NEED HELP! Chapter 13!

[badjuju]

Hello everyone,

My husband and I are embroiled in quite the quagmire in regards to his parents. To make a very long story short, my husband's parents filed for Chapter 13 bankruptcy 3 1/2 years ago. We discovered recently that they never completed the bankruptcy paperwork, or rather, they were never able to complete the necessary submissions in a timely manner, causing them to have to compile new information (i.e. his father would complete the 6 months of information gathering of bills, salary, bank statements, etc and would submit them sometime the following month, so when the lawyer goes to file everything, she needs a new month of information. By the time he would do that again, 3 months would pass, so you need the missing months, etc, submit late, repeat and here we are 3 1/2 years later). My husband FINALLY obtained Power of Attorney and now he and I are stuck getting this done, not out of want, but more out of need because this, you know, trickles down to us.

So since 5 months had passed since info was submitted to the lawyer, we basically had to pull everything from scratch, which actually worked out better for us as it divulged a lot of information that had been hidden from us. Basically they have been living like nothing is wrong and have been taking advantage of the "extra money" they had because they were on hold with the creditors, all the while the creditors are coming back now. Additionally, we discovered that they dont pay their bills, so there is a history of chronic late payments, cancellation of services/utilities, final notices, etc. What makes this worse, is that we discovered that there are large cash draws from the bank accounts, that cant be connected to any bill payments.

We called the lawyer and told her all of this, and she basically said upfront that she told them way back when that they NEED to show they can pay their bills and that bankruptcy is not a given. When I told her all we discovered, she reiterated the same to me, so we are pretty confident that between the lack of money in their account (even though the monthly salary vs. the monthly expenses shows $$ available. Part of the reason for the parent's slow down on paperwork is that the lawyer plugged in the data they provided, and it showed that a lot of $$ - 2500 to be exact - can go towards the creditors each month. I found the same, but the number was more like 1000.), the cash withdraws, and the missed bills will disqualify them.

I dont want to go into family dynamics, but I will just say that "they know what they are doing", so if the Chapter 13 does not go through, we did our part and they are on their own, because you know "they know best".

Anyway, what I was hoping to find out is:

What happens IF the Chapter 13 is denied by the trustee?
Does is roll over to a Chapter 7? Although in their 60's, they both work still and make more than the median income for the area....
The credit card companies have sued them, but the cases were "dismissed" because of the bankruptcy process. I guess they are on their own once the trustee/judge denies the protection?
Is it just a free for all with the creditors? Meaning, they will come in first come first serve and start taking assets such as the paid off cars?
Will they come after the house? They refinanced back in '03 and maxed out a line of credit in 06, but there is some equity in the home (maybe, JUST maybe, 100K). Would the creditors push for the equity in the house?
I am assuming bank accounts will be seized?

We told them that this probably wont go through, yet they are still not taking things seriously and are oppositional towards us "getting all up in their business" so we need for this to become real for them, but need to know what happens.

I asked the lawyer, and we were going to meet with the lawyer using our own $$ to meet with her as her retainer fee is all dried up, or rather, her retainer fee covers them, plus we want direct answers. She wont dole out free legal advice, which I dont blame her, because the facts of their case has changed and she needs to cover her own rear end (which I TOTALLY get). We will meet with her when all the info is gathered, but she wont tell me before hand what will happen if it is denied, and that is something we need to prepare for, so that is why I am here. Hopefully someone can help, because we sure do need it!

Thanks in advance!

And most importantly - how long until this all happens....

[LadyInTheRed]

Welcome to the forum.

It is not clear from your post what exactly is going on in your in-laws' case. That may be because you are still trying to sort out the details.

Hello everyone,

To make a very long story short, my husband's parents filed for Chapter 13 bankruptcy 3 1/2 years ago. We discovered recently that they never completed the bankruptcy paperwork, or rather, they were never able to complete the necessary submissions in a timely manner, causing them to have to compile new information (i.e. his father would complete the 6 months of information gathering of bills, salary, bank statements, etc and would submit them sometime the following month, so when the lawyer goes to file everything, she needs a new month of information. By the time he would do that again, 3 months would pass, so you need the missing months, etc, submit late, repeat and here we are 3 1/2 years later).

So was their BK petition actually filed? If so, it sounds like either it was an emergency petition and their schedules were never filed or the documents that have to be provided to the trustee after filing weren't provided. If they did not file the necessary paperwork, their case would have been dismissed by now. Are you now looking at filing a new BK petition for your in-laws?

My husband FINALLY obtained Power of Attorney and now he and I are stuck getting this done, not out of want, but more out of need because this, you know, trickles down to us.

