bankruptcy trustees take income tax refunds more frequently than any other asset.  You can protect your income tax refund by claiming it to be exempt.  In most cases, you’ll claim a “wild-card”exemption.  In some cases, you might be able to claim that “earned income credit” or “child-care credits” are welfare benefits, which could be exempt under the law of your state.  So work with your attorney to protect it to the fullest extent of the law.

When a bankruptcy is  filed the debtor gets an automatic stay.  The stay is a very important.

It prevents your creditors from continuing any attempts to collect on the debts that are owed.

While in place,  the creditors can’t:

• Call you in an attempt to collect on a debt;
• Send you letters or other correspondence to collect on a debt;
• File a lawsuit against you, or if a lawsuit has been filed, the creditor can’t continue with the lawsuit;
• Start or continue a foreclosure proceeding; or,
• Garnish wages.

If a creditor does attempt any collection actions while the stay is in place, then the creditor runs the risk of a court awarding you monetary damages and attorney’s fees for violating the stay.

Under most circumstances it remains in place for the life of your case.

How can you lose your stay?

The most common way that a debtor loses it is by not making the monthly payments on his secured debts that are required in his Chapter 13 Plan.

If the post Chapter 13 petition plan payments are not made then, the creditor will normally file a Motion To Lift Stay.  If the court does grant the motion, then the creditor can resume its collection actions.

Another way that an automatic stay can be lost is when a case is dismissed and refiled within one year.

When a case is filed within one year of a dismissed bankruptcy, the stay is not automatic.  Instead, the it remains in place for only 30 days unless a motion is filed requesting that the court continue it through the life of the case.

While less common, a secure creditor in a Chapter 7 may also file a motion to lift the stay.

During a bankruptcy, it is important to tell your attorney about any problems you have either with creditors contacting you or with difficulty in making plan payments.

An experienced bankrutpcy attorney can take action to protect your rights.

When a bankruptcy is  filed the debtor gets an automatic stay.  The stay is a very important. 

It prevents your creditors from continuing any attempts to collect on the debts that are owed.

While in place,  the creditors can’t:

• Call you in an attempt to collect on a debt;
• Send you letters or other correspondence to collect on a debt;
• File a lawsuit against you, or if a lawsuit has been filed, the creditor can’t continue with the lawsuit;
• Start or continue a foreclosure proceeding; or,
• Garnish wages.

If a creditor does attempt any collection actions while the stay is in place, then the creditor runs the risk of a court awarding you monetary damages and attorney’s fees for violating the stay.

Under most circumstances it remains in place for the life of your case.

How can you lose your stay?

The most common way that a debtor loses it is by not making the monthly payments on his secured debts that are required in his Chapter 13 Plan.

If the post Chapter 13 petition plan payments are not made then, the creditor will normally file a Motion To Lift Stay.  If the court does grant the motion, then the creditor can resume its collection actions.

Another way that an automatic stay can be lost is when a case is dismissed and refiled within one year.

When a case is filed within one year of a dismissed bankruptcy, the stay is not automatic.  Instead, the it remains in place for only 30 days unless a motion is filed requesting that the court continue it through the life of the case.

While less common, a secure creditor in a Chapter 7 may also file a motion to lift the stay.

During a bankruptcy, it is important to tell your attorney about any problems you have either with creditors contacting you or with difficulty in making plan payments.

An experienced bankrutpcy attorney can take action to protect your rights.b

by Kevin Gipson, a  New Orleans Bankruptcy Attorney

How did the rumor that you need to have a certain amount of debt to file? The likely answer lies in the fact that there is a maximum amount of debt to be eligible to file for Chapter 13: you can’t have more than $360,475 in unsecured debt, and can’t have more than $1,081,400 in secured debt to be able to qualify for Chapter 13. There are no maximum debt limits for Chapters 7 or 11; the total debt for Chapter 12 [family farmers] cannot be more than $3,792,650. This means that Chapters 7 and 11 are almost always available, regardless of how much debt you owe.

Not requiring a minimum amount of debt to file is a different question from whether you should file with a small amount of debt. I have counseled many clients over the years that, given a relatively small amount debt, it might not make sense for them to file. After all, you can only get a Chapter 7 discharge once every 8 years (although you can usually file Chapter 13 at any time, regardless of prior filings), and shouldn’t “use up” the discharge when you might need it in the future. This analysis differs depending on many factors. For example, a $5,000 judgment that has resulted in a garnishment on someone earning $20,000 a year would be approached very differently from the same judgment on someone earning $100,000 a year.

Rather than asking whether you have too much or too little debt to file, the better question to ask your bankruptcy attorney is whether, given all of your circumstances, bankruptcy is the best option for you. By the time most of my clients come in to see me, they have already tried everything short of filing, and bankruptcy is their best and least expensive option.

When a Chapter 7  is filed, the debtor must show that they do not have enough income available to pay their creditors any money under Chapter 13 .

