Chapter 13 Bankruptcy
In this section about filing bankruptcy, you will learn about:
- Chapter 13 bankruptcy and its applications;
- the value of having a Chapter 13 bankruptcy attorney in your corner;
- Chapter 13 bankruptcy pre-filing requirements;
- the Chapter 13 bankruptcy process;
- the Chapter 13 bankruptcy repayment plan;
- Chapter 13 bankruptcy pre-discharge requirements;
- who can file Chapter 13 bankruptcy;
- Chapter 13 bankruptcy benefits; and
- the importance of speaking to a local bankruptcy attorney about Chapter 13 bankruptcy.
Learn About Chapter 13 Bankruptcy
Chapter 13 bankruptcy often provides a solution for people who have faced short-term financial setbacks like job loss, illness, or large unexpected expenses. For people who have been derailed by a crisis and fallen behind on their bills, but who have regular income and are in a position to make regular monthly payments, filing bankruptcy under a Chapter 13 plan may allow the breathing room necessary to get back on track.
Many people looking to stop foreclosure or avoid repossession choose Chapter 13 bankruptcy, because it combines the automatic stay with the ability to catch up past due payments over a period of three to five years after filing bankruptcy while keeping current payments up to date.
A Local Chapter 13 Bankruptcy Attorney May be Your Best Resource
Chapter 13 bankruptcy can be a complicated process, and mistakes in that process can cost a bankruptcy petitioner the protection of the automatic stay, prevent a plan from being approved, or simply delay the bankruptcy process. A local bankruptcy attorney can explain your options and help you determine whether filing Chapter 13 bankruptcy is the right option for you. Then, if you choose Chapter 13 bankruptcy, a bankruptcy lawyer can guide you through the process, helping to ensure that all filing requirements and deadlines are met and that you've accounted for all of your allowable expenses and proposed a plan that will allow you to make payments while keeping up your regular expenses.
Pre-Filing Requirements for Chapter 13 Bankruptcy Cases
Since October of 2005, all personal bankruptcy petitioners filing bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code have been required to complete a U.S. Trustee approved Credit Counseling Briefing. Your bankruptcy attorney will file the Credit Counseling certificate with your bankruptcy petition. Bankruptcy petitions filed without a Credit Counseling certificate may be dismissed, and this can have catastrophic results because it may allow creditors a window in which to take collection action, even to move forward with foreclosure or repossession, while the automatic stay is not in effect.
Before filing bankruptcy, your bankruptcy attorney can direct you to an approved Credit Counseling agency, or you can purchase an approved online Credit Counseling briefing at Start Fresh Today.
The Chapter 13 Bankruptcy Process
A Chapter 13 bankruptcy case officially begins with the filing of the bankruptcy petition. In most cases, the court will enter an automatic stay as soon as the case is filed, prohibiting creditors from taking any further collection action while the bankruptcy case is pending, or until further order of the bankruptcy court.
The bankruptcy court will send notice to all of the creditors listed in the Chapter 13 petition, and will assign a bankruptcy trustee to the case.
Within about 15 days after the petition is filed, the court will send a Notice of Commencement of Case to the bankruptcy petitioner and to all of the creditors listed in the bankruptcy petition. This notice will include important information like the time, date and location of the creditors meeting and the deadlines for claims and/or objections from creditors.
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Schedules containing information about the petitioner's debts, assets, income and expenses must be filed within 15 days after the case is commenced. Often, these schedules are filed along with the petition, but where an emergency situation exists-for instance, if the petitioner is filing bankruptcy in order to stop foreclosure or repossession-they may be filed separately so that the petition can be filed immediately, without waiting to collect the required information and documentation for the schedules.
The 15 day deadline also applies to filing the Chapter 13 repayment plan.
The Chapter 13 Bankruptcy Repayment Plan
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy doesn't liquidate assets and clear the slate in a short period of time. Instead, Chapter 13 bankruptcy is intended to help people facing financial difficulty keep their property while gradually catching up on past due balances. A typical Chapter 13 bankruptcy repayment plan is 36 to 60 months long. During that time, the bankruptcy petitioner keeps current payments current, but makes monthly payments toward past due balances. Debts are prioritized, and secured creditors get paid first. Remaining disposable income goes to pay unsecured creditors, in a hierarchy established by the Bankruptcy Code.
