Chapter 13
A. Background
b. Advantages of Chapter 13
c. Chapter 13 Eligibility
d. Chapter 13: How it Works
e. The Chapter 13 Plan and Confirmation Hearing
f. The Chapter 13 Discharge
h. The Chapter 13 Hardship Discharge
A. Background
Individuals who are not eligible to file under Chapter 7 may file for bankruptcy under the terms of Chapter 13. Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, is different from Chapter 7 bankruptcy. Chapter 13 helps qualified individuals, or small proprietary business owners (NOT a corporation or partnership), who desire to repay their creditors but are in financial difficulty. Companies are not allowed to file under Chapter 13 for bankruptcy protection. Chapter 13 bankruptcy is a payment plan to your creditors that is calculated based on your income versus your expenses.A person filing under Chapter 13 bankruptcy must show the courts that they have the resources to pay their debts over the next three to five years. Otherwise, a judge will not approve the repayment plan. While Chapter 13 is more work and expensive than Chapter 7 in that it does not discharge as much debt, most people who file for Chapter 13 keep their homes and cars without having to liquidate property.
B. Advantages of Chapter 13
Chapter 13 bankruptcies are a type of debt consolidation allowing you to reorganize your finances by consolidating your debts into one monthly payment. Chapter 13 Bankruptcy protects individuals from the collection efforts of creditors; permits individuals to keep their real estate and personal property; and provides individuals the opportunity to repay their debts through reduced payments. Under Chapter 13 if you are late in your mortgage or car payments the Chapter 13 plan will allow you and force the lender to accept monthly payments over the three to five year plan period to make up for the missed payments. If you have a co-signed he or she will be protected on a consumer loan with you. As long as you propose to pay the debt in full, the creditor cannot sue the co-debtor while you are in Chapter 13.
C. Chapter 13 Eligibility
Chapter 13 bankruptcy is not for everyone. Chapter 13 bankruptcy filings are limited to individual debtors. Because Chapter 13 requires you to use your income to repay some or all of your debt, you will have to prove to the court that you can afford to meet your payment obligations. .Any individual who wants to be eligible for Chapter 13 has to use his/her income to repay all or part of his/her debt, and have to prove to the court that the individual can afford to meet payment obligations. If your income is irregular or too low, the court might not allow you to file for Chapter 13.
Also Debtors must have filed taxes through the most recent year and must have no outstanding tax returns to the IRS. A debtor may owe the IRS money in back taxes however, and sometimes those taxes can be discharged at the end of a Chapter 13 petition.
Chapter 13 bankruptcy may be a good option for those who Own lots of property - such as houses, land, cars, professional equipment - that they want to entirely protect and have steady, regular income with which to make payments to their chapter 13 trustee.
D. Chapter 13: How it Works
A chapter 13 case begins by filing a petition with the bankruptcy court. When a bankruptcy petition is filed, an Automatic Stay is put in place that should prevent your creditors from engaging in collection activities against you, including harassing phone calls, wage garnishment, repossession, lawsuits, and foreclosures. (The Automatic Stay does not affect tax proceedings, child support or spousal support proceedings or a few other types of legal actions.) A plan of repayment must be filed within 15 days of the bankruptcy petition, unless the time is extended by the court for cause. Within thirty (30) days after the filing of the plan the debtor must start making payments to the trustee, even if the plan has not yet been approved by the court. A meeting of creditors is held in chapter 13 case, at which the debtor is examined under oath. Usually, this meeting is held thirty (30) to forty-five (45) days after the filing of the petition. After the meeting of creditors, a confirmation hearing is held at which time the bankruptcy judge must determine whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code
E. The Chapter 13 Plan and Confirmation Hearing
Within 45 days after filing the plan, the bankruptcy judge decides at a "confirmation hearing" whether the plan is feasible and meets the standards for confirmation under the Bankruptcy Code. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. Once the court "confirms" the plan, it is the responsibility of the debtor to make the plan work. Creditors are notified of the hearing, and they may object to confirmation. Common grounds for objection would be that the payments in the plan are less than what they would receive in a Chapter 7 liquidation, or that the debtor's plan does not commit all of the debtor's projected disposable income for the three year period of the plan.
F. The Chapter 13 Discharge
The chapter 13 debtor is entitled to a discharge upon successful completion of all payments. The discharge releases the debtor from all claims provided for in the plan or disallowed by the court.
H. What is a Chapter 13 Hardship Discharge
If you could not complete the payments for reasons that you should not “justly” be held accountable you may be eligible for a hardship discharge
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
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