Not all claims filed in Chapter 13 bankruptcy cases are valid. In most situations, invalid claims will be paid by the Trustee unless a party in interest objects. This blog post will focus on time-barred Chapter 13 claims and claim objection.

What are Chapter 13 Claims?

A Chapter 13 claim is a document filed by a creditor that establish the creditor’s right to be paid money through the Chapter 13. A creditor that does not file a claim in a Chapter 13 will not be paid any money. That creditor may also be prohibited from ever asking the debtor for money after the Chapter 13 is discharged.

Surprisingly, not all creditors will file claims in a Chapter 13. Even more surprising, some creditors file claims that are clearly invalid. This is where claim objection comes into play.

What is a Time-Barred Claim in Chapter 13?

To establish a valid Chapter 13 claim, a creditor must establish their legal right to seek money from the debtor. This makes sense. Not just anyone can show up to a Chapter 13 bankruptcy case and demand money from the debtor.

Typically, a creditor will file a claim that demonstrates that the debtor borrowed money and later defaulted on their payment obligations.

However, just as in a civil lawsuit, the creditor must establish a valid legal claim against the debtor.

The most common way a Chapter 13 claim fails is if it is time-barred. In other words, the debt is too old to legally collect. For most debts based upon a written contract in California, four years is the statute of limitations.

How Chapter 13 Claim Objection Works

If a creditor files an invalid claim in a Chapter 13, it is up to the debtor, the Chapter 13 Trustee, or some other party-in-interest to object to that claim.

Claim objections in bankruptcies can be filed both as “contested matters” as well as “adversary proceedings.”

Once the claim objection is filed with the court, the bankruptcy judgement will ultimately decide if the claim is valid or invalid.

The bottom line is that parties to a Chapter 13 need to carefully review all claims to ensure that only valid claims are paid. Special attention needs to be paid to the supporting documents that are filed with each claim to ensure that the debts are not time-barred.

I represent bankruptcy filers in Chapter 13 matters in Sacramento. Please contact my office at (916) 333-2222 to discuss whether Chapter 13 bankruptcy is right for you. 

Bankruptcy comes in several flavors. Each bankruptcy “chapter” has its own advantages and disadvantages. What type of bankruptcy is best for foreclosure? Read on and I will tell you.

Bankruptcy Stops Foreclosure

A bank starts foreclosure proceedings when a borrower defaults on the terms of their home loan. Each lender is different, but getting past 90 days late on a mortgage puts the borrower in the danger zone.

In order to prevent a bank from selling a home at a foreclosure sale, the borrower must bring their mortgage account current. This usually means paying the missed mortgage payments, plus penalties, interest, and sometimes even attorney’s fees. This can be a substantial amount of money. Not everyone can just write a check to bring the mortgage account current.

The good news is that all types of bankruptcy halt foreclosure proceedings. This means that bankruptcy is an effective tool to stop a foreclosure. What happens next depends on the type of bankruptcy being filed.

Chapter 13 Bankruptcy is Best for Foreclosure

Filing Chapter 13 bankruptcy stops a foreclosure sale dead in its tracks. That is just a temporary solution to a much larger problem. Chapter 13 has a borrower covered with a long-term solution as well.

In Chapter 13 bankruptcy, a debtor repays some or all of their bills over time. Included in the list of debts that must be repaid in full during a Chapter 13 is mortgage arrears.

Mortgage arrears is the fancy name for the amount of money a borrower must repay to bring their mortgage account current. Most mortgage companies will not let a delinquent borrower repay their arrears over time. Pay up, or get out, is what the mortgage companies say.

Chapter 13 bankruptcy allows a delinquent borrower to repay their mortgage arrears over time. Up to 60 months, in fact. Spreading mortgage arrears payments out over 5 years is a huge benefit to a borrower that cannot come up with the full payment in a lump sum.

Chapter 13 is a tricky bankruptcy to get right. When done correctly, Chapter 13 is a very powerful tool. Saving a home from foreclosure is just one benefit of Chapter 13 bankruptcy.

