Introduction to Chapter 13 Bankruptcy
Many people are surprised to learn that filing for bankruptcy protection can involve partial repayment of debts over a timer period of three to five years.Chapter 13 of the bankruptcy code, also referred to as the repayment chapter, allows relieves debtors of unsecured debts that remain after completion of a repayment plan. Filing for chapter 13 bankruptcy is extremely complicated and shouldn’t be considered without the advice of an experienced bankruptcy lawyer.
Frequently Asked Questions
What is chapter 13 bankruptcy? How does it differ from 7?
Chapter 13 bankruptcy, also referred to as the repayment or wage earner’s plan, allows individuals with regular income to repay a portion of their debts, achieving discharge of all eligible debts at the end of the plan. A normal chapter 13 bankruptcy plan lasts 5 years (60 months). One notable exception is a reduction in plan length to 36 months when the debtor earns an income below the applicable state median.
There are many benefits to filing for chapter 13 bankruptcy protection. Perhaps the most noticeable is the ability to prevent home foreclosure. Under chapter 13 bankruptcy, a debtor can incorporate any mortgage delinquencies present at the time into their monthly plan payment. In addition, chapter 13 may allow some debtors to spread out payments on secured property over the life of the repayment plan, effectively decreasing monthly payments. Chapter 13 can protect cosigners and provides a means to consolidate loans.
Do I qualify for chapter 13 bankruptcy? What are the criteria?
Any individual, even if self-employed or operating an unincorporated business, is eligible to file, as long as the individual’s unsecured debts are less than $360,475 and secured debts are less than $1,081,400 (These numbers are subject to change and we will update them as soon as possible if and when they do). Individuals seeking chapter 13 protection must have sufficient income to fund their plan.
In addition, an individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. No individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency.
What happens after I file? What is the next step in chapter 13?
After individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. The chapter 13 trustee will serve as the person who collects payments from the debtor and makes the distributions to creditors.
Your Attorney will file a proposed plan as to how you are going to repay the debt over 3-5 years depending on your individual circumstances.
Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors.The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan. The parties typically resolve problems with the plan either during or shortly after the creditors’ meeting.
After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor’s chapter 13 repayment plan. After which the Trustee will confirm your repayment plan and you can start repayment.
Your attorney will make sure that every form and document is provided and filled out correctly. Your attorney should also contact the trustee ahead of time to make sure that the plan will be workable and that all of the creditors will be satisfied. These steps by the attorney will not only speed up the process but also prevent any delays that that could delay the start of your repayment schedule.
Why is filing for chapter 13 bankruptcy in a good option for me?
Chapter 13 bankruptcy allows you to consolidate your monthly payments into one manageable sum, satisfying your unsecured debt through partial payment.In addition, mortgage arrearages and other deficient payments on secured property can be incorporated into your chapter 13 payment, allowing you a time period of 3-5 years to repay this debt.
But these are not the only reasons, there are other reasons as well. Chapter 13 bankruptcy allows you to keep assets not protected in chapter 7 bankruptcy. In addition, you may be able to prevent foreclosure or repossessions.