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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”. The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.
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Eligibility.
You are not eligible for a Chapter 13 discharge if you received a Chapter 7 discharge in a case filed within 4 years of the Chapter 13 filing, or received a Chapter 13 discharge in a case filed within 2 years of the the Chapter 13 filing.
Chances of Completing the Plan are Slim.
You should know going into Chapter 13 that about 90% of plans are not completed. The vast majority of plans are dismissed or converted to Chapter 7. Chapter 13 filings have historically been about 30% of total filings. So, on average, if I file 100 bankruptcy cases, 70 will be Chapter 7 and 30 will be Chapter 13. Of those 30 cases, only about 3 will complete their plans.
Washington State is in the top 5 states for per case yields to all creditors. That means the Chapter 13 Trustee is squeezing as much money out of debtors as possible without regard for whether doing so decreases the likelihood of plan completion.
This is accomplished primarily in 4 ways:
(1) Mortgage arrears must be caught up by including the regular payment plus the arrears (not just the arrears) divided by 60 months in the plan. The Trustee takes a 5% fee on the whole amount. Debtors should catch up their mortgages before filing if possible.
(2) All vehicle payments in Chapter 13 must be made through the plan regardless of whether payments are current. This requires debtors to pay an additional 5% on their regular car payment to cover the Trustee’s fee. It also causes Debtors to have late vehicle payments during the 3 to 5 months prior to confirmation of the plan. In my opinion, Debtors should be allowed to pay vehicle payments outside the plan if they choose to do so, but the Bankruptcy Court disagrees.
(3) Non-dischargeable student loans are (sometimes) required to be paid in full within 5 years. This increases the payment amount and adds the 5% Trustee’s fee. In my opinion, Debtors should be allowed to pay non-dischargeable student loans outside the plan.
(4) All tax refunds in excess of $1,500 are committed to the plan even though Debtors are paying 100% of disposable income into the plan. In my opinion, Debtors should be allowed to claim tax refunds as exempt if the income from which the taxes were paid was exempt.
To make matters worse, you can expect objections and Motions to Dismiss your case from the Chapter 13 Trustee’s office even when you are proposing to pay 100% to creditors. Debtors should be assisted and encouraged by the Trustee in the completion of their Chapter 13 plans (The Bankruptcy Code requires this, and the Trustee is being paid 5% on all distributions – even those that are totally unnecessary). That is not what happens. Chapter 13 is a battle to get your basic rights as a Debtor to information you need about your case, and a struggle against objections made before Debtors even have a chance to respond. This results in enormous inefficiency as well as ineffectiveness. The Chapter 13 Judges are primarily former partners in large law firms that represented creditors. So, when a Debtor goes to a hearing in Chapter 13, there are 3 creditor lawyers (the Trustee, the Judge, and Counsel for the creditor) and the Debtor’s counsel. Many provisions of in the Bankruptcy Code are drafted after substantial lobbying by creditors. Bankruptcy Judges have very little discretion. They can’t even waive the credit counseling requirement, for example.
Chapter 13 is much more of a last resort than Chapter 7 because at least in Chapter 7 you have a very high probability of obtaining the Discharge you seek. Chapter 13 Discharges are so relatively rare, that Debtors should have realistic expectations about the likely dismissal of their case before completion which may or may not result in refiling under Chapter 7 depending upon eligibility.
YOU MUST READ AND UNDERSTAND THE BANKRUPTCY PETITION, AND NOTIFY ME OF ANY ERRORS OR OMISSIONS, BEFORE YOU SIGN IT, AND IT IS FILED. FAILURE TO DO SO IS AN UNCONSIONABLE BREACH OF YOUR DUTIES AS A DEBTOR.
Please read the Chapter 7 Section of my web site (www.mulvaneylawoffices.com) for the top 10 bankruptcy pitfalls, debt-to-income ratio, and exemption information. Below is information specific to Chapter 13.
TOP 10 BANKRUPTCY PITFALLS
1. Failure to make or catch up plan payments.
The first full payment is due 30 days after filing. A wage order issued by the Trustee to your employer is required. Your employer sends the money to the Trustee and the Trustee sends the money to your creditors once your plan is confirmed. That means, if you are paid twice per month, the wage order needs to start on your next pay check after filing in order for you to be current. If it doesn’t start then direct payment is required. You must catch up missed payments or your plan will be dismissed.
***** Please create a free account at the ***** National Data Center in order to track your payments. www.ndc.org
WARNING: You will get behind in your car payment in Chapter 13 if you put the Attorney’s Fees in the plan, so you will have to catch up ASAP if your case is dismissed.
2. Failure to budget.
Chapter 13 is designed to take 100% of your disposable income for 5 years. It is very difficult to live with just what you need for necessities for that long. Therefore, budgeting is vital to success in Chapter 13. There are many good sources of useful information and tools for budgeting. Below are just two to get started:
A Free Web Site That Lets You Download and Analyze Your Banking Information https://www.mint.com/
3. Using credit.
Do not use credit, even if a creditor sends you a pre-approved credit card. A condition of being in Chapter 13 is that you not use credit. You must seek and obtain a Court Order to use credit. Obtaining the Order requires filing a Motion and setting the Motion for Hearing.
