Confused... thought I was allowed to rebuild with a credit card during 13

[jange]

In Philadelphia, there was no handbook or instructions on my confirmation order so I did get a small limit card and a secured card for business travel. My lawyer actually encouraged it. It is so odd how different our experiences really are through the same legal process!

I am also in Eastern PA, a handbook, instructions, anything would have been nice. The confirmation order says very little except that we were confirmed. Chris I never asked my attorney about getting a card with a small limit and I don't really want one, but did the trustee have to approve it?

[andy158]

For what it is worth I took out a loan on my 401k for $1500 + our emergency fund money to replace the transmission in our car that is being paid in the 13 plan. Our attorney said I didn't need trustee approval if it is an emergency and I didn't have any problem paying back the $80/mo payment over the 20 months . I am paying myself back at 7% interest.

Remember the trustee doesn't want to jeopardize their collection either. We have paid ours well over $2000 already. I can see where securing the very thing that landed most of us here is like falling off the wagon. Therefore, the trustee would want to know. They are like your financial parole officer. With the increased acceptance of debit cards I will never have another credit card.

[LadyInTheRed]

My confirmation order doesn't say anything about incurring debt either. In fact, it doesn't cover many things that people here often say to check your confirmation order for. I wonder if it came right down to it, if what they tell you in the handbook is enforceable if your order does not prohibit you from incurring debt. Especially the part that says my non-filing spouse can't incur debt. I looked in the BK code a while ago for a prohibition against incurring debt and didn't find anything. Perhaps there's case law on the issue. It is true that if you are incurring debt, you aren't really sticking to your plan.

Regardless of what is in your confirmation order or any handbook, nobody in a Chap 13 should use a credit card or incur any other debt without first checking with their attorney.

[justbroke]

The case law comes from 11 USC 1102. I always found it a stretch, but in the caselaw that I read a while ago, with respect to this same topic, comes from the Trustee's duty to "advise, other than on legal matters, and assist the debtor in performance under the plan". The "assist the debtor in the performance under the plan" is what specifically is used to force "wage deduction" orders in my District.

There is also 11 USC 1305(c) which is why creditors want a letter from the Trustee before allowing debt to be incurred during the pendency of a Chapter 13!!!

11 USC 1305(c)A claim filed under subsection (a)(2) of this section shall be disallowed if the holder of such claim knew or should have known that prior approval by the trustee of the debtor’s incurring the obligation was practicable and was not obtained.

[lillymarlene]

Regardless of what is in your confirmation order or any handbook, nobody in a Chap 13 should use a credit card or incur any other debt without first checking with their attorney.

I agree, especially about credit cards. One thing I do remember asking my attorney about though, since I'm self employed, was about vendor accounts. I asked if this meant that everytime a vendor (if they offered) to ship me for example, net 30, was I supposed to ask him first? He said: No, this is just normal business.

[stlrs]

I know every district and Trustee is different. I'm another one in PA and my lawyer advised me I am able to get a credit card as long as it's $500 or under and I don't need approval for it.

[sm23]

Justbroke;

I appreciated your reply. I checked my confirmation order (lawyer never gave it to me, was never mailed to me, etc) and it does not mention anything about new debt.

1. The Meeting of Creditors having been concluded on
2. Upon consideration of the papers filed in this case, any testimony given at the Confirmation Hearing (s),
any argument of counsel,
3. The Court makes the following findings:
a. The Plan complies with the provisions of Chapter 13 Title 11, United States Code;
b. The Debtor has paid the filing fee in full in this case;
c. The Plan has been proposed in good faith and not by any means forbidden by law;
d. The value, as of the effective date of the Plan, of property to be distributed under the Plan on account
of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of
the Debtor were liquidated under Chapter 7 of this Title on such date;
e. With respect to each allowed secured claim provided for by the Plan;
i. The Holder of such claim has accepted the Plan; or
ii. (A) The Plan provides that the holder of such claim retain the lien securing such claim;
and
(B) The value, as of the effective date of the Plan, of property to be distributed under the Plan on
account of such claim is not less than the allowed amount of such claim; or
iii. The Debtor surrenders the property securing such claim to such holder; and
f. The Debtor will be able to make all payments under the Plan and to comply with the Plan.
4. GOOD CAUSE APPEARING
a. IT IS ORDERED that the Debtor(s) Plan (or Amended Plan) filed on March 10, 2010 is confirmed.
b. IT IS FURTHER ORDERED that the future income of the Debtor(s) is submitted to the supervision
and control of the Trustee, as is necessary for the execution of the Plan (or Amended Plan).
c. IT IS FURTHER ORDERED that any creditor whose claim is entirely disallowed by final non
appealable order, and any creditor listed in the Debtors' original Schedules that has not filed a proof of claim
by the claims bar date need not be served with notice of any subsequent action in this case by the Debtors or
the Trustee unless such creditor files a request for special notice with the Court and serves such request on the
Trustee and Debtors' attorney. Notwithstanding the above, if the proposed action would adversely impact a
creditor, that creditor must be served notice.
ADDITIONAL PROVISIONS: Pro Tanto Amount
END OF ORDER


It really is odd how differently states handle this. I am actually happy they gave me the handbook.

