What is a Chapter 13 bankruptcy case?
A Chapter 13 bankruptcy case (also known as “Debt Consolidation Plan” or “Wage Earners Plan) is to a debt consolidation plan where a person may repay all or a portion of his debts. Payments are made to a Chapter 13 Trustee who collects the money and disburses it to creditors.
How does the filing of a Chapter 13 case affect collection proceedings and foreclosure proceedings?
The filing of a Chapter 13 case automatically stays (stops) all lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against a person or a person’s property. This stay is called the automatic stay.
How does a Chapter 13 case differ from a Chapter 7 case?
The difference between a Chapter 7 case and a Chapter 13 case is that in a Chapter 7 case, the person filing the case seeks to extinguish and eliminate debt, while a Chapter 13 case, proposes to pay as much debt that is feasible under the person’s circumstances, and in accordance with the debtors’ ability.
When is a Chapter 13 case preferable to a Chapter 7 case?
Chapter 13 is usually preferable for a person who wishes to repay all or most of his debts and has the income with which to do so within a reasonable time.
Chapter 13 is usually preferable for a person who has valuable property which may be lost in a Chapter 7 Case; and Chapter 13 is usually preferable if a person has debt that cannot be discharged in a Chapter 7 case such as child support, taxes, student loans, etc.
How does a Chapter 13 case differ from a private debt consolidation service?
In a Chapter 13 case, the bankruptcy court can order relief for the debtor that a private debt consolidation service cannot provide.
What is a bankruptcy discharge?
It is a court order releasing a person from all of his dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the person is released from and does not have to pay.
What is a bankruptcy Plan?
A bankruptcy plan is a debt repayment plan which is presented to the bankruptcy court by a debtor that states how much money or property the debtor will pay, how long the person’s payments will continue, how much will be paid to each of the creditors, and certain other matters.
What is a bankruptcy Trustee?
A bankruptcy trustee is the court appointed person who collects payments from the debtor, makes payments to creditors in the manner set forth in the debtor’s plan and who administers the bankruptcy case until it is closed.
What debts may be paid under a Bankruptcy Plan?
Any debts whatsoever, whether they are secured or unsecured.
Must all debts be paid in full under a Bankruptcy Plan?
No. While priority debts, such as debts for domestic support obligations and taxes, and fully secured debts must be paid in full, only an amount that the debtor can reasonably afford must be paid on most debts. The unpaid balances of most debts that are not paid in full under a bankruptcy plan are discharged upon the completion or termination of the plan.
When must the debtor begin making payments to a Chapter 13 trustee and how are payments made?
The debtor must begin making payments to the Chapter 13 trustee within 30 days after the Chapter 13 case is filed with the court. The payments must be made regularly, usually on a weekly, bi-weekly, or monthly basis. If the debtor is employed, some courts require that the payments be made directly to the Chapter 13 trustee by the debtor’s employer by withholding the payments from a debtor’s wages.
How long does a bankruptcy plan last?
The required length of a bankruptcy plan depends on the debtor’s income, but it is typically three to five years.
Is it necessary for all creditors to approve a Bankruptcy Plan?
No. A Chapter 13 plan must be approved by the court, not by the creditors; however a Chapter 11 Plan must be approved by at least one class of creditors.
How are cosigned or guaranteed debts affected in Chapter 13 cases?
A cosigned or guaranteed debt is a debt that has been cosigned or guaranteed by another person. If a cosigned or guaranteed consumer debt is being paid in full under a Chapter 13 plan, the creditor may not collect the debt from the cosigner or guarantor. However, if a consumer debt is not being paid in full under the plan, the creditor may collect the unpaid portion of the debt from the cosigner or guarantor. A consumer debt is a nonbusiness debt. Creditors may collect business debts from cosigners or guarantors even if the debts are to be paid in full under the debtor’s plan.
Who is eligible to file a Chapter 13 case?
An individual (i.e., natural person) is eligible to file a Chapter 13 case if he (1) resides in, does business in, or owns property in the United States, (2) has regular income, (3) has unsecured debts of less than $307,675, (4) has secured debts of less than $922,975, (5) is not a stockbroker or a commodity broker, (6) has not intentionally dismissed another bankruptcy case within the last 180 days, and (7) has received a briefing from an approved credit counseling agency within the last 180 days. Corporations, partnerships, limited liability companies, and other business entities are not eligible to file a Chapter 13 case.
May a husband and wife file a joint Chapter 13 case?
A husband and wife may file a joint Chapter 13 case even if only one of them has regular income and their combined debts meet the debt limitations.
When should a husband and wife file a joint Chapter 13 case?
If both spouses are liable for any significant debts, they should file a joint Chapter 13 case, even if only one of them has income.
How does filing a Chapter 13 case affect a person’s credit rating?
The fact that a person has filed a Chapter 13 case can appear on his credit report for as long as seven (7) years.
Is a debtor’s employer notified when he or she files a Chapter 13 case?
In most cases, yes. Many courts require a debtor’s employer to make payments to the Chapter 13 Trustee on the debtor’s behalf.
How often does the debtor have to appear in court in a Chapter 13 case?
Most debtors have to appear at least twice: once for a hearing called the meeting of creditors, and once for a hearing on the confirmation or approval of the Chapter 13 plan. The meeting of creditors is usually held about a month after the case is filed. The confirmation hearing is usually held about two months after the case is filed. If difficulties or unusual circumstances arise during the course of a case, additional court appearances may be necessary.
What occurs if the court does not approve a Chapter 13 plan?
If the court does not approve the plan initially proposed by a debtor, the debtor may modify the plan and seek court approval of the modified plan. If the court does not approve a plan, it will usually give its reasons for refusing to do so, and the plan may then be appropriately modified so as to become acceptable to the court. A debtor who does not wish to modify a proposed plan may either convert the case to a Chapter 7 case or dismiss the case.
What happens if a person is temporarily unable to make the Chapter 13 Plan payments?
If a person is temporarily out of work, injured, or otherwise unable to make the payments required under a Chapter 13 plan, the plan can usually be modified so as to enable the person to resume the payments when he is able to do so. If it appears that the person’s inability to make the required payments will continue indefinitely or for an extended period, the case may be dismissed or converted to a Chapter 7 case.
What about new debts or needs credit during a Chapter 13 case?
Only two types of credit obligations or debts incurred after the filing of the case may be included in a Chapter 13 plan. These are (1) debts for taxes that become payable while the case is pending, and (2) consumer debts arising after the filing of the case that are for property or services necessary for the debtor’s performance under the plan. All debts or credit obligations incurred after the case is filed must be approved by the court.
What if a person decides to discontinue a Chapter 13 case?
A person has the right to either dismiss a Chapter 13 case or convert it to a Chapter 7 case for any reason. However, if the debtor simply stops making the required Chapter 13 payments, the court may compel the debtor or the debtor’s employer to make the payments and to comply with the orders of the court.
What happens if a person is unable to complete the Chapter 13 payments?
A person who is unable to complete the Chapter 13 payments has three options: (1) dismiss the Chapter 13 case or (2) convert the Chapter 13 case to a Chapter 7 case.
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