4. Not staying current on taxes
. Your Chapter 13 plan only includes debts that existed on the day you filed. It does not include debts which accrue after filing. Therefore, if you under withhold and owe taxes while you are in Chapter 13, the IRS has cause to move to dismiss your plan. Dismissal would require refiling in order to include the tax debt as pre-petition debt and starts the clock over for the 60-month plan. So, if your plan is dismissed in month 40 and you refile, you will not receive your discharge until 100 months from your original filing date.
5. Not sending Trustee tax refund amount above $1,500.
Any tax refund amount above $1,500 is non-exempt in Chapter 13 and must be voluntarily sent to the Trustee. Failure to do so, could result in dismissal of your case.
6. Not sending Trustee copy of tax return.
Refusal to send the Trustee tax returns for each and every year you are in the plan is cause for the Trustee to move to dismiss your case. Please send the tax returns to me first and I will submit them for you. When you receive a letter from the Trustee directing you to do something, send me the letter and whatever was requested by fax or email attachment and I will submit it to the Trustee for you. Please do not communicate with the Trustee’s office directly even if they contact you. Contact me first and I will communicate with the Trustee’s office for you. It makes representing you difficult if I don’t know what you are doing with respect to the Trustee. Thank you.
7. Failure to report increased income.
If you are paying anything less than 100% to creditors, if your income goes up during Chapter 13 then likely so will your disposable income and required plan payment. If you don’t timely report a raise or increased income, then you could fall behind on your required Plan payments which could result in dismissal of your case.
8. Buying a car.
It is possible to buy a car while you are in Chapter 13, but strict requirements must be met which are: (1) A monthly payment of $400 or less (2) A purchase price (before trade in) of $15,000 or less (3) Interest of 20% or less
You are required to remain current on child support in Chapter 13. The Trustee sends letters to the child support recipient to ensure that you remain current. Failure to remain current could result in dismissal of your case and refiling with the regular child support payment, plus the arrears in the new plan and payment of the 5% Trustee’s fee on the whole amount distributed.
10. Post-petition HOA dues.
If you own a condominium or house with HOA dues and the property is being surrendered in your bankruptcy, your personal liability to pay the dues that accrue after filing continues until the title to the property is out of your name. Banks sometimes take 5 years or more to foreclose. Banks and HOA’s often will not accept a Deed in Lieu of Foreclosure (they are not required to do so). This means that even if you have been in Chapter 13 for 4 years when the bank finally forecloses, the HOA will sue you for the which accrued after filing. This could result in a garnishment of 25% of your net pay, which would trigger a Motion to Dismiss your case and refile for another 5 year plan, putting you in Chapter 13 for 9 years. This is an unfair result that has yet to be remedied by the Washington State Legislature. If you are affected by this issue, I urge you to contact your representatives in the State Legislature and ask them to pass a law correcting this injustice.
To Always Be a Human Being First, and My Role Second. To First, Do No Harm, then to provide the best legal outcome, smoothest process, best value, and to make a positive difference in the life of every client.
Christopher S. Mulvaney’s Mantra:
May I be filled with loving kindness for all life. May I be safe from dangers within and without. May I be healthy in body, mind, socially, and spiritually. May I be at ease and happy, doing good in the world.
May You be filled with loving kindness for all life. May You be safe from dangers within and without. May You be healthy in body, mind, socially, and spiritually. May You be at ease and happy, doing good in the world.
I am an experienced solo estate planning, debtor bankruptcy, and real estate attorney. At my law firm in Bellevue, Washington between Eastgate and Factoria, I do things a little differently. I am passionate about helping people take control of their lives.
One of my primary practice areas is urgent (bankruptcy), and the other is important, but not urgent (estate planning). Not letting the urgent crowd out the important is key. I have made a choice to include the positive difference I make in the life of each client in how I calculate profit. This means I have higher job satisfaction, and happy clients who confidently give referrals.
My goal is that my work is transformative for people during a challenging time in their lives. At Mulvaney Law Offices, PLLC (MLO), you will not find a gatekeeper. There are no forgotten cases hiding on an associate’s cluttered desk. It’s just me, working with each one of my clients one-on-one to resolve their legal concerns as favorably as possible.
As your lawyer, I will personally handle every aspect of your case. My office is not a factory churning out thousands of filings per year, where each case matters little. You, and your case, matter to me. You can see what clients have said about me, and leave your own reviews at these links.
Mulvaney Law Offices, PLLC is located in Bellevue, Washington, representing estate planning & chapter 7 and chapter 13 bankruptcy, clients in all 39 Washington Counties.
Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary. Just email me an image of your photo ID.
