Chapter 13

Chapter 13 Bankruptcy

Need More Time to Pay Old Debts?

A Chapter 13 bankruptcy has many benefits. Depending on the facts of your individual case, a Chapter 13 bankruptcy may enable you to:

* Prevent a home foreclosure
* Pay back debts more gradually
* Stop creditor harassment
* Stop a wage garnishment

A Chapter 13 bankruptcy involves making monthly payments to the bankruptcy court (a “trustee”) for a period of three to five years.  Many factors affect the amount of your monthly payments, including the size of your income, your monthly living expenses, the total amount of debt and the type of debts involved.  Consumer debts like credit card liabilities are treated differently than home mortgages and tax liabilities.

Eligibility

To be eligible for a Chapter 13 bankruptcy your secured debts cannot exceed $1,010,650, and your unsecured debts cannot be more than $336,900. A “secured debt” is one that gives a creditor the right to take a specific item of property (such as your house or car) if you don’t pay the debt. An “unsecured debt” (such as a credit card or medical bill) doesn’t give the creditor this right.

Step One

Consult with a qualified bankruptcy attorney to verify that bankruptcy is the best solution for your problem and, specifically, which form of bankruptcy is best for you.  An knowledgeable attorney will make use of the section of the bankruptcy law that will give you the best overall benefit.  Chapter 7 is often viewed as “the best”, but in many cases, a Chapter 13 can carry more advantages and sometimes can result in more total debt being discharged.

Step Two

Once you and your attorney have decided that bankruptcy is the solution for you, the next step will be for you, and your spouse if filing jointly, to receive credit counseling from an approved agency.  This part of the process is not as difficult or time-consuming as it may sound.  You are simply required to go online, select an approved credit counseling agency, pay the applicable fee (about $50), and then review the training materials and take a short online test.  The entire process can be completed in about ninety minutes.  A list of approved agencies may be found at www.usdoj.gov/ust.

Step Three

Your attorney will gather information from you concerning your income, your assets and your debts.  You will need to gather copies of your recent payroll stubs, your last three tax returns and statements from your creditors, or the information related to each creditor, such as amount owed, name and address of creditor, account number and date debt arose.

Step Four

Your attorney will prepare the many forms required by the bankruptcy court.  These forms contain all the information that is necessary to the filing process, necessary to the review of the bankruptcy and discharge request and the approval of your chapter 13 repayment (partial) plan.

You will then be asked to review the forms for accuracy and to sign the forms, signifying your approval of the data contained in the forms and your request for the Court to assist you by granting your request to discharge all or some of your debts and approve your repayment plan, under the terms that you have proposed.

Repayment Plan

The most important part of the Chapter 13 filing is the proposed repayment (partial) plan. The repayment plan describes how much you are offering to pay toward each of your debts.  Some debts may be paid in full, while no payment at all may be paid toward other debts.  It is the details of this plan, as determined by various legal and practical needs, and the wise, experienced guidance of an attorney that will allow you to take full benefit of the protections and debt relief offered by Chapter 13 of the bankruptcy law.

How Long Your Repayment Plan Will Last

The length of your repayment plan depends on how much you earn and how much you owe. If your average monthly income over the six months prior to the date you filed for bankruptcy is more than the median income for your state, you’ll have to propose a five-year plan. If your income is lower than the median, you may propose a three-year plan. You may obtain the current median income for your state at www.usdoj.gov/ust (means test information).

How a Chapter 13 Case Ends

Once you have made the required payments, as proposed in your “Plan”, to the bankruptcy trustee, your obligation is complete.  Any debts remaining are discharged, wiped away and you have no further obligation to pay anything further on those debts.  There are some other requirements as well, such as being current on court-ordered payments like child support and spousal support.  You also must complete a credit counseling class, like the one you completed before filing the bankruptcy petition, but geared toward post-bankruptcy issues.

If you need guidance on chapter 13 bankruptcy, and want to find out if that is the best solution for you, give me a call at 913-782-7075 for a free consultation.