Chapter 13 Bankruptcy

Chapter 13 is about the same as a Chapter 7 except it happens over a period of time, usually between three and five years.  It includes monthly payments to the trustee based on your non-exempt income, non-exempt assets, priority payments that are required, and the adequate protection payments made toward liens you are seeking protection from. Chapter 13 will help a higher income person find protection from debt and liens. Typically the creditors will receive a portion of their non-secured debts. The secured is surrendered, modified, paid directly to the creditor, or paid timely plus a monthly portion of the arrearage through the trustee.  To get a better idea on how this applies to you, please consult an attorney.

Chapter 13 Bankruptcy

The United States Bankruptcy Code allows a debtor who has a steady income to offer to pay installments to creditors under the supervision of the court within a limit of up to five years. Chapter 13 bankruptcy permits a person who has sufficient regular income to keep property, (i.e., a home or a car) which would otherwise be susceptible to loss in the bankruptcy process.

In Chapter 13, a court-approved repayment plan arranges for you to use your future income to manage and pay off  your debts during a period ranging from three to five years. It allows you to participate in a debt-management program, which reorganizes and consolidates liabilities into one reasonable monthly payment rather than liquidating property. Chapter 13 also allows you to catch up on debts on things such as your home or car. It also allows you to strip off junior mortgages under certain circumstances, and allows you to satisfy non-dischargeable debts such as domestic support obligations and taxes.  You receive a discharge of your debts, after you have made the necessary payments under the plan.

A debtor’s current monthly income is compared to the state median income, and the findings set the parameters of the extension of the repayment plan. A Chapter 13 bankruptcy repayment plan cannot extend beyond a time frame of five years, but under limited circumstances such as a temporary income loss, the plan time-clock may be temporarily placed on hold. Within the repayment plan time frame, Chapter 13 bankruptcy law protects debtors from creditors’ initiation or continuation of collection efforts, including attempts to take possession of property without prior bankruptcy court permission.

Who Can File for Chapter 13?

Chapter 13 requires that a person’s income is able to cover both their monthly living expenses and the court-mandated payment obligations. If your income is marginal or unsteady, or if your total debt is too high, the court will prevent you from filing Chapter 13.  If you can fund a reasonable and feasible plan and fall below the debt limits, you can typically file for Chapter 13 bankruptcy relief.

The primary reasons to file for Chapter 13 are:

  • There has been an Order of Discharge for a previous chapter 7 within 8 years
  • The means test for a Chapter 7 has failed
  • The payments for a mortgage, equity line, or home owners association in arrears are being caught up to save the home from foreclosure
  • Non-dischargeable debts such as back owed taxes and domestic support obligations are being satisfied through the plan
  • There are non-exempt assets and liquidation of those assets to file under Chapter 7 is not an option
  • Possible protection for co-signers

Advantages of Chapter 13 Bankruptcy

There can be several advantages in filing for Chapter 13 bankruptcy. These include:

  • Stopping foreclosure. When you file for Chapter 13, the court will typically put a halt to home foreclosure proceedings during the bankruptcy process, even if they have already started. This may allow you to keep your house while you sort out your mortgage debt in bankruptcy.
  • Silencing creditors. The Automatic Stay, which kicks in when you file for bankruptcy, prevents most creditors from hassling you during your case.
  • Reorganizing debt. The Chapter 13 court will help you create a new plan to pay off your debts, potentially allowing you more time to meet your financial obligations.

Chapter 13 Requirements

You will meet with our firm, assess your case and possible issues, decide which chapter is best, then you will be given direction of all documentation and information needed in order to prepare your petition.  This information and documentation is part of the strict due diligence requirements and allows your income, expenses, businesses, liabilities, assets, and recent transactions to be fully disclosed.  Some of these documents are tax returns, pay stubs, and divorce decrees.  Whether filing Chapter 13 bankruptcy as a joint petition or separate individual petitions, or if just one spouse is filing chapter 13, some information must be included for the spouse. If only one spouse files Chapter 13 bankruptcy, the income and expenses of the non-filing spouse are still required. This is needed so the court, the trustee, and creditors can examine the financial circumstances of entire household.  Furthermore, all debtors are required by law to complete a credit counseling course prior to filing a bankruptcy petition at an approved provider of the United States Department of Justice.  This ensures that you have explored non-bankruptcy options before filing.

Once the petition is complete it is filed with the Court.  An “Automatic Stay” goes into effect and your creditors are required to stop harassment and most collection efforts as soon as your case is filed.  About 30-45 days after your petition is filed, a Meeting of the Creditors called a “341 meeting”, will be held.  The trustee assigned to the case will lead and ask questions about the contents of the bankruptcy petition.  You must be present at the meeting to answer questions under oath and under penalty of perjury about your assets, liabilities, income, plan, and petition. Most 341 meetings are uneventful and short.  Creditors are permitted to attend and to ask the debtor questions under oath. However, creditors usually do not attend.

After the 341 Meeting of Creditors any changes necessary will be made to the petition and/or plan that the trustee requests.  The next step is to get your Chapter 13 Plan approved.  The firm appears in court on your behalf, without your presence required, until the plan is recommended for confirmation of the Court by the trustee.  The final approval of the plan of reorganization will be confirmed and so ordered by the judge.  All creditors are bound to the terms and conditions of the confirmed plan.

If you have done everything to try and pay off your debt and are searching to prevent foreclosure and retain other property, Chapter 13 bankruptcy may be the best for you. You can stop foreclosure, creditor harassment, and accomplish a repayment plan for your debt through Chapter 13.

We Can Help

Attorney Christopher Hittel has significant experience with Chapter 13 bankruptcy cases. He has successfully represented clients in Chapter 13 throughout the state of Florida and surrounding areas. Contact Christopher Hittel for a free initial consultation to get answers to your questions about the process to file Chapter 13 bankruptcy. Contact him today at (941) 746-7777, or via email.