Chapter 13 Bankruptcy
Is Filing Chapter 13 Bankruptcy Right For You?
We'll review your situation and contact you to schedule a free consultation with one of our Chapter 13 bankruptcy attorneys who will discuss your legal rights and detail why Chapter 13 bankruptcy may be the right option for you.
What Is Chapter 13 Bankruptcy?
Chapter 13, entitled “Adjustment of Debts of an Individual With Regular Income,” is designed for an individual debtor who has a regular source of income. Chapter 13 may be preferable to a debtor who has extensive assets or has fallen behind on secured debts, such as mortgages or automobile loans because it enables the debtor to keep valuable assets, . A debtor filing for relief under Chapter 13 is allowed to propose a “repayment plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for Chapter 7 relief under the means test.
At a confirmation hearing, the bankruptcy trustee reviews the debtor’s repayment plan with the debtor and the debtors attorney. The trustee either approves or disapproves the debtor’s repayment plan, depending on whether it meets the Bankruptcy Code’s requirements for confirmation. Chapter 13 is very different from Chapter 7 as the Chapter 13 debtor makes payments to creditors, through the trustee, based on the debtor’s anticipated income over the life of the Chapter 13 plan.
Unlike Chapter 7, the Chapter 13 debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from foreclosures, lawsuits, garnishments, and other creditor actions while the plan is in effect. The discharge is also somewhat broader (i.e., more debts are eliminated) under Chapter 13 than the discharge under Chapter 7.
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy does not liquidate assets and give debtors a “clean slate.” Rather, Chapter 13 bankruptcy is intended to help people gradually catch up on past due debts .
Chapter 13 Bankruptcy Eligibility
Most people filing for Chapter 13 bankruptcy relief are required to complete Official Bankruptcy Form 22C— the Statement of Current Monthly Income and Calculations. This form is for “means testing” purposes, that is, to see if the monthly average of your last 6 months gross income is below the median income for your state.
You must enter income and expense information onto Form 22C and then make calculations using the information entered. Some of the information needed to complete these forms, such as your current monthly income, will come from your own personal records. However, other required information comes from the Census Bureau and the Internal Revenue Service (IRS). Your attorney has this information and will prepare this document, along with all of the bankruptcy documents, using information provided by you during your free consultation.
If your income is slightly higher than your state's median income, you may still be able to file Chapter 13. We can make this calculation and advise you on allowable expenses that can be used in the calculation.
Who Can File for Chapter 13 Bankruptcy?
To qualify for Chapter 13 bankruptcy, a debtor must:
Have a regular source of income from which to make payments to the bankruptcy trustee on behalf of creditors;
After covering current necessary living expenses, have sufficient disposable income to make regular payments to the trustee; and
Fall within pre-set limits for secured and unsecured debts. The limits are updated periodically, and we will tell you the current limits for secured and unsecured debts.
Which Debts Are Not Dischargeable Under Chapter 13?
Debts that were paid outside of the plan and not covered in the plan
Debts for alimony or child support
Debts for death or personal injury caused by the debtor’s operation of a motor vehicle while intoxicated
Debts for criminal fines
Debts for most student loans
Installment debts whose last payment is due after the completion of the plan
Debts incurred while the plan was in effect, yet not paid under the plan
Will I Have To Go To Court?
In most bankruptcy cases, you only have to go to a proceeding called the "meeting of creditors" to meet with the bankruptcy Trustee and any creditor who chooses to come. Generally, creditors will not be in attendance and the meeting is a short and simple procedure. You will be asked a few questions about your bankruptcy forms and your financial situation. If complications do arise, or if you choose to dispute a debt, you may have to appear before a judge at a court hearing. Your attorney can assist you in the event this occurs.