Avoid Costly Mistakes and Various Issues Before Filing Chapter 13
Picture this: You’ve been juggling bills for months, watching your debt pile up despite your best efforts. The collection calls are increasing, and the stress is taking a toll on your health and relationships. If this sounds familiar, Chapter 13 bankruptcy might be the fresh start you need. However, the steps you take before filing can significantly impact your case’s success or failure.
At Scott Harris Law, we’ve guided countless Oklahoma residents through the Chapter 13 process. We’ve witnessed firsthand how simple mistakes made before filing can derail even the most promising cases. This guide will walk you through what to avoid in the months leading up to your Chapter 13 filing to ensure the smoothest possible path to financial recovery.
Understanding Chapter 13 Bankruptcy in Oklahoma
Before diving into what not to do, let’s briefly explain what Chapter 13 bankruptcy is and how it works in Oklahoma.
Chapter 13 bankruptcy, often called a “wage earner’s plan,” allows individuals with regular income to develop a plan to repay all or part of their debts over three to five years. Unlike Chapter 7 bankruptcy, which liquidates assets to pay creditors, Chapter 13 enables you to keep your property while making monthly payments to a court-appointed trustee, who then distributes funds to your creditors according to your repayment plan.
In Oklahoma, Chapter 13 cases are handled by the United States Bankruptcy Court for the Western, Northern, or Eastern District of Oklahoma, depending on where you reside. Oklahoma law also provides specific exemptions that determine what property you can protect during bankruptcy.
For many Oklahoma residents facing financial hardship, Chapter 13 offers several advantages:
- Stopping foreclosure proceedings and allowing you to catch up on missed mortgage payments
- Protecting co-signers on your consumer debts
- Allowing you to pay off tax debts over time
- Preventing repossession of your vehicle
- Providing a structured path to debt relief while maintaining dignity and assets
9 Mistakes to Avoid Before Filing Chapter 13 in Oklahoma
1. Transferring or Hiding Assets
Why it’s a problem: One of the most serious mistakes you can make is transferring assets to friends or family members or attempting to hide property from the bankruptcy court. The bankruptcy trustee has the authority to examine transactions from the past several years.
Oklahoma law: Under Oklahoma statutes and federal bankruptcy law, transfers made to delay, hinder, or defraud creditors can be reversed. The trustee can pursue fraudulent transfer actions under 11 U.S.C. § 548 and Oklahoma’s Uniform Fraudulent Transfer Act (24 O.S. §§ 112-123).
What to do instead: Be completely transparent about all your assets. If you’ve made transfers in the past two years, disclose them to your attorney immediately. Honesty is not just the best policy—it’s the only legal policy in bankruptcy.
2. Taking On New Debt
Why it’s a problem: Incurring new debt shortly before filing bankruptcy may be considered fraud if you had no intention of repaying it. Credit card charges for luxury goods over $725 within 90 days of filing or cash advances over $1,000 within 70 days are presumed fraudulent.
Forms You Must File in Chapter 13 Bankruptcy
Oklahoma law: Under 11 U.S.C. § 523(a)(2), debts obtained through false pretenses or fraud may be deemed non-dischargeable. Oklahoma bankruptcy courts strictly enforce these provisions.
What to do instead: Stop using credit cards and avoid taking out new loans at least 90 days before filing. Focus on using cash for necessary expenses only.
3. Paying Off Preferred Creditors
Why it’s a problem: Many people want to repay family members or certain creditors before filing bankruptcy. However, these “preferential transfers” can be reversed by the trustee if they exceed a certain value to any creditor within 90 days of filing, or payments to “insiders” (family or business associates) within one year.
Oklahoma law: Under 11 U.S.C. § 547, the bankruptcy trustee has the power to recover preferential payments. Oklahoma bankruptcy courts regularly enforce these provisions to ensure fair treatment of all creditors.
What to do instead: Consult with your bankruptcy attorney before making any significant payments to creditors, especially family members, in the year before filing.
4. Cashing Out Retirement Accounts
Why it’s a problem: Many people drain their retirement accounts to pay debts before considering bankruptcy. This is usually a costly mistake because retirement accounts like 401(k)s and IRAs are typically protected in bankruptcy.
Oklahoma law: Oklahoma law provides strong protection for retirement accounts. Under 31 O.S. § 1(A)(20), tax-exempt retirement accounts are 100% exempt in bankruptcy, meaning creditors cannot touch them.