How does this trickle down to you? Your husband is not responsible for his parents' debts. If they die with debt, the creditors will get paid before your husband gets any inheritance. Is this the concern? If so, your husband needs to remember that anything he does under that power of attorney needs to be for his parents' benefit, not for his. If you really don't want to do anything, you don't have to do anything. If you and your husband want to help your in-laws, that is great. But unless you have been appointed conservators, you have no obligation to do anything other than whatever moral obligations you place on yourself.

the cash withdraws, and the missed bills will disqualify them.

They may have to explain where the cash went to show they aren't hiding cash or making preferential payments, but cash withdrawals and missed bills won't disqualify them from a Chap 13. As long as they can show they have the income to propose a feasible plan, and neither of them have unsecured debts more than $360,475 or secured debts more than $1,081,400, they are eligible for a 13. If they have $1000 or $2500 available to pay creditors, they can propose a feasible plan, unless they have non-exempt assets they are unwilling to give up and cant pay the value of over the life of the Chap 13.

I don't want to go into family dynamics, but I will just say that "they know what they are doing", so if the Chapter 13 does not go through, we did our part and they are on their own, because you know "they know best".

The reality is that if they don't want your help and are unwilling to go through a Chap 13, there isn't much you can do unless you think they are not competent and want to go to court to be appointed conservators of their estate. Because they both have jobs, my guess is they are not incompetent.

What happens IF the Chapter 13 is denied by the trustee?

The trustee doesn't have the power to deny a Chap 13. The trustee may object to the Chap 13 plan in which case there is a negotiation with the trustee to try to resolve the objection by filing a new plan that both sides agree on. If the trustee and the debtor can't agree on a plan, the decision goes to the judge. If the debt exceeds the debt limits I mentioned above, the trustee can petition for dismissal of the 13. The court may also dismiss it on its own.

Does is roll over to a Chapter 7?

No. If the Chap 13 plan is not confirmed, either the debtor petitions to convert to a 7 or the Chap 13 will be dismissed. If your parents have $1,000 to $2,500 in disposable income, they will not qualify for a Chap 7. If they have too much debt to qualify for a 13, they would have to consider a Chap 11.

The credit card companies have sued them, but the cases were "dismissed" because of the bankruptcy process. I guess they are on their own once the trustee/judge denies the protection?

Okay, so it sounds like a BK was filed. Was the BK dismissed? Depending on the facts of the prior case, it is possible that some debts may not be dischargable in a second filing. But, I don't know the details of how that works. The attorney will be able to tell you how the prior filing will effect a new filing.

Is it just a free for all with the creditors? Meaning, they will come in first come first serve and start taking assets such as the paid off cars?
Will they come after the house? They refinanced back in '03 and maxed out a line of credit in 06, but there is some equity in the home (maybe, JUST maybe, 100K). Would the creditors push for the equity in the house?
I am assuming bank accounts will be seized?

It won't be a free for all. Each creditor must file a lawsuit and get a judgment before they can collect. Their ability to collect and what they can collect depends on laws of the state. Some states don't allow wage garnishment. The ones that do allow it impose limit on how much can be garnished, but those limits don't tend to leave much for the debtor. Each state has a list of property that is exempt from collection. Sometimes they are the same as bankruptcy exemptions, sometimes they are different. Judgment creditors can get liens on real property, but usually cannot force a sale (again, that depends on state law). They may be able to go after cars, but that doesn't mean they will. Bank accounts are a more likely target. The best way to protect cash from creditors is to not put it in the bank. I wonder if that is why your in-laws have made large withdrawals.

We told them that this probably wont go through, yet they are still not taking things seriously and are oppositional towards us "getting all up in their business" so we need for this to become real for them, but need to know what happens.

The reality is that unless a court rules they are unable to manage their own financial affairs, if they want you to butt out, you'll have no choice but to butt out. I am sure you have the best of intentions. But you can't help somebody that doesn't want help. Their finances really aren't your business unless they want them to be or they aren't competent to handle their own affairs due to dementia or some other medical condition. The power of attorney is an indication that they were willing to let your husband get involved, but a power of attorney can be revoked. So, when your in-laws start pushing back, you may want to back off a bit and give them some space before trying again. As you try to help them, it is important to make sure they do not feel like you are trying to take over. If you think they do not have the mental capacity to take care of their financial affairs, I urge you to seek the help of an attorney or service organization who specializes in elder services or contact social services for assistance. Keep in mind that irresponsible management of money does not always equal legal incompetence.