Whether the debtor has enough money to require them to be in a Chapter 13 or a 7  is determined though a process known as the “ Means Test .”

In its simplest form, the Means Test takes the debtor’s income for the six month before the filing of a bankruptcy and compares that income to the average income for a person in the debtor’s state with the same family size.  As an example, in Louisiana, where I practice, if a single debtor make $37,331.00 per year or less, he qualifies to be in a Chapter 7 .

So a person without employment can file under Chapter 7 .

Remember the amount of income is only a start when performing the means test calculation.  Other factors are stilled taken into account when determining which Chapter to file.

Also, if a person makes more than the median income for his State and then loses his job, it is usually best to wait until enough time has passed for the debtor to become a “ below means debtor .”

The only time a consumer debtor needs a job (or income) to file for bankruptcy is if he is filing for a Chapter 13 bankruptcy.

The issue of income or lack of income is only one of many issues that are involved in the timing of a bankruptcy filing.

The type of debts you have, the status of those debts and other factors need to be considered.

If you are considering filing for bankruptcy you need to consult an experienced bankruptcy attorney.
by Kevin Gipson, New Orleans Bankruptcy Attorney · Posted in *Filing for Bankruptcy

Bankruptcy can clear some types of tax debt.  It will not clear a federal tax lien that has attached to your assets.  However, when no tax lien has been filed, income tax debt can be discharged and cleared from your record if some very specific requirements are met in either a Chapter 7  or a Chapter 13 proceeding.  Not only can bankruptcy clear IRS income tax debt, it can get rid of state and local income tax debt as well.

Timing is an important issue in clearing a tax debt and there are some other basic steps that must be followed.  To discharge income tax debt, the following rules apply:

1. Your tax returns must have been due three years or more before the  petition was filed;
2. Your tax returns have to have been filed more than two years before the petition;
3. The tax you owe must have been assessed against you by the government for at least 240 days before the case is filed;
4. Your tax returns must have been truthful and not fraudulent; and,
5. You must not have been intentionally attempting to evade or defeat the tax when you failed to pay.

There are some technical rules that can complicate a discharge of tax, but in most cases the tax will be discharged if the above requirements are met.

If a notice of federal tax lien has been filed by the IRS, the tax debt covered by the lien becomes attached to any assets you own at the time it is filed.  What is worse is that it attaches to anything new you get so long as the lien is in effect.  This applies as long as you owe the tax.  Until the collection time limit expires or the tax debt is cleared the lien remain in place.

by Russell DeMott, Charleston Bankruptcy Attorney

I’ve been thinking of some of the bizarre things I’ve seen creditors do lately.  You’ll find a lot written about abusive creditors, mean creditors, heartless creditors, and law-breaking creditors here at Bankruptcy Law Network.  But what about stupid, self-destructive creditors?

It’s obviously bad to violate the Fair Debt Collection Practices Act or the Bankruptcy Code’s automatic stay, to be sure.  But while abusive creditor practices are bad, they’re not necessarily stupid.

What’s been puzzling me lately is some of the downright stupid, self-destructive behavior engaged in by creditors.  It seems to be going on in epic proportions here in the Charleston, South Carolina area.  And I have a feeling it’s probably an issue in other parts of the country.

Why do credit card companies push their customers into bankruptcy by refusing to work with them?  Why is it so hard to get that auto lender to put those one or two payments on the back of that loan?  (They know if they repossess the car, they’ll have a huge loss, after all.)  Why is getting a mortgage modification–even a teeny weeny modification–like asking for a kidney?  And my list of questions goes on.

Why is it creditors behave this way?  It’s like playing poker with someone who thinks he’s holding five aces–with every hand.  Why is it lenders are so unfamiliar with loss mitigation?  Why do they assume that if they plow forward things will turn out all right when their collateral has grossly depreciated–or when they don’t even have any collateral?

My leading theory–and I’m open to other ideas–is that loss mitigation is not taught in business school.  Students learn marketing, product development (and boy can banks develop new products!), finance, and management.  But loss mitigation is simply ignored–at least until the last couple of years. It’s a grand illusion lenders labor under, and it has horrible consequences for both the creditor and the debtor.  Let’s hope loss mitigation 101 gets introduced to business school in the near future.

Often people come to see me who have been working with a debt settlement company but are unable to manage the payments to the debt settlement company or get discouraged with the whole process.  How can bankruptcy be better?

To be clear, a debt settlement company is an entity that will take your money in monthly installments and builds up a sum that will be used to settle your debts.  Once that sum is built up, the debt settlement company will then make a lump sum offer to your creditors for payment in full satisfaction of their claim.  For this “service,” the debt settlement company charges a fee which is typically a percentage of the total debt.

For example, if you have three credit cards totaling $25,000.00 in unsecured debt, the debt settlement company will say that they can settle the accounts for $15,000.00 (approximately 60%) and will charge a fee of $3,750.00 which is 15% of the total debt.  Thus, your total payment to settle $25,000.00 in credit card debt is $18,750.00 ($15,000 paid to creditors and the fee of $3,750.00).  In order to have this money available to make the “settlement offer,” you pay in approximately $800 a month for 24 months (of course, this may vary among companies).  Generally, the debt settlement companies want your accounts to go into “charge off” status.