What to do instead: Preserve your retirement savings. Using protected assets to pay debts that could be addressed in bankruptcy can leave you financially vulnerable in the future.
5. Making Large Purchases
Why it’s a problem: Significant purchases shortly before filing may suggest you’re not filing in good faith or are trying to convert cash (which might be taken in bankruptcy) into assets you hope to keep.
Oklahoma law: The bankruptcy court can deny confirmation of your Chapter 13 plan if it determines you’re not filing in good faith, as required by 11 U.S.C. § 1325(a)(3). Additionally, Oklahoma exemption laws (31 O.S. § 1) determine what property you can keep in bankruptcy.
What to do instead: Hold off on major purchases until after your bankruptcy is filed and approved. If you need to replace something essential, like a refrigerator or car, consult with your attorney first.
6. Changing Jobs or Income Without Planning
Why it’s a problem: Chapter 13 requires you to have regular income sufficient to make your plan payments. Changing jobs or reducing your income shortly before filing can jeopardize your ability to qualify for Chapter 13 or make your plan payments.
Oklahoma law: Under 11 U.S.C. § 109(e), only individuals with regular income are eligible for Chapter 13. Your plan must also be feasible under 11 U.S.C. § 1325(a)(6), meaning you must be able to make the proposed payments.
What to do instead: If possible, maintain stable employment before filing. If you must change jobs, ensure your new position provides similar or better income and stability.
7. Falling Behind on Tax Filings
Why it’s a problem: You must be current on tax filings for the past four years to file Chapter 13 bankruptcy. Missing tax returns can delay or derail your case.
Oklahoma law: Local bankruptcy rules in all three Oklahoma districts require tax returns to be provided to the trustee. Additionally, 11 U.S.C. § 1308 requires that all tax returns for the past four years be filed no later than the day before your first meeting of creditors.
What to do instead: Ensure all required tax returns for the past four years are filed before beginning your bankruptcy case. If you need help catching up, speak with a tax professional.
8. Skipping Mandatory Credit Counseling
Why it’s a problem: Federal law requires completion of a credit counseling course from an approved provider within 180 days before filing bankruptcy. Without this certificate, your case will be dismissed.
Oklahoma law: This requirement applies in all Oklahoma bankruptcy courts under 11 U.S.C. § 109(h). You can find approved providers for Oklahoma at the U.S. Trustee Program website: Approved Credit Counseling Agencies.
What to do instead: Complete the required credit counseling at least a week before your planned filing date. The course can usually be taken online or by phone, and fee waivers are available for those who qualify.
9. Filing Without Proper Legal Guidance
Why it’s a problem: Chapter 13 bankruptcy is complex, with detailed rules about plan structure, payment amounts, and treatment of different types of debt. Pro se (self-filed) cases have an extremely high failure rate.
Oklahoma law: While you can legally file without an attorney, Oklahoma bankruptcy courts strongly recommend against it. Local rules and procedures in Oklahoma’s bankruptcy courts create additional complexities that experienced attorneys are familiar with navigating.
What to do instead: Consult with a knowledgeable Oklahoma bankruptcy attorney who regularly handles Chapter 13 cases. The investment in proper legal guidance typically pays for itself many times over in a successful bankruptcy outcome.
Oklahoma-Specific Considerations for Chapter 13 Filers
Oklahoma Exemption Laws
Oklahoma filers can choose between state and federal exemptions, but most choose Oklahoma exemptions because they’re generally more favorable, particularly for homeowners. Key Oklahoma exemptions include:
- Homestead: Unlimited value for up to 1 acre in a city, town, or village, or 160 acres elsewhere (31 O.S. § 1(A)(1))
- Personal property: Various items including household furniture, clothing, wedding rings (31 O.S. § 1(A)(3-7))
- Motor vehicles: Up to $7,500 equity (31 O.S. § 1(A)(13))
- Tools of trade: Up to $10,000 (31 O.S. § 1(A)(5))
- Retirement accounts: 100% exempt (31 O.S. § 1(A)(20))
These exemptions can significantly impact your Chapter 13 plan by determining how much you’ll need to pay to unsecured creditors.
Oklahoma Bankruptcy Districts
Oklahoma has three bankruptcy districts:
- Western District (Oklahoma City): Western District Bankruptcy Court
- Northern District (Tulsa): Northern District Bankruptcy Court
- Eastern District (Muskogee): Eastern District Bankruptcy Court
Each district has specific local rules and procedures that must be followed precisely.