I asked the lawyer, and we were going to meet with the lawyer using our own $$ to meet with her as her retainer fee is all dried up, or rather, her retainer fee covers them, plus we want direct answers. She wont dole out free legal advice, which I dont blame her, because the facts of their case has changed and she needs to cover her own rear end (which I TOTALLY get). We will meet with her when all the info is gathered, but she wont tell me before hand what will happen if it is denied, and that is something we need to prepare for, so that is why I am here. Hopefully someone can help, because we sure do need it!

If the power of attorney gives your husband the power to deal with the BK on his parents' behalf, any retainer that is left for the benefit of his parents should apply to work the attorney does for the parents, even if she is dealing with your husband pursuant to the power of attorney. Under a power of attorney, your husband steps into his parents' shoes. But, if a Chap 13 was filed and then dismissed, it is likely that there is little or nothing left of the retainer.

And most importantly - how long until this all happens....

If you mean how long before the creditor's start suing and collecting, it varies. It can be a few months, a few years or never. If they have income and assets available for collection, chances are that creditors will take action relatively soon.

You are dealing with a very difficult situation. I hope this helps a little.

[badjuju]

THANK YOU THANK YOU THANK YOU!!!

OK - to shed some info:

"So was their BK petition actually filed? If so, it sounds like either it was an emergency petition and their schedules were never filed or the documents that have to be provided to the trustee after filing weren't provided. If they did not file the necessary paperwork, their case would have been dismissed by now. Are you now looking at filing a new BK petition for your in-laws?"

No - it wasnt filed....they have dragged their feet for 3 years compiling the info to get it to the lawyer so she can run it all through the means test to figure out where they would stand. Once the lawyer gets the info, she will submit them. If I understand all this correctly, she will submit it, it will go a trustee who will review everything, then it goes to a judge...

How does this trickle down to you? Your husband is not responsible for his parents' debts. If they die with debt, the creditors will get paid before your husband gets any inheritance. Is this the concern? If so, your husband needs to remember that anything he does under that power of attorney needs to be for his parents' benefit, not for his. If you really don't want to do anything, you don't have to do anything. If you and your husband want to help your in-laws, that is great. But unless you have been appointed conservators, you have no obligation to do anything other than whatever moral obligations you place on yourself.

Bottom line is that it trickles down to us in obligation. I will be honest in saying that I live very much in my means and live a meager life. They havent and have been very irresponsible with their spending, and it caught up. It trickles down to us in that we live right up the road from each other, and guess who will be knocking on our door should they have to give up the house, or the car gets taken...

They may have to explain where the cash went to show they aren't hiding cash or making preferential payments, but cash withdrawals and missed bills won't disqualify them from a Chap 13. As long as they can show they have the income to propose a feasible plan, and neither of them have unsecured debts more than $360,475 or secured debts more than $1,081,400, they are eligible for a 13. If they have $1000 or $2500 available to pay creditors, they can propose a feasible plan, unless they have non-exempt assets they are unwilling to give up and cant pay the value of over the life of the Chap 13.

My husband confronted them about it, and they arent making payments or hiding any of it. Its just "gone", as in "I bought this nice new washer and dryer".

The reality is that if they don't want your help and are unwilling to go through a Chap 13, there isn't much you can do unless you think they are not competent and want to go to court to be appointed conservators of their estate. Because they both have jobs, my guess is they are not incompetent.


Exactly, it may be just that, but as you said, they are not "incompetent" because they have jobs. Declaring incompetence would also effect that

The trustee doesn't have the power to deny a Chap 13. The trustee may object to the Chap 13 plan in which case there is a negotiation with the trustee to try to resolve the objection by filing a new plan that both sides agree on. If the trustee and the debtor can't agree on a plan, the decision goes to the judge. If the debt exceeds the debt limits I mentioned above, the trustee can petition for dismissal of the 13. The court may also dismiss it on its own.

I used the wrong terminology - the trustee can object to the chapter 13 plan, not reject it. They are not above the limits (135K in credit card debt, 270K on their house).

The reality is that unless a court rules they are unable to manage their own financial affairs, if they want you to butt out, you'll have no choice but to butt out. I am sure you have the best of intentions. But you can't help somebody that doesn't want help. Their finances really aren't your business unless they want them to be or they aren't competent to handle their own affairs due to dementia or some other medical condition. The power of attorney is an indication that they were willing to let your husband get involved, but a power of attorney can be revoked. So, when your in-laws start pushing back, you may want to back off a bit and give them some space before trying again. As you try to help them, it is important to make sure they do not feel like you are trying to take over. If you think they do not have the mental capacity to take care of their financial affairs, I urge you to seek the help of an attorney or service organization who specializes in elder services or contact social services for assistance. Keep in mind that irresponsible management of money does not always equal legal incompetence.

