Five Years is a Long Time for Rice and Beans

22 Aug Five Years is a Long Time for Rice and Beans

The October, 2005 changes to the Bankruptcy Law have forced many debtors into five year Chapter 13 plans. Chapter 13 trustees are demanding that every penny not specifically accounted for in your budget be paid to the trustee, resulting in “rice and beans” budgets for five years. Is it time to say “enough?”

The stated purpose of the October 2005 changes to the bankruptcy law is to discourage bankruptcy filings in general and to force those who do file into five year Chapter 13 repayment plans that pay back secured creditors in full with interest and pay most or all of what is owed to unsecured creditors.

In 2006,  the year following the enactment of the new law, bankruptcy filings were way down nationwide but 2007 has seen a dramatic upswing in the number of filings.  Many of these filings are caused by mortgage delinquencies as debtors fight to save their homes.

Where I practice, in Atlanta, Georgia, the Chapter 13 trustees have taken hard line positions on Chapter 13 cases, filing numerous objections to the approval or confirmation of debtors’ plans.  These objections are designed to force debtors to amend their plans to increase the monthly trustee payments.  As lawyers, we want our clients’ plans to be approved therefore, we encourage our debtor clients to increase their trustee payments often to a level higher than what many debtors can afford, especially given the five year terms of most repayment plans.   My guess is that we will soon see statistical evidence that these Chapter 13 plans are sucking debtors dry of all emergency funds and that the plans will begin to fail, resulting in foreclosures, repossessions and other unpleasant results.

In my practice, I am less and less inclined to back down when the Chapter 13 trustee demands higher and higher payments.  Living under a “rice and beans” budget for five years is impossible.  As lawyers, we need to sensitize our judges to this reality and get cases approved that are designed to work, not to bleed our clients dry.

A conversation I had with a client today is a case in point.  My client is a legal secretary with a solid job and good income.  Her husband, who did not file bankruptcy with his wife,  is a truck driver and his income varies from week to week.  The six month look back now required by the Bankruptcy Code included a lot of overtime for the husband and the “average” income we listed on our budget is somewhat higher than what he can depend on.  In addition, the husband gets paid weekly, meaning that most months result in four weeks of pay, while four times a year, he gets five weeks of pay.  Our budget, however, uses a monthly average.  Averages are great for statistics but they don’t put food on the table.  In addition, my client informed me that her husband had an unexpected vehicle repair and the satellite tv company just grabbed $600 from his checking account.

My client is now left with no money to buy school supplies for her 5 children and can’t pay the mortgage.

How can this be reconciled with a Chapter 13 law that purports to give debtors relief from creditors and a fresh start?  The answer, I believe, is for debtor’s lawyers to insist on reasonable, livable budgets with room built in for emergencies.  The Chapter 13 trustees have succeeded in changing the rules of the game but at the end of the day, bankruptcy is supposed to offer debtors a fresh start.

If you are a debtor’s lawyer, think twice about backing down when your trustee demands a higher payment.  Don’t hesitate to argue for a reasonable budget at the confirmation hearing.  If you are a debtor, don’t let yourself get bullied into signing off on a trustee payment you can’t afford.  And if you are a voting citizen, let your elected representative know that honest, hardworking people who end up in bankruptcy are not criminals and deserve a fair shot at financial redemption.

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Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including and an Atlanta bankruptcy blog, Please mention Bankruptcy Law Network when you call.
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