WHAT IS BANKRUPTCY?

Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills can get a fresh financial start. The right to file for bankruptcy is provided by federal law, and all bankruptcy cases are handled in federal court. Filing bankruptcy immediately stops virtually all of your creditors from seeking to collect a debt from you, at least until your debts are sorted out according to the law.

WHAT CAN BANKRUPTCY DO FOR ME?

Bankruptcy may make the following events possible:

1. Eliminate the legal obligation to pay most or all of your debts. This is called a "discharge" of debts. It is designed to give you a fresh financial start.
2. Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.
3. Prevent repossession of a car or other personal property, or force the creditor to return personal property even after it has been repossessed in the event the personal property (usually a vehicle) is still in possession or control of the creditor.
4. Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
5. Restore or prevent termination of utility service.
6. Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.

WHAT BANKRUPTCY CANNOT DO!

Bankruptcy cannot cure every financial problem, nor is Bankruptcy the right step for every individual. In bankruptcy, it is usually not possible to accomplish the following:

1. Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are car loans and home mortgages. You can ask the court to force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
2. Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, certain other debts related to divorce, most student loans, court restitution orders, criminal fines, and some taxes.
3. Protect cosigners on your debts. When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
4. Discharge debts that are created after bankruptcy has been filed.

DEFINITIONS

1. Debtor: The person that owes money to a creditor.
   
2. Creditor: A person or business entity to which a debtor owes money.
   
3. Secured Debt: A debt that is pledged or "backed" by a piece of property supported by a written agreement, like a car or a home.
   
4. Unsecured Debt: A debt that has no agreement to pledge property, like a credit card.
5. 341 Meeting: A section of the federal bankruptcy law that mandates that the debtor must be examined under oath by a bankruptcy trustee and any interested creditors.
   

WHAT DIFFERENT TYPES OF BANKRUPTCY CASES SHOULD I CONSIDER?

There are four types of bankruptcy cases provided under the law:

1. Chapter 11, known as “reorganization”, is used by businesses (e.g. Airlines) and a few individual debtors with debts that are very large.
2. Chapter 12 is reserved for family farmers and fishermen and is not often used in North Carolina.
3. Chapter 7 is known as “straight” bankruptcy or “liquidation”. It requires a debtor to give up property which exceeds certain limits, called “exemptions”, so the property can be sold to pay creditors.
4. Chapter 13 is called “debt adjustment”. It requires a debtor to file a plan to pay debts (or parts of debts) from current income.

Chapter 7(Straight Bankruptcy)

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold, with the money distributed to creditors. If you want to keep property, like a home or a car, and are behind on the payments on a mortgage or car loan, a chapter 7 case probably will not be the right choice for you. That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

Chapter 13 (Consumer Debt Reorganization)

In a chapter 13 case you file a “plan” (with our help) showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property- especially your home and car - which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors. In most cases, these payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind (the amount of your “arrears”). You should consider filing a chapter 13 plan if you meet these criteria:

1. You own your home and are in danger of losing it because of money problems.
2. You are behind on debt payments, but can catch up if given some time.
3. You have valuable property which is not exempt, but you can afford to pay creditors from you income over time.
4. You must have enough income when filing a Chapter 13 Plan to pay for your monthly expenses and keep up with the required payments as they come due.

WHAT DOES IT COST TO FILE FOR BANKRUPTCY?

The filing fee for a Chapter 7 bankruptcy is now $299.00 (2006) and $274.00 to file under Chapter 13, whether for one person or a married couple. If you hire an attorney you will also have to pay the attorney’s fees you agree to. The attorney fee for a Chapter 7 is a minimum of $1,500.00 and may be more, depending on your situation and the type of debts in your case, the fee is payable in full at the time the petition is filed with the court. The fee for a business or Corporate Chapter 7 begins at $1,800.00.

The attorney fee for a Chapter 13 is $3,000.00. This fee is incorporated in the Chapter 13 plan to be paid as a priority debt by the Chapter 13 Trustee. The attorney may ask for a portion of his fee in advance, a minimum of $500.00 for first time filers, $1,000.00 for re-files, depending on the circumstances of filing. If you are filing for a third time, the full fee of $3,000.00 is payable prior to filng. It is important to remember that if you file a third time and are dismissed there will be a 180 day waiting period until you can file again. This lapse of time may be sufficient for a creditor to foreclose on your home and you will not be able to file a Chapter 13 to stop the foreclosure. These costs and fees are subject to change without notice.

WHAT MUST I DO BEFORE FILING BANKRUPTCY?