I have helped delinquent homeowners all over Northern California save their homes from foreclosure with Chapter 13 bankruptcy. Please call my office at (916) 333-2222 to discuss your bankruptcy options.  

Not all bankruptcy cases end in a bankruptcy discharge. For various reasons, some bankruptcy cases are dismissed prior to discharge. What happens after a bankruptcy is dismissed? Read on to learn more.

Some Bankruptcy Cases Are Dismissed

Bankruptcy can be very complicated. Not all debtors make it all the way through their bankruptcy to discharge. The bankruptcy court dismisses most bankruptcies. Other times, debtors themselves request that their bankruptcy case be dismissed.

Dismissal prior to discharge does not necessarily mean that the bankruptcy failed. A debtor may utilize a bankruptcy filing to delay a foreclosure or other legal event until such time that they can make other arrangements. This strategic use of the bankruptcy code is not explicitly forbidden, but is generally frowned upon. However, that does not stop it from happening. This is especially true in Chapter 13 court where a majority of dismissals occur.

Failing to file the required paperwork will also result in case dismissal. Occasionally the debtor does not show up to court when ordered. The bottom line is that not all cases end in a discharge.

Post-Dismissal

What happens after a bankruptcy dismissal depends on the chapter under which the bankruptcy case was filed.

In Chapter 7 cases, the court will dismiss the debtor and the automatic stay will terminate. The court will likely close out the case fairly quickly thereafter.

In Chapter 13 cases, the court will dismiss the debtor and the automatic stay will terminate — just like in the Chapter 13. If the Chapter 13 plan was no confirmed, the Chapter 13 Trustee will refund any Chapter 13 payments received back to the debtor. If the Chapter 13 plan was confirmed, the Chapter 13 Trustee will wrap up the administration of the bankruptcy case and issue a final report to the court. The court will proceed to officially close the case once the Chapter 13 Trustee’s administrative duties are resolved. Timing here could be 30-60 days from dismissal to closure, depending on the circumstances of the case.

Important to remember: dismissal terminates the automatic stay! You may need to make alternative arrangements to protect property once your bankruptcy case is dismissed.

My office handles Chapter 7 and Chapter 13 bankruptcy cases in the Sacramento area. Please call us at (916) 333-2222 to schedule a friendly bankruptcy consultation. 

Chapter 13 bankruptcy cases contain many important deadlines. Chapter 13 cases can last anywhere from three to five years. The Chapter 13 Trustee issues a “notice of filed claims” after several of these Chapter 13 deadlines. Read on for more information about this critical document.

Creditors Have Limited Time to File Claims in Chapter 13

Debtors reorganize their finances in Chapter 13. This typically means that debtors are repaying some of their debts over time. But which creditors get paid in Chapter 13?

Importantly, only creditors that file formal claims with the court will be paid. Creditors must file their claims within certain deadlines established by the bankruptcy court at the start of every Chapter 13. The court will not pay a a creditor unless the creditor files their claim within the allowed time.

The Notice of Filed Claims Specifies Who Gets Paid What

Your Chapter 13 Trustee will issue a “notice of filed claims” after the claim submission deadlines have passed. The report specifies which creditors filed claims. Here in Sacramento, the report will also specify the nature of the distribution that each creditor should receive over the life of the bankruptcy.

Carefully Review the Notice of Filed Claims

Don’t just assume that the notice of filed claims is accurate. Carefully review the document along with your attorney. Taking an active role in your Chapter 13 case will ensure the best possible result at the end of your long bankruptcy journey.

Typical issues discovered in the report are:

1. Creditor submitting duplicate claims
2. Creditor claiming too much money is owed
3. Mortgage or car creditor not filing a claim that should have been filed
4. Aggregate claims higher than anticipated at the time of filing

Your attorney can resolve these issues. But only if everyone is paying attention. It may be difficult or impossible to resolve these problems if your attorney waits until the last year of your bankruptcy case to take action.

Please call my office you are considering Chapter 13 bankruptcy in Sacramento. You can reach my office by calling (916) 333-2222. Don’t delay.