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Chapter 13 plans must be approved in bankruptcy

For many working Cincinnati area residents who, despite their income, are experiencing financial distress a chapter 13 bankruptcy proceeding can be a valuable tool to find significant debt relief. In chapter 13 an Ohio resident can often retain all of their property, while curing issues with back taxes, delinquent mortgages or digging out from a mountain of unsecured debt.

Chapter 13 cases require a petitioner to file a proposed payment plan that can run from between three and five years. Occasionally, a bankruptcy trustee may object to a proposed plan and the petitioner will be required to file an amended plan that may make more sense. The case of a former East Coast state lawmaker highlights the importance of filing the amended plan in a timely manner.

A former state Delegate in Virginia ran into financial difficulty and filed for chapter 13 relief in February. The man and his wife filed a joint petition, which listed assets of roughly $520,000 and debts of roughly $594,000.

The couple had roughly 20 creditors, including banks, credit card companies, individuals and state and federal back taxes. The chapter 13 plan proposed to make total payments of $73,800 over the course of a five year plan. The state and federal taxes, which are generally not dischargeable, would be paid off through the plan. Unsecured creditors would receive roughly 3 percent of the $87,101 the couple owed.

Unfortunately, the former lawmaker was facing criminal charges. The trustee objected to the payment plan saying the plan was unlikely to be successful. The trustee had some concerns over the total payments proposed in the plan. However, the main flaw, according to the trustee, was the couple would not likely to make the monthly payments as proposed. The husband is facing a prison sentence and the wife is unemployed.

The bankruptcy court ordered that a new payment plan be proposed. The couple missed the deadline and Monday, the court dismissed the chapter 13 bankruptcy case. Upon dismissal, the protections of the bankruptcy court are no longer in place and the creditors are free to resume all lawful collection practices.

It is possible in some cases, to convert a chapter 13 bankruptcy plan into a chapter 7 bankruptcy. It is unclear what the couple plans to do regarding their bankruptcy proceeding. Individuals in Ohio experiencing financial distress can speak to an experienced Cincinnati bankruptcy attorney to learn what options may be available to find significant debt relief.

Source: Daily Press, "Phil Hamilton's bankruptcy case dismissed," Peter Frost, Aug. 23, 2011

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