You must receive budget and credit counseling from an approved credit counseling agency within 180 days prior to your filing date. The court approved agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in person, by telephone, or over the internet. If you decide to file bankruptcy, you must file a certificate from the court approved agency stating that you received the counseling. If you decide to go ahead with bankruptcy, you should be very careful in choosing an agency for the required counseling. It is extremely difficult to sort out the good counseling agencies from the bad ones. Many agencies are legitimate, but many are simply rip-offs. Being an “approved” agency for bankruptcy counseling is no guarantee that the agency is good. It is important to understand that even good agencies will not be able to help you much if you are already too deep in financial trouble. Some of the approved agencies offer debt management plans. This is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors. Debt management plans can be helpful for some consumers. For others, they are a terrible idea. The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not. It is important to keep in mind these important points:

1. Bankruptcy is not necessarily to be avoided at all costs. In many cases, bankruptcy may actually be the best choice for you.
2. If you sign up for a debt management that can not afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).
3. There are approved agencies for bankruptcy counseling that do not offer debt management plans.

It is usually a good idea for you to meet with an attorney before you receive the required credit counseling. Unlike a credit counselor, who can not give legal advice, an attorney can provide counseling on whether bankruptcy is the best option. If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions. The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust. We have a set- up in our office for your convenience in the event you do not have access to a computer.

WHAT PROPERTY CAN I KEEP?

In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors. The allowed exemptions for the state of North Carolina presently (2008) are:

1. $18,500.00 in equity in your home.
2. $3,500.00 in equity in one vehicle.
3. $5,000.00 in equity in household goods, and up to $3,000.00 in equity for dependents.
4. $2,000.00 in equity in things you need for your job (tools, books, etc).
5. $5,000.00 of any unused exemption equity in your home.
6. Your right to receive certain benefits such as social security, unemployment compensation, veteran’s benefits, public assistance, and pensions (regardless of the amount).

The amount of the exemptions are doubled when a married couple files together.

In determining whether property is exempt, you must keep a few things in mind. In some cases the value of the property is not the amount you paid for it, but what it is worth now in its present condition. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost bo buy a replacement. However, any amount owed to a creditor on purchases made within one year of filing must be paid in full regardless of its condition. If you financed your vehicle within 910 days (2 ½ years) of the filing date the full contract price and interest rate must be paid to the creditor if you wish to keep the vehicle.

If you financed the vehicle more than 910 days prior to filing, then the secured portion of the debt would be the value of the vehicle as of the date of filing. If you owe more than the value of the vehicle, there will be a split claim and the over-secured portion will be classified as an unsecured debt.

You will have to review the equity in property. This means that you count your exemptions against the full value minus any money that you owe on the mortgages or liens. For example, if you own a $60,000.00 house with a $40,000.00 mortgage, you count your exemptions against the $18,500.00 which is your equity if you sell it. Any equity above the $18,500 of the filing debtor(s) would be turned over to the bankruptcy trustee and paid to unsecured creditors in your plan.

While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you did not file bankruptcy.

WHAT WILL HAPPEN TO MY HOME AND CAR IF I FILE BANKRUPTCY?

In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non- exempt value to creditors in Chapter 13.

However, some of your creditors may have a security interest in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you do not make your payments on that debt, the creditor may be able to, (through court proceeding) seize and sell the home or the property, during or after the bankruptcy case.

There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full, or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the validity of the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods) you can usually keep your property without making any more payments on that debt.

CAN I OWN ANYTHING AFTER BANKRUPTCY?

YES! Many people believe they can not own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors, if the property or money is not exempt.

WILL I HAVE TO GO TO COURT?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” (341 Meeting) to meet with the bankruptcy trustee and any creditor who chooses to come (creditors rarely attend the meeting). Most of the time the meeting will be a short and simple procedure where you are asked a few questions about the truthfulness of your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear before a judge at a hearing. If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

WHAT ELSE MUST I DO TO COMPLETE MY CASE?

After your case is filed, you must complete an approved course in personal finances. This course will take approximately three hours to complete. Your attorney can give you a list or organizations that are approved, or you can check the website for the united States trustee Program at www.usdoj.gov/ust. In a chapter 7 case you should sign up for the course soon after your case is filed. The 3 hour course must be completed within 45 days of the filing date. If you file a chapter 13 case, this course is offered in connection with the trustee prior to the (341 Creditors Meeting) on the same day.

Both pre bankruptcy and post bankruptcy financial courses for Chapter 7 are offered through this office for your convenience in the event that you do not have access to internet.

