What is a Chapter 13 bankruptcy?

A chapter 13 bankruptcy is also called a wage earner’s plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period “for cause.” (1) If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. § 1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making the plan work, and the special chapter 13 discharge.

Advantages of Chapter 13

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on “consumer debts.” This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

 

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

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Chapter 13 Bankruptcy

CHAPTER 13 | BANKRUPTCY

CHAPTER 13 BANKRUPTCY BASICS

 

A debtor considering filing for bankruptcy may seek protection under Chapter 13 of the Bankruptcy Code for a variety of reasons. Debtors who file for bankruptcy under Chapter 13 are often suffering under tremendous debts or are facing foreclosure and in need of fresh start.

A Chapter 13 bankruptcy, sometimes called a wager-earner plan, is a form of debt adjustment in which the debtor sets forth a plan to pay back some or all of their debts over a period of 3 to 5 years. Typically, a debtor will file for Chapter 13 bankruptcy if he or she does not pass the “means test” for Chapter 7 bankruptcy or there is certain property he or she would like to keep.           

The Chapter 13 debtor must devote all “disposable income” to the plan. Disposable income is income left over after certain deductions are accounted for. At the end of the plan, the remaining debts owed by the debtor are discharged with some exceptions. The plan payment is submitted the U.S. Trustee, who then distributes payments to the debtor’s various creditors according to the plan. In order to develop your Chapter 13 Plan, we will meet and analyze your debts, income, monthly expenses, and assets to determine what you will be required to pay. Your creditors will have an opportunity to provide input into your proposed Chapter 13 Plan and may object if they believe you are not following the rules as set out in the Bankruptcy Code. Once there is an agreement between you, your creditors, and the bankruptcy trustee, the bankruptcy judge will confirm your Chapter 13 Plan.

The debtor is expected to make regular monthly payments to the U.S Trustee and, failure to do so may result in the Chapter 13 case being dismissed.  Also, a plan that does not treat creditors fairly under the United States Bankruptcy Code, that does not devote “disposable income” to the plan, or that is not feasible based on the debtor’s income, can be dismissed.

Like Chapter 7 Bankruptcy, a debtor who files for Chapter 13 is protected by the Bankruptcy Code and the debtor’s exempt property is retained.  Also, creditors must cease collection efforts on debts owed and can only communicate with the debtor’s attorney or U.S. Trustee. By filing a Chapter 13, a debtor can:

  •  Keep property that might otherwise be lost.
  • Debtors may be able to catch up on past due payments owed on the home or vehicle.
  • Debtors can in some cases, lower car payments and pay a lower interest rate.

THE CHAPTER 13 PROCESS

STEP ONE

CONSULTATION

A free no obligation consultation. We are available to meet with you in person or by phone to discuss the details of your financial circumstances and assist you in determining whether you should file a Chapter 13 Bankruptcy.

STEP TWO

COLLECT INFORMATION

If you decide to file a Chapter 13 case with our office, you will be required to provide documentation relating to all of your debts, your most recent federal income tax return, and pay stubs from your job for the past 60 days. I will typically meet with you for 1 -2 hours to go through all of your paperwork and obtain all the necessary information to be included in your bankruptcy petition.

STEP THREE

MEETING OF CREDITORS

 A 341 Meeting of Creditors will be conducted at the bankruptcy court located in Nashville. I will attend this Meeting of Creditors with you where the U.S Trustee will ask you to verify the information on your bankruptcy schedules and discuss in detail your proposed Chapter 13 Plan.

STEP FOUR

CONFIRMATION HEARING

Provided that you, your creditors, and the Chapter 13 Trustee are in agreement to your proposed Chapter 13 Plan, the court will confirm your plan at the confirmation hearing. Your attendance at this hearing is typically not required unless your lawyer advises you to attend.

STEP FIVE

FRESH START

Upon completion of your Chapter 13 Plan payments, any unpaid debt (with some exceptions) will be eliminated and provide you and your family a fresh financial start.

We know that the information contained on this website is rarely a substitute for a face-to-face or telephone interaction. So if you have visited our site and still have questions or need additional information, please call us or use the contact form for a free consultation. We have convenient office locations in Murfreesboro, Nashville, Brentwood, Franklin and Columbia to serve you.

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Phone:   (615) 796-1857
Fax:    (615) 250-0553

Mailing Address:
P.O. Box 333012
Murfreesboro, TN 37133

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