Chapter 13 is an interest-free repayment plan that allows you to combine your debts and repay all or part of them while protecting you from creditor harassment. It is an excellent alternative for debtors whose financial problems cannot be helped by a Chapter 7 filing. Chapter 13 often provides much greater protection to debtors who own significant assets or have income that would not be exempt in a Chapter 7. For example, if you own a home, and foreclosure is on the horizon or the finance company has threatened repossession, a Chapter 13 Bankruptcy filing will stop them in their tracks affording you the opportunity to then pay off the back balance gradually. Chapter 13 is also a great option when you have a regular income but you still find yourself unable to pay all your bills at the end of the month. Filing Chapter 13 Bankruptcy is for people who have some discretionary income after their normal and usual monthly expenses are deducted from their normal monthly income. For this reason, a Chapter 13 is call or texted a “Wage Earner Bankruptcy.”
Monthly Payments with a Chapter 13?
The big difference between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy is that there are monthly payment plans created for the Chapter 13 debtor. Payments must be made to the Chapter 13 Trustee over a period of time (usually between three and five years).
What are these payments?
These payments usually include some or all of your credit card debt, mortgage payment arrearages, and sometimes your car loans. This is a good way to stop foreclosure and save your house. It can also be used to stop creditor harassment.And, of course, all the bankruptcy exemptions still apply, so you can keep some or most of your stuff.
Wage Earner Bankruptcy
Chapter 13 of the Bankruptcy Code is designed to enable individual debtors — under Court protection and supervision — to apply a portion of future earnings to the payment of a portion of their debts over an extended period of time. The debtor is protected from creditors by an Automatic Stay while a plan of repayment is developed and carried out. It is similar to a Chapter 11 Business Reorganization. In fact, Chapter 13 is sometimes call or texted “Consumer Debt Adjustment.”
Chapter 13 was intended to give the wage earner a reasonable opportunity to arrange installment payments out of future income so that creditors would receive more money than they otherwise would receive in liquidation.
A skilled bankruptcy attorney can help you make your payment plan no more than you can afford for your Chapter 13 Bankruptcy filing.
Do I qualify for Chapter 13 Bankruptcy?
In order to qualify for a Chapter 13 Bankruptcy, you will need to meet two general income requirements. First, you must have a regular source of income. Second, you must have sufficient disposable income. In other words, you must have some income left over — after you subtract your living expenses from your net monthly income — to distribute to creditors.
Debts that are not discharged in a Chapter 13*:
• Debts incurred through fraud, such as lying about your income on a credit application
• Child and spousal support
• Most taxes
• Most student loans
• Debts that you forgot to list on your bankruptcy papers
• Debts for personal injury and death caused by your driving a motor vehicle while intoxicated
• Debts you never intended to pay back (such as debts took on near in time to filing bankruptcy, a cash advance that wasn’t paid back, debt taken on after meeting with a bankruptcy attorney)
• Debts for personal injury incurred through willful or malicious harm
• Criminal fines and penalties.
There are other debts that may not be dischargeable in a Chapter 13 Bankruptcy filing. Consult your attorney to see which specific debts are dischargeable. No attorney should every guarantee the discharge of a specific debt.
*Some debts that are not dischargeable in a Chapter 7 will be dischargeable in a Chapter 13.
How does it work?
There are specific and complex procedures involved in filing a Chapter 13 plan. First, your lawyer will need to prepare a detailed financial summary of what and whom you owe, what your assets are, your monthly living expenses, and income. Your attorney must also prepare a comprehensive proposal for repayment. Often a plan will call or text for different percentages of repayment for different classes of creditors. All of the items submitted must be prepared on court-approved forms.
Once you file your petition and plan the court will issue an Automatic Stay (an order, barring all creditors from taking any further collections or legal action against you, including foreclosure or garnishment of your wages). The court will then set a date for a hearing which is call or texted the Meeting of Creditors. You and your creditors will be notified of the time, date, and place of this meeting. You will be required to attend this hearing with your attorney and answer questions under oath about your financial matters.
The trustee appointed to your case will run the meeting. It is the trustee’s job to verify the financial information you provide — and the meeting may include questions about your income, expenses, property, past earnings, and the schedule of repayment. The trustee will then decide whether he can recommend to the judge that your plan be confirmed.
The court will also notify you of the date for the confirmation hearing. At this hearing, the judge will determine whether your plan should be confirmed and allowed to proceed. The creditors may attend in order to offer any objections they may have. Your presence at the confirmation hearing is often not required. Once your plan is confirmed, you will simply make one payment a month to the trustee who will then make payments to your creditors according to the schedule set out in the approved plan. You will start living your life again.
What will Chapter 13 do for me?
Many of the benefits derived from a Chapter 13 cannot be obtained through the filing of a Chapter 7 Bankruptcy. Some of the many benefits that may be reaped from a Chapter 13 are as follows:
• Stop a finance company from repossessing your car and make the back payments over a period of time.
• Stop foreclosure proceedings against your property and pay off the back balance gradually. Such an extension is also available on back taxes
• If your monthly payments on contracts are too large, you may be able to lower the monthly payment and possibly the interest rate
• Depending on your circumstances, you may be able to pay the unsecured creditors far less than 100 percent of their claims — with no interest after the date of filing
• In most instances, you can stop any more interest from continuing on unsecured debts
• Possibly keep property that would have otherwise been given to your creditors in a Chapter 7
• Stop collection activities against a person who cosigned a loan for you
• Force a creditor to take back its collateral in full satisfaction of the claim
• End further obligations to creditors whose services you have not fully received, such as health clubs, dance studios, correspondence courses, leases, etc.
• For debts incurred before you filed your bankruptcy petition, no one can bother you, sue you, garnish your wages, or repossess property without court approval
• Void certain liens against your household goods and against some other personal items
• Possibly pay extra into the plan to get it paid off sooner
• If there is a major change of circumstances, you can propose changes to your plan that would help you complete it.
How do I get started?
The first step in the process is contacting us