Random Chapter 13 thoughts

[lvmilizia]

I am just wondering, why if it is Federal bankruptcy count, that the rules seem to be different in each state it make no since to me? Then whoever came up with Chapter 13, was for sure working for the credit companies, this stuff with your payment can change if your income changes during the 5 years and so forth is crazy. I think your chapter 13 should be based on the point you are at, at the time you file, and once your payment is set, that is is. Not that I am expecting a big raise or anything, but it just seems to me there is to much uncertainty in the way chapter 13 works. Just some random thought for the day.

[LadyInTheRed]

First of all, much of the Bankruptcy Code is written by the banks. They have a lot of influence over Congress.

The Bankruptcy Code is the same for all states. It is Federal Law because it affects interstate commerce over which the Federal Government has jurisdiction. For matters not subject to federal jurisdiction, the people of the states and local jurisdictions get to set their own laws based on their local values as long as they don't violate the rights guaranteed to all citizens under the U.S. Constitution. There are some bankruptcy issues that the Bankruptcy Code leaves to the states. Like, what things should bankrupt people be allowed to keep. A good example of how local values affect state laws is that some state laws have gun exemptions while others don't. Some states favor debtors with very generous exemptions while some favor creditors with stingy exemptions. The "people" of these states have decided, based on their local values, how much somebody should have to give up before their debts are forgiven.

Allowed expenses vary by state because the cost of living varies by state. Procedures vary by court because not every little detail is covered in the law. So, each court decides how to address things.

A lot of uncertainty and inconsistency comes from the fact that the law is not always clear and different trustees take different positions on things. Most of those differences get settled between the trustee and the debtor. If they don't, then the judge decides and different judges will interpret laws and apply the laws to certain facts differently. If they get it wrong, the decision can be appealed. Disputes are resolved at the local level first. If somebody believes a ruling is wrong because the interpretation of the law was wrong or because the local law is inconsistent with laws at a "higher level", then you take the question up the court chain, from the district court, to the circuit appellate court or panel, to the US Supreme Court. If the 9th Circuit Appeals Court rules one way on an issue and the 5th Circuit Court rules a different way, the law is different in the two states unless and until the issue goes to the Supreme Court.

It's all part of the belief that we should be able to work with our neighbors, with similar interests as ours, to decide what is acceptable instead of having to work with people on the other size of the country who may have very different interests.

Laws vary by state because states have a right to govern themselves.

That's our civics lesson for the day.

As far as Chap 13 plans, the law is consistent: The debtor must contribute all of their disposable income to the plan during their commitment period. So, it makes sense that if your income increases so that your disposable income ends up significantly higher than expected, your plan payment should be increased. It works both ways. If your income decreases, do you think it would be fair for your payment to remain the same? What varies, is how close a trustee monitors your income, at what point you are required to report an increase in income and how much income is considered significant enough to insist on an increase in payment.

Once your plan is confirmed, there is very little uncertainty. Make all of your plan payments on time and you will get a discharge. Any uncertainty is caused by the uncertainties of life.