Oklahoma Median Income Thresholds
Your Chapter 13 plan length is partly determined by whether your income is above or below the median income for your household size in Oklahoma. If your income exceeds these thresholds, you’ll typically need a 5-year repayment plan; otherwise, you may qualify for a 3-year plan.
Timeline: Preparing for a Successful Chapter 13 Filing
6+ Months Before Filing
- Gather financial documents (tax returns, pay stubs, bills, property records)
- Monitor your credit report for accuracy
- Begin budgeting carefully and tracking expenses
- Avoid taking on new debt
- Consult with a bankruptcy attorney for initial guidance
3-6 Months Before Filing
- Stop using credit cards completely
- Avoid transferring any assets
- Maintain steady employment if possible
- Begin setting aside money for filing fees and attorney costs
- Start organizing documentation of all debts and assets
1-3 Months Before Filing
- Ensure all tax returns for the past four years are filed
- Complete required credit counseling
- Provide all requested documentation to your attorney
- Avoid paying back family members or preferred creditors
- Begin preparing your budget for life during Chapter 13
Final Weeks Before Filing
- Review all bankruptcy paperwork carefully
- Make sure your attorney has complete information about all assets and debts
- Prepare for the initial filing fee (approximately $313)
- Set up a dedicated account for making plan payments
- Mentally prepare for the 341 meeting of creditors
Key Takeaways
- Actions taken in the months before filing Chapter 13 can significantly impact your case’s success
- Be transparent about all assets and avoid transfers that could appear fraudulent
- Don’t drain protected retirement accounts to pay debts that could be addressed in bankruptcy
- Complete all pre-filing requirements, including credit counseling and tax returns
- Oklahoma’s generous exemption laws can provide significant protection in Chapter 13
- Working with an experienced Oklahoma bankruptcy attorney is crucial for navigating the complex process
- A successful Chapter 13 filing can provide a structured path to debt relief while allowing you to keep your important assets
Frequently Asked Questions
How long does a Chapter 13 bankruptcy stay on my credit report in Oklahoma?
A Chapter 13 bankruptcy remains on your credit report for seven years from the filing date, compared to ten years for Chapter 7. As you make consistent payments through your plan, you may see your credit score gradually improve even before the bankruptcy falls off your report.
Can I keep my home and car if I file Chapter 13 in Oklahoma?
Yes, one of the main advantages of Chapter 13 is that you can keep your property, including your home and car, as long as you continue making payments through your approved repayment plan. Oklahoma’s generous homestead exemption provides additional protection for your primary residence.
Can I include tax debts in my Chapter 13 plan in Oklahoma?
Many tax debts can be included in your Chapter 13 plan. Generally, income tax debts that are at least three years old can be discharged if you filed the returns on time. More recent tax debts and certain other types of taxes (like payroll taxes) cannot be discharged but can be paid over the life of your plan.
What happens if I can’t make my Chapter 13 plan payments?
If you experience hardship that prevents you from making payments, you should immediately contact your attorney. Options may include requesting a plan modification, temporary suspension of payments, or in some cases, conversion to Chapter 7 or a hardship discharge.
Do I need to include all my debts in Chapter 13?
Yes, you must list all debts in your bankruptcy filing, even those you want to continue paying normally, like your mortgage. However, your Chapter 13 plan can treat different debts differently.
Will my co-signers be protected if I file Chapter 13 in Oklahoma?
Chapter 13 provides a “co-debtor stay” that protects co-signers on consumer debts as long as you’re making payments through your plan. This is a significant advantage over Chapter 7, which offers no such protection.
Get Help With Your Chapter 13 Bankruptcy in Oklahoma
Filing for Chapter 13 bankruptcy is a significant financial decision that requires careful planning and preparation. By avoiding the mistakes outlined in this guide, you can significantly increase your chances of a successful filing and a fresh financial start.
At Scott Harris Law, we have helped numerous Oklahoma residents navigate the Chapter 13 process successfully. We understand the complexities of Oklahoma bankruptcy law and can provide the guidance you need during this challenging time.
Don’t let financial stress control your life any longer. Take the first step toward financial recovery by scheduling a consultation with our experienced bankruptcy team. We’ll help you determine if Chapter 13 is right for your situation and guide you through every step of the process.
Contact us today for a free consultation about your bankruptcy options in Oklahoma.
