Chapter 13
Do I qualify?
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. Put another way, 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.
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 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 that is called 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 finding an experienced bankruptcy attorney.
Considering the complexity of Chapter 13 itself, and the further complications offered by the reforms in The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you want to find a professional who specializes only in bankruptcy. Because bankruptcy law is based largely on state law and local exemptions, you will want to find a lawyer that specializes in your state.
Why Chapter 13 Bankruptcy?
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.
lnk