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« Bankruptcy Lawyers Home « Chapter 13 Bankruptcy Information
What Is Chapter 13 Bankruptcy?
Under Chapter 13 of the Bankruptcy Code, the aim is to have the opportunity to repay some or all the debts, on better terms, i.e., lower or no interest. Unlike Chapter 7 bankruptcy which involves liquidation of assets, this process involves restructuring debts which allows the debtor to use whatever income they may have in the future to pay off the creditors. Filing Chapter 13 Bankruptcy is thus applicable for a debtor who has a regular income, and thus can afford to request for such adjustments or reductions.
The United States Bankruptcy Code gives the debtor a ceiling of 5 years, within which the creditors must be paid back. While the attorney will safeguard your interests, the entire process is carried out under the supervision of the courts.
The following is a summary of the Chapter 13 Bankruptcy process.
Primary Purpose for Chapter 13 Bankruptcy:
The opportunity for debtors to reorganize and lower debts to meet reduced income. A Chapter 13 bankruptcy case stops most, if not all, creditors in their tracks. Upon filing a Chapter 13 bankruptcy (or any other kind of bankruptcy), the "automatic stay" goes into effect. The automatic stay immediately stops creditors from initiating or continuing collection activity against a client or a client's property. Creditors cannot repossess cars, foreclose on real property, garnish wages or bank accounts, or cut off utilities.
Eligibility Requirements for Chapter 13 Bankruptcy
- Must have a regular income.
- Must not have filed any bankruptcy petition within the past 180 days.
- Must have completed compulsory credit counseling 180 days before filing a bankruptcy.
The individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650. A corporation or partnership may not file for Chapter 13 bankruptcy protection.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:
- A list of all creditors and the amounts and nature of their claims;
- The source, amount, and frequency of the debtor's income;
- A list of all of the debtor's property; and
- A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
- Any record of any interest the debtor has in federal or state qualified education or tuition accounts.
- Copies of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began).
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.
Timeframe
Meeting of Creditors: 30 days after the petition is filed. Presided over by a Chapter 13 Trustee appointed by the court to administer the case. At this meeting, the Trustee and the creditors can ask the client questions about his or her property and the documents the client filed with the court, including the Chapter 13 Bankruptcy Plan. However, in many cases, creditors do not attend. The meeting of creditors usually involves the client, the Chapter 13 Bankruptcy Trustee and an attorney from our firm. Our bankruptcy attorneys always prepare our clients for the meeting and defend them at the meeting.
The repayment must begin within thirty to forty-five days after the case has started.
- Determine and implement methods of dealing with secured creditors.
- Devise a chapter 13 bankruptcy plan, and fill out the forms.
- Pay the filing fee and complete the process of filing the forms and pleadings.
- Attend whatever meetings you maybe required to attend; with the creditors, court hearings etc.
- Obtain a discharge once the payments have all been made, and the plan terminated.
Once the meeting of creditors is concluded and the trustee has received all information necessary to adequately process the case, the court holds a Chapter 13 Plan Confirmation Hearing presided over by one of the local bankruptcy judges. This court hearing is presided over by a federal Bankruptcy Judge and is scheduled well in advance. The client must attend this hearing, unless instructed otherwise.
At this hearing, the court will decide to confirm or deny the client's Chapter 13 Plan to pay creditors. In most cases, the resolution of the hearing is decided beforehand by consent between the trustee and the client. However, it is not uncommon for one or more creditors or the trustee to object to confirmation of a plan. We guide our clients through all aspects of the Chapter 13 process from the filing of the case through confirmation of the plan and completion of the case.
Chapter 13 bankruptcy requires discipline. For the entire length of the case (three to five years), the client will have to live within a budget geared to enabling the client to meet their Chapter 13 obligations. The majority of debtors do not complete their Chapter 13 repayment plans and do not receive the benefits of their Chapter 13 reorganization and discharge. However, the benefits of completing the plan are substantial, and our attorneys and staff work diligently with clients to create a reasonable plan to help the client complete the entire Chapter 13 process.
How Does Chapter 13 Bankruptcy Work?
While debtors are allowed to keep all of their property, the court approves a new interest-free plan for repayment. A written plan is created giving details of all the transactions that will occur, and the duration of the same. The repayment must begin within thirty to forty-five days after the case has started. The transitory stage of paying a trustee who then pays a creditor, as in Chapter 7 Bankruptcy is usually eliminated with Chapter 13 Bankruptcy. Although, in some cases people may involve a trustee who would take care of disbursing money to the creditors as per the plan. Also, as per the law the creditors must strictly adhere the repayment plan approved by the court and are in fact prohibited to collect any claims from the debtor. Your attorney will prepare new repayment plan to best suit your situation.
The one advantage of Chapter 13 over Chapter 7 Bankruptcy is the full discharge option which is not applicable under Chapter 7 filing. For example, if a debtor manages to complete all necessary payments in the plan, he/she is given a full plan discharge. (There are a few exceptions to this case, which your attorney will guide you about if necessary.) Yet another advantage of the Chapter 13 filing is that a repayment can be created even if creditors disagree with it, as long as it is approved by the Court. Although, in all fairness the court allows creditors also to file an objection, in case they may have any.
Determine whether Chapter 13 bankruptcy is the best solution for you.
- Prepare a budget.
- Examine individual cases to figure out whether require filing of Chapter 13 bankruptcy, or can be tackled in some other way.
- Determine and implement methods of dealing with secured creditors.
- Devise a chapter 13 plan, and fill out the forms.
- Pay the filing fee and complete the process of filing the forms and pleadings.
- Attend whatever meetings you maybe required to attend; with the creditors, court hearings etc.
- Obtain a discharge once the payments have all been made, and the plan terminated.
Now, find out how our Jacksonville Bankruptcy Attorneys can help you with your debt relief! Don't wait until it's too late, contact the Jacksonville bankruptcy lawyers you can trust. Contact Wilcox Law Firm today!
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