So what happens if one of your creditors with whom you wish to settle refuses the settlement?  You are still obligated on the debt.  Just because a debt settlement company says that they can settle your debts, that does not mean that the creditor will actually accept the offer.  So, in the above example, if one of the creditors does not settle, you still must pay that creditor or seek some other alternative.

Another issue concerns your credit rating while you are paying the debt settlement company each month building up your “settlement funds.”  Your credit rating or score goes down the tubes.  My colleague, Kurt O’Keefe, has just written a nice piece on that very topic.  See The Secret to New Credit After Bankruptcy. Your score is dependent on your paying your bills on time.  If you do not, such as through paying a debt settlement company, your score goes down.  So, assuming that you do settle with your creditors, your credit score is still trashed.

So how can bankruptcy be better?  First, the fees involved are typically much, much cheaper.  For example, in my area, a routine chapter 7 can typically be accomplished for $2,500.00 to $3,000.00 inclusive of the costs.  In a typical, “no-asset” chapter 7 case, you do not pay anything to your creditors so that you are not obligated to pay $15,000.00 towards your credit card debt (this scenario assumes the case is a “no asset” case).  That money is saved.

While it is true that bankruptcy does not help your credit, once it is done, you can start working toward building your credit back.  Unlike the above scenario with the debt settlement company, as soon as your bankruptcy case is over, you can start toward rehabilitating your credit.  Perhaps in your bankruptcy case, you reaffirmed a mortgage or automobile loan–those creditors will report that you are making your payments on time (assuming that you do).  This will start you on the road to credit rehabilitation.

I rarely recall seeing a debt settlement company that could offer a better “deal” than bankruptcy.  The bankruptcy fees are cheaper and the total cost is generally must less.  Plus, you can start rehabilitating your credit so much sooner with a bankruptcy filing than working through a debt settlement.

By Adrian Lapas, Eastern North Carolina Bk Attorney, posted in Bankruptcy Information

At the same time the bankruptcy community is pondering theLanning decision on what “projected disposable income” is in a Chapter 13, I read Judge Eugene Wedoff’s thoughts on whetherChapter 13 plans ought to require the payment of all of that disposable income to the trustee. *

His point was that requiring payment of 100% of the calculated disposable income was a disincentive to choose Chapter 13.  He likened it to a 100% tax on all income above the median income. (Of course it’s not 100% of “income”, but 100% of “disposable income”  as figured on the B-22 form.) We would find an income tax that took 100% of any measure of wealth to be reprehensible.  But that’s the Chapter 13 requirement.

I concur in those thoughts, but would come at the issue a bit differently.  A Chapter 13 debtor with above median income commits his earnings to the “supervision of the court” for five years.  What an opportunity to develop new spending habits!  Or, more precisely, new savings habits.   Instead, the current system requires thatevery penny not calculated as required for basic living be spent.

We squander this opportunity to have debtors practice saving, a habit that most have not regularly indulged in.  We require that they expend every cent that comes through their bank account.

No financial management class or counselor would see a budget with no provision for either the unexpected nor the inevitable old age as acceptable.  Why does a plan of reorganization for consumers mandate such a result?

(Unfortunately, the article is in the member’s only portion of the Chapter 13 Trustees’ marvelous site.)

At the same time the bankruptcy community is pondering theLanning decision on what “projected disposable income” is in a Chapter 13, I read Judge Eugene Wedoff’s thoughts on whetherChapter 13 plans ought to require the payment of all of that disposable income to the trustee. *

His point was that requiring payment of 100% of the calculated disposable income was a disincentive to choose Chapter 13.  He likened it to a 100% tax on all income above the median income. (Of course it’s not 100% of “income”, but 100% of “disposable income”  as figured on the B-22 form.) We would find an income tax that took 100% of any measure of wealth to be reprehensible.  But that’s the Chapter 13 requirement.

I concur in those thoughts, but would come at the issue a bit differently.  A Chapter 13 debtor with above median income commits his earnings to the “supervision of the court” for five years.  What an opportunity to develop new spending habits!  Or, more precisely, new savings habits.   Instead, the current system requires thatevery penny not calculated as required for basic living be spent.

We squander this opportunity to have debtors practice saving, a habit that most have not regularly indulged in.  We require that they expend every cent that comes through their bank account.

No financial management class or counselor would see a budget with no provision for either the unexpected nor the inevitable old age as acceptable.  Why does a plan of reorganization for consumers mandate such a result?

(Unfortunately, the article is in the member’s only portion of the Chapter 13 Trustees’ marvelous site.)

by Cathy Moran, California Bankruptcy Lawyer on June 22, 2010 · Posted in *Chapter 13 Bankruptcy