If all payments have been made as scheduled, unsecured debt remaining at the end of the plan may be discharged.
Pre-Discharge Requirements in Chapter 13 Bankruptcy
In addition to making payments as agreed to when filing bankruptcy under the Chapter 13 plan, Chapter 13 bankruptcy petitioners must complete a U.S. Trustee approved financial management course (often called Debtor Education) before a discharge may be granted. Your bankruptcy attorney may refer you to a Debtor Education course, or you can purchase an approved, online Debtor Education course at Start Fresh Today.
Who Can File for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is not for everyone. In order to qualify for Chapter 13 bankruptcy, a debtor must:
- Have a regular source of income from which to make pre-determined payments to the bankruptcy trustee for the benefit of creditors;
- Have enough disposable income to make regular payments to the trustee after covering current necessary living expenses; and
- Fall within pre-set limits for secured and unsecured debts. The limits are updated periodically, and a local bankruptcy attorney can tell you the exact current limits; the limit for secured debts as of April, 2007 is just over $1,000,000, and the limit for unsecured debts approximately $337,000.
For those who do not qualify for Chapter 13 bankruptcy, filing bankruptcy may still be an option; this time in the form of Chapter 7 bankruptcy.
The Benefits of Chapter 13 Bankruptcy
There's no one "right solution" when it comes to serious financial difficulties. Whether filing bankruptcy under Chapter 7 or Chapter 13 or going with another alternative outside the bankruptcy process is the best fit depends upon the debtor, the circumstances, the amount and nature of the debt, current income, and a variety of other factors. Often, people find Chapter 13 bankruptcy helpful when:
- They are behind on payments on secured property that they want to keep. Many people file Chapter 13 bankruptcy petitions specifically to stop foreclosure or vehicle repossession, but Chapter 13 may be equally useful for catching up on other secured debts while keeping the property that secures the debt.
- They have tax debts that cannot be discharged in a Chapter 7 bankruptcy case. Certain tax debts are non-dischargeable, but may be included in a Chapter 13 repayment plan and paid over time.
- They have non-exempt property that they want to keep. In a Chapter 7 bankruptcy case, non-exempt property can be liquidated (sold) for the benefit of creditors, but in a Chapter 13 repayment plan, the debtor maintains his or her property while making scheduled payments.
- They have filed for Chapter 7 bankruptcy within the previous eight years, and thus are not eligible to file under Chapter 7.
- They wish to protect co-signers on certain debts. In a Chapter 7 bankruptcy case, a non-filing co-signer remains liable for a debt even if that debt has been discharged as to the primary debtor. However, if a debt is included in a Chapter 13 repayment plan, the co-signer is protected so long as the debtor complies with the plan.
- They have past-due student loan debt. Student loans are not dischargeable in a Chapter 7 bankruptcy case except under certain very narrow circumstances, but student loan debt may be included in a Chapter 13 repayment plan.
Is Chapter 13 Bankruptcy the Right Answer for You?
Talking to a bankruptcy attorney isn't a decision—it's part of the information gathering process when gauging whether filing bankruptcy under a Chapter 13 plan may help with your current situation. Unfortunately, many people wait until their circumstances are desperate to talk to a bankruptcy lawyer, and then find themselves with only days in which to stop foreclosure, vehicle repossession, or other collection action. The best decisions are based on thorough, accurate information, and a Chapter 13 bankruptcy attorney may be the best source of that information when examining how filing bankruptcy may be able to help you keep these items most important to you.
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If you'd like to learn more about filing bankruptcy—whether it’s Chapter 7 and/or Chapter 13 bankruptcy—all you have to do is pick up the phone and call 1 (877) 349-1309. We'll put you in touch with a bankruptcy attorney in your area who can assess your financial situation and help you decide which alternative might be right for you. Or, if you prefer, use our online case evaluation form and we'll contact and connect you with a local bankruptcy lawyer who can explain in better detail how filing bankruptcy works.