WHAT ELSE SHOULD I KNOW?

1. Utility Services - Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.
2. Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
3. Drivers License - If you lost your license solely because you could not pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.
4. Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt unless special arrangements are made in your plan to pay the debt in full.

OTHER QUESTIONS THAT CONCERN PEOPLE THINKING ABOUT BANKRUPTCY

1. Must my employer be notified of my filing Chapter 13? Yes, Chapter 13 policy is to obtain a payroll deduction.
2. Until the time the payroll deduction is actually deducted by my employer, are payments due and if so, by whom? Your first payment is due withing 30 days of filing your petition.
   1. If your case is being handled by the Durham, NC Chapter 13 Office, a payroll deduction will be started prior to your attending the interview or creditors meeting. If you employer has not begun deducting, you must take your first monthly payment with you to your interview, prior to the creditors meeting.
   2. If your case is being handled by the Greensboro NC Chapter 13 Office, you should be prepared to take your first full monthly payment with you to the interview. Payroll deduction will be set up after your interview and your creditors meeting (341 Meeting).
3. May a creditor collect any balance, not paid in my plan, from my friend or relative, who is a co-signer (or anyone legally liable)? A creditor may collect any unpaid balance plus any interest which has accrued from the co-signer; however, the 1984 Amendments permit debtors to classify co-signed debts in a separate class and provide for full payment with contract interest while only paying a portion to other unsecured claims. Further, prior to discharge a creditor may petition the Court to allow collection from the co-signer immediately for any amounts not scheduled to be paid in the plan.
4. Will my filing hinder my obtaining credit after completing Chapter 13? You must begin establishing credit all over again once the plan is completed. Also, your ATM privileges and debit card privileges may be suspended by your bank until you receive your discharge.
5. Will the Credit Bureau be notified of my filing, and if so, how long is this information kept on my record? The Credit Bureau receives notice of all bankruptcy filings and may report the Chapter 13 filing for seven (7) years from the date of your discharge or dismissal of your plan. Chapter 7 cases may be reported for ten (10) years from the date of filing.
6. May I purchase another house or sell my house while on Chapter 13? Yes, with Court approval. The procedure is to file a motion with the court requesting permission to either re-finance or to incur a debt for the purpose of purchasing a home. If you wish to sell your home you must provide a copy of the Offer to Purchase Contract to the attorneys office. Please provide all documentation regarding the refinance, purchase or sale to the attorneys office. The attorney will then file a motion with the Bankruptcy Court requesting permission for you to sell or refinance your property. A hearing will be held approximately three weeks after the motion is filed. You must attend the hearing. You may not complete the sale of the property without the written order of the Bankruptcy Court.
7. May I purchase a vehicle while during my Chapter 13 case? Yes. Consult us first. We will advise you about feasibility. In order to purchase a vehicle the procedure is that you locate the vehicle you feel you can afford as the payment will not be included in your Chapter 13 plan. It will be a post-petition debt and must be paid direct by you to the creditor. You should get all of the information on the vehicle, (year, make and mileage) and the information on who will finance the vehicle, how much is being financed, the monthly payment, the interest rate and how many payments you will make, and bring it to this office. The attorney will file a motion with the Bankruptcy Court requesting permission for you to incur a debt for the purpose of purchasing a vehicle. A hearing will be scheduled on the motion. A hearing before the court will be held in approximately three weeks after the motion is filed. The Judge will determine if you can afford the vehicle. The Judge will issue an Order authorizing the financing of a vehicle. A creditor will not finance a vehicle without this order from the judge. At that time you can complete the purchase of the vehicle with the dealership.
8. Will finding new employment increase or decrease my payments into the plan? Any changes in the plan payment when changing employment will depend on your plan and your new monthly income. If you change employment, you should immediately notify us and the Standing Trustee's Office with the new employment information so a payroll deduction can be started with the new employer. If there is a lapse in income you must send your payment direct to the Chapter 13 Office until the new deduction can be started (Direct Payment). You are primarily responsible for your monthly Chapter 13 payment.
9. If I am dismissed for failure to pay, may the creditors begin contacting me for debts due? Yes, there will no longer be a bankruptcy stay (362 stay) protecting you. Plus, creditors may add any accrued interest and late charges to the debt.
10. May I include child support and alimony payments on my plan? It is possible to put any arrearage in the plan and regular future payments are paid outside the plan. If you become delinquent after you file your petition, the trustee will recommend the dismissal of your Chapter 13 plan.