[justbroke]

It really is odd how differently states handle this. I am actually happy they gave me the handbook.

Yes is interesting and is why we need to sometimes defer to the specific District (state) and order confirming the plan. As you have just learned, what's in my order doesn't bind you in your order. Here's what my order says about new debt!

The debtor is prohibited from incurring any post-confirmation debt during the term of this plan
without prior approval of the Court or the Trustee.

[chicagoed195]

Every jurisdiction seems to be different. My plan states "During the term of the plan, debtor(s) should not voluntarily incur additional indebtedness in an amount exceeding $5,000 without approval from the court."

[chicagoed195]

Also, that language is not in my order, but is an enumerated section of the plan itself.

[becky20]

Anyone here have an idea of what the rules are on this for Arizona (Maricopa County)? I know our confirmation order says nothing about it. We're now over 3 years into our 5 year plan so I'm thinking it would be a good time to do this if it's something we're allowed to do. I have to call my attorney in the next few weeks anyway with another question so will ask this as well, but just curious...

[karm43]

Would this be considered middle district Pa?

[booradley61]

Take this advice for what it's worth to you. I did the same thing. My confirmation order said if you need to purchase a car or house during the 13 that you need to get prior approval of the court. But it said NOTHING about credit cards. I run a very small business (was running it when I filed BK) and at times when cash flow was strained, I needed a credit card to get supplies and then pay it off. I got a credit card offer in the mail, got online and got it within 5 minutes. I did that, not knowing that in general, credit cards are a huge no-no IF the trustee finds out, and that's a huge IF.

It's not something I would take a chance on in HINDSIGHT, because when I found out I had violated the rules, I was scared out of my mind! Do NOT, if you're reading this, take chances with your plan by getting credit cards based on what I'm saying here, because all cases/districts/states are different. But, I talked to the paralegal at my attorney's office, and she told me that the likelihood of the Trustee finding out is slim and none. She told me that she had seen hundreds of times in which debtors did the same thing, and the most they got was a reprimand and usually the Trustee found out because they were late on a bk payment and voluntarily told the Trustee they were late or couldn't pay because of debt they had incurred DURING the bankruptcy. Otherwise, if they had never been late and volunteered such info, the Trustee probably would have never known. She said that if ASKED for any reason if I had incurred debt without permission, that we would not lie - we'd tell the truth. But the question never came up. There was never any reason for it to in my case.

They're too busy to know all that goes on, but that's no reason to take a chance (I say that for people who may read this and think they won't get caught) It COULD be grounds for dismissal, so I would never knowingly take that chance. But since you've ALREADY done it, I wanted to help you feel better if I could. I was just like you - didn't fully understand everything and I felt really stupid after I found out that I could have derailed my discharge. I have been discharged, and NO, the Trustee never found out about my credit card. So I'm telling you this to ease your mind somewhat, because I know how scared you probably are about this. I was never late on a bk payment, I paid the CC off as quickly as I could and prayed all the way to my discharge.

Some on here will chew you out about doing this, and to be honest, we should have known better. And you sound like me - you thought that since you got approved, it was ok. There is so much that goes on prior to the 341 meeting, and so much that goes on during it, if some things aren't stressed to you, you forget or don't fully understand, so many have made this mistake. But just stay current on your payments, pay that card off just to be on the safe side, and know that the odds are against this ever coming back to bite you. Lesson learned.

[lillymarlene]

booradley61, Thanks for your post. I am self employed too, and wouldn't have had any idea about credit cards, if it wasn't for posts like yours. Then to make matters worse, I'm slightly hard of hearing, and sometimes things my attorney told me, I may have missed. My confirmation states nothing about credit cards, and I still receive offers in the mail. Thank goodness for this forum.

[booradley61]

booradley61, Thanks for your post. I am self employed too, and wouldn't have had any idea about credit cards, if it wasn't for posts like yours. Then to make matters worse, I'm slightly hard of hearing, and sometimes things my attorney told me, I may have missed. My confirmation states nothing about credit cards, and I still receive offers in the mail. Thank goodness for this forum.

Well, in hindsight, if I had gone to the Trustee and explained the cash flow problem with my being self-employed, I think he would have approved it. But by the time I found out I shouldn't have gotten a CC (I found it out just by accident on a forum like this), I only had 3 months left to play in my plan, so at that late date, I didn't bring it up. I'd been using it for supplies and paying it off for at least 2 years, not thinking I was doing anything wrong and with no one finding out. But I do think I had a good case for using one, being self-employed, I just didn't have official permission. It all turned out okay in the end, and I have my discharge. BUT - I do NOT recommend doing this AT ALL. Your best bet is understanding and staying WITHIN the rules. You'll sleep better.