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Chapter 13

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Chapter 13 Bankruptcy

The following is a brief overview of a Chapter 13 bankruptcy. You are strongly advised to consult with an attorney to get a more detailed explanation of the bankruptcy process and what it can and cannot accomplish for you. Each person's situation is unique and requires personalized advice. Also bankruptcy and related laws change, as do court rulings, so the information on this website should not be relied upon.

Chapter 13 is a repayment type bankruptcy. With this type of bankruptcy your attorney will create a repayment plan (Chapter 13 Plan) for you to repay your creditors at least something if not all that you owe them. The Chapter 13 Plan normally last between 36 and 60 months depending on how much you owe and earn. Each month you will make a payment to the Chapter 13 Trustee, who will keep a percentage of that payment to cover his/her services and expenses. The Chapter 13 Trustee will take the balance of the payment and pay that to your creditors according to a priority.

In order to do a Chapter 13 bankruptcy, you have to meet certain requirements. The primary requirements are that you have a steady source of income, a job. You also have to be able to pay your normal living expenses each month, and then have money left over after paying those expenses to make your Chapter 13 Plan payment. The Chapter 13 Plan payment has to be large enough that you are paying your creditors at least as much, if not more than what they could have received if you had filed a Chapter 7 type bankruptcy and had assets that could not be protected with your exemptions. (See the Chapter 7 section about "Keeping My Property")

STOPPING FORECLOSURE
One of the benefits of a Chapter 13 bankruptcy is that you can get back on  track with secured debt payments like a home mortgage. For instance, let's say you are facing foreclosure because you fell behind on your mortgage payments and now are able to make them. You could file a Chapter 13 type bankruptcy before the foreclosure and get back on track and keep your house instead of losing it to foreclosure. You would make your normal mortgage payment each month and the amount of missed payments would be included in your Chapter 13 Plan which would be paid back by the Chapter 13 Trustee. When your plan is completed your would be caught up on your missed mortgage payments and be back on track with your normal monthly mortgage payments.

AUTOMATIC STAY
The reason you are able to stop the foreclosure when you file your bankruptcy is called the Automatic Stay. The Automatic Stay is an injunction that gets issued automatically the instant you bankruptcy gets filed, regardless of the type of bankruptcy you are filing. The Automatic Stay stops creditors from pursuing their claims against you during the bankruptcy as long as you do what you are supposed to do. It stops lawsuits, garnishments, and harassing telephone calls from bill collectors. There are some exceptions to and ways creditors can get relief from the Automatic Stay. Make sure you ask your attorney about them.

Another benefit of the Chapter 13 type bankruptcy is that you could possibly discharge some, if not all of your unsecured debts, like credit cards. This is similar to the benefit you could receive if you filed a Chapter 7 type bankruptcy. This aspect of Chapter 13 can be rather complicated, so you need to be careful when are attempting to discharge unsecured debts.

DEBT LIMITS
There are some debt limits restrictions as to who can file a Chapter 13 bankruptcy. The debtor cannot have more than $360,475.00 of unsecured debt, such as credit cards and no more than $1,081,400.00 of secured debt, such as mortgages and car loans. Be aware these limits are subject to change, as are many parts of the bankruptcy law. Therefore, you need to consult with an experienced attorney who is current on latest changes to the law.

In order for an attorney to be able to prepare the bankruptcy documents and Chapter 13 Plan, the debtor must provide lots of information to the attorney. This process was outlined in the Chapter 7 section "Providing Information to the Attorney"..

Before a personal bankruptcy can be filed, debtor(s) have to complete a credit counseling certification with an approved credit counseling organization. That organization must provide a certificate of completion to the debtors' attorney so it can be filed with the bankruptcy court.

FIRST MEETING OF CREDITORS & CONFIRMATION OF CHAPTER 13 PLAN
Once the bankruptcy is actually filed with the Bankruptcy Court, a hearing gets scheduled before the Chapter 13 Trustee that has been appointed to oversee that case. This hearing is known as the first meeting of creditors or the 341 hearing. If the debtor fails to attend that hearing, then the trustee can certify the case for dismissal. The hearing is fairly straight forward and there is a set of questions the Chapter 13 Trustee will ask each debtor. The Chapter 13 Trustee is normally inquiring into the ability of the debtors to make the monthly Chapter 13 Plan payment and that the Plan complies with the applicable bankruptcy code sections. It is also an opportunity for creditors to ask questions of the debtor about their bankruptcy filing.  Assuming there are no issues that come up during that hearing then is is just a matter of getting the Chapter 13 Plan confirmed by the Bankruptcy Court at the Confirmation Hearing. If a creditor or the Chapter 13 Trustee objects to the terms of the Chapter 13 Plan then the judge may or may not confirm it. If the Chapter 13 Plan is not confirmed, the the debtor will normally have a opportunity to modify the plan and ask that the new Chapter 13 Plan be confirmed.

The debtor also has another requirement besides attending the first meeting of creditors and that is to complete a debtor education course. That course is given by approved providers who will issue certificates of completion once the debtor has successfully taken the class. If this is not done, then the debtor will not get a discharge.

Once the debtors have attending the first meeting of creditors, complied with all the procedural requirements and made all their Chapter 13 Plan Payments, then the debtors will receive their discharges. . The debtors will then have received their fresh start, eliminating  their dischargeable debts and kept their exempt assets.

Make sure you consult with an attorney to fully explain all the requirements and benefits of filing a Chapter 13 bankruptcy as well as representing you during the case.

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The materials on this website are not intended as legal advice but only informational. For any legal questions or matters you may have, you should consult with your own attorney as no attorney client relationship is formed between you and The Lilly Law Group, PC by you visiting this website. Also, any information you provide by visiting this website is not confidential and The Lilly Law Group, PC may represent a party that is adverse to you. The Lilly Law Group, PC's attorneys are only licensed to practice law in Virginia and the District of Columbia .
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