Individuals often file Chapter 13 bankruptcies. In Chapter 13 bankruptcies the debtors make payments on the pre-petition claims over a three to five year period of time. Unless you do some investigating before extending credit, you may find that you've extended credit to people that are already in Chapter 13 bankruptcy proceedings. If so, what can you do when they donâ??t pay you? We usually recommend that creditors always file proofs of claims in bankruptcy proceedings, you may wish to file a proof of claim for a post-petition debt in a Chapter 13 bankruptcy proceeding. You are free to try to collect from the debtor, but you cannot collect from property of the bankruptcy estate. Because the debtor's wages are property of the bankruptcy estate, collection may be difficult until the Chapter 13 plan is closed, dismissed or converted. If you find yourself in this situation, you should probably go ahead and file a proof of claim. Hereâ??s the problem. The filing of a bankruptcy petition creates an estate pursuant to 11 U.S.C. § 541. That bankruptcy estate consists of all legal and equitable interests of the debtor in property as of the beginning of the case. But, in Chapter 13 bankruptcies, Section 1306 of the bankruptcy code expands the definition of an estate to include (i) all property the debtor acquires after commencement of the case, but before the case is closed, dismissed or converted; and (ii) earnings from services performed by the debtor after the case is begun, but before it is closed, dismissed or converted. Therefore, the debtor's post-petition wages are part of the bankruptcy estate until the case is ended. Everyone knows that the automatic stay prevents creditors from trying to collect pre-petition claims from the debtor once a bankruptcy is filed. But the automatic stay also prevents creditors from trying to collect post-petition claims from property of the estate. Therefore, the extension of the definition of property of the estate in Chapter 13 cases to property acquired after the commencement of the case makes a huge difference in trying to collect post-petition claims. Although the stay of actions against the debtor to collect is limited to pre-petition claims, the automatic stay also protects the Chapter 13 debtor's property until the case is over. A creditor with a pre-petition debt may file a proof of claim in a bankruptcy proceeding, and we almost always recommend that creditors do so. On the other hand, creditors with post-petition claims do not meet the definition of creditors under 11 U.S.C. § 101(10), and are, therefore, barred from filing claims. But once again, Chapter 13 is different. Bankruptcy Code § 1305(a) allows claims for post-petition consumer debts that are for "property or services necessary for the debtor's performance under the plan." If you are a creditor meeting this criteria, you can file a claim. Section 1305 provides that such post-petition claims may be allowed. Well, I guess you already figured out that you shouldn't have extended credit to those after they filed for Chapter 13 bankruptcy. You are prevented from taking any collection efforts against the debtor's property until after the case is closed, dismissed or converted. ===================================== This article from a collection agency law firm was hard to find but a jewel of information. A Chapter 13 bankruptcy allows you to file amendments to your schedule F and include a post-petition debt. The process is simple to do and the fee for amending your schedule F is $26. There is some information I have not included but I will be willing to answer any questions via email. My concern is I do not want to tip off those people from collectionindustry.com from any info they don't know about. clc PS Just PM me with your questions. I WILL not answer questions if I get a vibe you are a CA.
