Reader’s Question: Do Chapter 13 Bankruptcy Rules Change in 2010?
Posted on December 27th, 2009
From time to time in my Indiana bankruptcy blog, I answer reader questions that I think will be of interest to my Indiana bankruptcy clients and to other blog readers. Last week, a reader asked whether Chapter 13 bankruptcy rules will be changing in 2010.
The answer – yes and no.
Chapter 13 bankruptcy in Indiana will mostly be same-old, same-old going into next year. By way of explaining the general way Chapter 13 works, here are some basic factors which will remain “business as usual” in 2010:
- Chapter 13 begins by filing a simple form with the Indiana bankruptcy court, and when a “docket number” is assigned by the court to identify the case.
- The Automatic Stay then goes into effect, and creditors are prevented from making any collection efforts: they can’t call or write to the debtor, repossess assets, or garnish wages.
- A list of all creditors, with name and address of each, plus paperwork showing all the debtor’s assets, liabilities, income, expenses, financial history, and a plan for repaying debt is turned in to the court. (A very big and important part of the work I and the Columbus bankruptcy lawyers who work in my offices there, plus the work done by the professionals in the Indianapolis, Bloomington, and Anderson bankruptcy law offices of Mark Zuckerberg consists of preparing and filing this paperwork.)
- The Creditors’ Meeting is held, presided over by the bankruptcy court trustee. (This is usually the one and only time the debtor ever needs to appear in court.)
- The payment plan begins, and is continued for three to five years. Secured creditors are paid directly “outside the plan”, while unsecured creditors are paid in one monthly check that goes to the bankruptcy trustee, who in turn allocates the funds to the creditors.
So what IS new for 2010? Actually the new “means” numbers began for Indiana bankruptcy cases filed on or after November 1 of 2009. These numbers are called the Census Bureau Median Family Income by Family Size, and are used to determine
- eligibility for filing bankruptcy
- how much of monthly income can go towards expenses of living before any dollars are allocated towards debt repayment under Chapter 13 bankruptcy.
The IRS National Standards for Allowable Living Expenses lists how much money (depending upon the size of the household) a debtor gets to keep towards paying for food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous expenses.
In addition, the IRS publishes national standards for out-of-pocket health care. (This financial standard differs for debtors under age 65 and 65 and older.)
Allowable living expenses for local housing and utilities are different depending on the county of residence, plus whether the dwelling is rented or owned. For example, for a household of four people, the standard is $860 per month in Bartholomew County (Columbus, Indiana, where one of the Mark Zuckerberg bankruptcy law offices is located), compared to $915 for Marion County (Indianapolis).
In addition to all these new numbers, the IRS publishes rules for transportation expense (the costs of using public transportation to get to work, doctor appointments, errands, etc.. In the Midwest, for one car, the number is $183, or $396 for two cars.
As I continue to provide Indiana bankruptcy information, I explain that, long story not-so short, the numbers used for measurement are new, but the basic Chapter 13 rules remain the same for 2010.
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