§ 27.1     Explaining Chapter 13 to a Debtor
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 27.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

In addition to the obvious professional and ethical considerations, debtor’s counsel has to explain the basics of Chapter 13 to the debtor before filing for at least two reasons: (1) it will scare off some debtors who shouldn’t be in Chapter 13; and (2) Chapter 13 is not simple, and only debtors who understand at least the basics can hope to follow the rules and succeed in a Chapter 13 plan.


Chapter 13 debtors are rarely college educated, and few have had any previous experience with bankruptcy. Chapter 13 is known to them, if at all, as a vague alternative to regular bankruptcy that involves paying debts. They have no knowledge of the rigor or complication of budgets, payroll deductions, disposable income, cramdown and so forth.


Appendix A contains a checklist of topics that debtors’ counsel should discuss with potential Chapter 13 clients before filing. The footnotes to the checklist reference the parts of this book where detailed discussion of each topic is found. Chapter 13 was substantially revised—some would say mangled—by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).1 Even attorneys with extensive pre-BAPCPA experience must reeducate themselves and be prepared to educate clients who may have received misinformation about Chapter 13 after BAPCPA from the media or from acquaintances. After BAPCPA, every Chapter 13 debtor’s attorney is a Debt Relief Agency subject to a mind-numbing catalog of new written disclosure requirements, new duties and new responsibilities to explain things to debtors.2


In addition to face-to-face counseling, sophisticated debtors’ counsel have written explanations of Chapter 13 that they give to debtors. An understandable handout can help answer the common questions debtors have before filing and that arise during the years a case is pending. Appendix G contains an example of a handout for debtors in Chapter 13 cases. Some standing trustees have (free) booklets explaining Chapter 13, available for debtors’ lawyers to distribute to their clients.


Effective communication between attorney and client, as well as proper legal advice, are critical, not only to adequately inform debtors but also to help the attorney avoid ethical problems in practice before the bankruptcy court.3


1  Pub. L. No. 108-8, 119 Stat. 23 (2005). See Part 9 for discussion of Chapter 13 after BAPCPA.


2  See 11 U.S.C. §§ 101(12A) and 526–528, discussed in § 366.1 [ WARNING! You Are a Debt Relief Agency ] § 4.1  WARNING! You Are a Debt Relief Agency.


3  See, e.g., United States Trustee v. Jones (In re Alvarado), 363 B.R. 484, 490, 492 (Bankr. E.D. Va. 2007) (Attorney who permitted dismissal for nonpayment of filing fee that had been collected breached duties under Virginia Rules of Professional Conduct, including duty to keep client informed. “Attorneys owe both a duty of competence and a duty of care to their clients. . . . Counsel must effectively communicate with their clients. An attorney must render candid advice and must explain matters sufficiently to enable clients to make informed decisions. Holding himself out as a ‘registered participant’ under the Court’s CM/ECF system, Mr. Jones assumed additional responsibilities to keep his client informed of court proceedings[,]” including dismissal of the case. Attorney was sanctioned by prohibiting bankruptcy practice while attorney obtained “continuing legal education with regard to BAPCPA and his ethical obligations under the Virginia Rules of Professional Conduct.”).