11. If I list doctor or hospital bills, may they deny me treatment or require cash each visit? Yes, they may deny treatment and/or require cash. However, if you have insurance coverage it is not likely that you will be denied treatment.
12. May my spouse obtain credit while I am under the plan if he/she did not file with me? Yes, Chapter 13 does not cover your spouse if he/she did not sign the Petition. (Spouses would be protected as a co-maker if jointly liable on most debt).
13. If any of my creditors file a claim for more than I owe, what should I do? You should immediately contact this office with proof of what you actually owe (recent statement, canceled checks, etc.) so we can file a documented objection to the amount filed by the creditor.
14. My mortgage holder has begun foreclosure on my house. Will they be able to continue? No, a bankruptcy filing activates a stay of virtually all actions (Sec 562(a) restraining order prohibits the creditor from continuing with foreclosure unless they have the permission of the court to do so if this is the first time you have filed for bankruptcy. If you have filed before, and have been dismissed within one year of the second filing, and the creditor has started a foreclosure after your dismissal, the restraining order is effective for only 30 days. The attorney may file a motion with the court requesting an extension of the automatic stay (restraining Order). There will be a separate hearing on this motion. There is also an additional attorney fee (set by the Court) of $350.00 for the motion, which is payable at the time the petition is filed. This motion in bankruptcy court may not be necessary in some cases.
15. How may creditors obtain the court's permission to proceed with foreclosure? By filing a Motion with the Court requesting a hearing to consider whether or not the stay order should be modified to allow foreclosure. The matter will be set for hearing by the Court. All parties will be notified of the hearing and present their side of the issue. The Court will make a decision based upon the evidence presented. Generally, if you bring the account current prior to the hearing date the Judge may deny the motion and allow you to keep the property. If this happens you must make your payments on time from that point forward.
16. May I put old telephone, gas, or electric bills under the plan? Yes, but you must pay all bills which are incurred after filing the plan. You must contact the utility company and make arrangements to pay a reasonable deposit if you are including the utility company in your plan. This deposit will be for future service.
17. Will my chapter 13 payment change? It will depend on how much debt you have and your income. Cases are periodically reviewed by the Standing Trustee to be sure that the payment is sufficient to pay all creditors according to the Order Confirming Plan. The trustee will review your plan after all creditors have filed a claim and review the plan payment to be sure the payment is sufficient to pay proper claims that have been filed . If the amounts filed are more than the amounts estimated on the petition you filed, the payment may be increased by the trustee to an amount sufficient to pay proper claims filed within the 60 month time period as determined by the trustee.
18. May I pay the plan off earlier than scheduled by the Standing Trustee? Yes, contact your attorney to evaluate your case. The rule is: If a plan is paid out earlier than the minimum 36 monthly plan payments required then you must pay 100% of any unsecured debt that has been filed. The 36 months begins with the confirmation date of your plan.
19. May we pay Rent-to-Own creditors direct for the items we are purchasing? Discuss this issue with the attorney. It sounds like this could be a lease/purchase contract. Lease contracts are often exempt from the Chapter 13 as this is a rental contract which becomes void upon non-payment. You should plan on paying this account direct. It is at the option of Rent-to-Own creditor to allow this claim to be paid in the plan as a secured creditor.
20. What do we do about collision insurance on our car? You must keep collision insurance on the car at all times if there is a lien against the vehicle. If the physical damage coverage lapses, the Chapter 13 trustee will issue an Order allowing the creditor to store the vehicle until physical damage coverage is obtained. You must have physical damage insurance on the vehicle even if the car is inoperable until the lien is paid in full.
21. What if I do not have the money to pay the insurance premium? The creditor may file a motion for relief from stay to repossess the vehicle unless you provide proof of insurance coverage to the lienholder. The Trustee may also issue a notice of storage of the vehicle until you provide evidence of insurance. The creditor may repossess the vehicle and hold it for 30 days allowing you time to get the insurance. If, within thirty (30) days from the notice of storage of the vehicle, you have not provided evidence of insurance, the creditor may sell the vehicle. If you do provide evidence of insurance and wish to get the car back you will be responsible for any storage fees charged by the creditor from the date the vehicle was seized.
22. Must I attend Debtor Counseling School? Yes, it is desired by the trustee that everyone attend this class. The class is scheduled at 9:00 a.m. on the day of the creditors meeting. After attending the class you will receive a Certificate of Financial Management Course. This is required in order for you to receive a discharge upon completion of your Chapter 13 plan. The trustee will file this certificate with the bankruptcy court.