Thats the issue - his mother asked for help because she cant take the stress anymore (mind you, she has not changed her ways and has the spending issue) and his father who has been in charge of all the finances is oppositional. Discovering all we have now, we know why - he was hiding everything.

In regards to being sued by CC Companies...whenever they received a summons, they sent it to the lawyer "and she took care of it". The retainer fee is basically gone now because of the 3 years she has been working on it. Im thinking she has done more than she should have without charging, just to get this done and anything above and beyond (like wanting ourselves to have a sit down) would require an hourly rate. The last of the retainer will go to the final meeting with all the info gathered, submitted, and then the court/trustee meeting.

It is one thing to be in this situation due to circumstances beyond your control (job loss, illness, disaster, etc) and then there is this. This is just irresponsibilty - they have played a game of "Stealing from Peter to Pay Paul" for a very long time, but when faced with a dead end, there was always a safety net - money from parents, home equity loans, mortgage refinances, etc to pay debt. Now there is no safety net.

Thank you for the response, and yes, this is very hard on our family.

[Pandora]

As LITR pointed out - having power of attorney doesnt mean they're incompetent to manage. I think in order to save your own sanity...you (or your husband) need to simply stand back and let his parents deal with THEIR issues vs. hiding their heads in the sand. Basically what I've taken from your post is that Mom doesnt want to "deal with this" and merely wants to be a bystander, while allowing her son (and you) to sort out their issues. You arent helping them by doing it for them - they need to put their big kid pants on and deal with the issues they created - and by you stepping into that role, its actually hurting everyone all the way around. Not being able to function on an every day level is much different than just not wanting to deal with situations one gets into.

one other thing you should check is if you actually have legal grounds for filing a Bk using power of attorney; different districts see things differently using a POA. Usually a POA is done if the person is hospitalized, out of the country, or mentally incompetent...whether or not you can act on it basically on a "just because" (on the parents part) - is anyone's guess.

You could also have a lawyer represent them and be their POA; that way it removes you completely - but again, generally a POA for BK purposes generally cant be done due to someone not wanting to deal with it.

[badjuju]

As LITR pointed out - having power of attorney doesnt mean they're incompetent to manage. I think in order to save your own sanity...you (or your husband) need to simply stand back and let his parents deal with THEIR issues vs. hiding their heads in the sand. Basically what I've taken from your post is that Mom doesnt want to "deal with this" and merely wants to be a bystander, while allowing her son (and you) to sort out their issues. You arent helping them by doing it for them - they need to put their big kid pants on and deal with the issues they created - and by you stepping into that role, its actually hurting everyone all the way around. Not being able to function on an every day level is much different than just not wanting to deal with situations one gets into.

one other thing you should check is if you actually have legal grounds for filing a Bk using power of attorney; different districts see things differently using a POA. Usually a POA is done if the person is hospitalized, out of the country, or mentally incompetent...whether or not you can act on it basically on a "just because" (on the parents part) - is anyone's guess.

You could also have a lawyer represent them and be their POA; that way it removes you completely - but again, generally a POA for BK purposes generally cant be done due to someone not wanting to deal with it.

Thank you for the response...

Yes, we are on the verge of standing back and letting things fall....we just feel, out of obligation (more so for my husband) that we have to at least do our part. She asked, we are doing, yet they (and she) arent changing....there is definitely a larger issue here that I wont get into, but so far the folks who have responded are on the same page as us and not all info has been disclosed...

Also, we arent filing the BK...it will all be on them, however we are just doing all the gathering for them. For our own sake, we will meet with the laywer to discuss what the outcome will be, for our own informational purposes, and then everything will be them (going to the trustee, going to the judge, etc)...if they need to submit more info, we will gather all of that to prevent procrastination...

Its just a giant terrible mess, especially when even after numerous inquiries by hubby about "whats going on", he was misled and then at the very end when it really couldnt get any worse, his mother spills part of the truth, asks for help and then we discover much more...

And what was the catalyst that prompted his mother to have to spill it? We were getting harassed by collection agencies looking for THEM. We live around the corner from them so when investigating, I am sure the agencies saw *same last name *same zip code and decided to see what would happen when they would call. Well they got the answer they were looking for....

Never leave this kind of burden on your children....

[Pandora]

I'm sorry you're having to endure all of this... I know it's stressful. Hang in there....