23. What happens if I am injured or have a serious illness and unable to work? You should contact the Chapter 13 office so to see if any payment adjustment can be made. You should also check with your creditor to see if there is disability insurance on your account. Your plan payments will be due whether you are working or not. The payments will be paid direct to the Chapter 13 Office by you from any unemployment income or medical leave income until you are again employed. It is important to remember that once you file the petition, all payments are due regardless of your circumstances.
24. I have a savings account with about $200.00 at my bank and I owe them about $1,800.00. Should I have taken the money out of the Bank before filing this plan? Yes, your bank can offset the money or freeze the savings account.
25. Must I put my Credit Union debt on the plan? I will not be able to get other loans if they must stop their deduction out of my check. Yes, all Credit Unions and all creditors. For banks you must stop any deductions from your check. Also, no credit is allowed without court approval while you are under Chapter 13.
26. Must I list Sears or other large creditors on my Chapter 13 petition? I want to be sure I can get credit in case of an emergency. You must list all creditors owed at the time of filing your petition. If you have an emergency situation, you should contact your attorney and the Chapter 13 office.
27. May I voluntarily get off Chapter 13 if I see that things are getting better for me? Yes, you should contact your attorney first. You must request dismissal in writing to the trustee. If you are dismissed you should be aware creditors may add interest and late charges which were prohibited by Chapter 13 during your Chapter 13 plan.
28. I have a new car with a balance of approximately $28,000.00 and payments of $550.00 per month. Will I be allowed to keep it? I just purchased it a couple of months ago. The payment to your Chapter 13 plan must be high enough to cover the payment on the vehicle and you must be able to afford the plan payments to keep any large vehicle or luxury item. Also, the Standing Trustee reviews any recent purchase for possible abuses of credit and Chapter 13. A creditor may object to the debt being included in the plan if the purchase was made within 90 day of filing the plan. You must be able to pay the full balance of the note within your plan period time, not to exceed 60 months. Also the new Bankruptcy law provides for payments to auto creditors within 30 days of the filing. This is handled by the trustee as an “adequate protection” payment.
29. I have a loan with a bank which is co-signed by my mother and secured by her Certificate of Deposit. What will happen to her CD? The bank may file a claim for the debt with your Chapter 13 plan and request they be allowed to setoff against the CD unless this debt is scheduled to be paid in full in the plan. The claim will be allowed and the bank may offset the percentage not scheduled to be paid in your plan. Your mother may file a claim with your plan for any amount paid by her CD, which debt will be classified and paid pro rata with other unsecured creditors.
30. If my house payment or loan payment is deducted from my salary through a payroll deduction to my Credit Union, must these deductions stop? It is the policy of the Trustee to pay mortgage payments in the Chapter 13 plan. Mortgage payments may be allowed to be paid direct by the debtor to the lienholder if the account is current at the time of filing. This is a decision made by the Trustee in your case.
31. If my spouse and I separate during the life of the Chapter 13 plan, must I make my spouse's portion of the payments in case he/she stopped paying? When a plan is filed, both parties are responsible for the payments until the plan is completed. The payroll deduction will continue as it is set up unless a written request to change the payroll deduction is made. In the case of separation or divorce each debtor may wish to make his/her share of the payment. If one debtor does not make his/her share of the payment, the other will be responsible for the full payment.
32. May I pay off my car loan directly to obtain the title to the vehicle, if so, will my Chapter 13 payments be reduced? You may pay off a car loan only if you are selling the car or trading it for another. You are not allowed to pay any creditor direct who is scheduled to be paid in your plan. If your loan is paid out for either of these reasons it is possible to have your payment adjusted. If there is an unsecured portion of the creditors claim (split claim) on the loan, you will not be able to get the title to the car until the plan is completed.
33. If I want to attend college or a continuing education program, may I obtain a loan or grant while under the Chapter 13 plan? Permission for loan or grants may be granted by the Court after review of your plan and your written request and a motion and hearing before the court.
34. If I have a bankruptcy showing on my credit report or am presently under a Bankruptcy will it prevent me from getting a grant or a student loan? A governmental unit that operates a student grant or loan program may not deny a grant, loan, loan guarantee, or loan insurance to a person that has been a debtor under title 11 or a debtor under the Bankruptcy Act.
35. Will filing a Chapter 13 stop my 401K loan repayment? No. The automatic stay (restraining order, which prevents any creditor action) does not affect the collection of a debt under the debtor’s agreement authorizing that withholding and collection for the benefit of a pension, profit- sharing, stock bonus, or other plan to the extend that the amounts withheld and collected are used solely for payments relating to a loan from a plan under the Employee Retirement Income Security Act.