Are All Of The Debtor’s Debts Discharged Or Only Some
Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523 of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons .
There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.
Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523 applies. The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees.
Chapter 13 Bankruptcy What Can It Do For Me
Chapter 13 is often referred to as the wage-earners repayment plan. Businesses and corporation DO NOT qualify to file a Chapter 13. Only individuals may file. If I decide that bankruptcy is the best option for you, we will file a Chapter 13 if you are ineligible for a Chapter 7 or you want to take advantage of the distinct benefits of a Chapter 13 payment plan. Chapter 13 is essentially a court approved debt reorganization in which you to repay a portion of your debts over a 3 to 5 year period, depending on the amount of money you make. A Chapter 13 bankruptcy is most beneficial in the following situations:
- You want to keep your house and car and have the ability to catch up your delinquent payments through the Chapter 13 plan.
- You want to retain assets that would normally be taken by the Chapter 7 Trustee in a Chapter 7 case.
- You want to repay certain debts that cannot be discharged in a Chapter 7 bankruptcy case, such as recent tax debts.
- You can discharge certain debts, like property settlements in divorces and non-criminal fines in a Chapter 13 that you cannot in a Chapter 7.
What Is A Bankruptcy Hardship Discharge
Now assume Bill has a stroke of bad fortune, instead of a stroke of good fortune, halfway through his bankruptcy. Perhaps he loses his job or becomes seriously ill. Bill is entitled to a hardship discharge if:
- His creditors have received what they would have received if Bill filed a Chapter 7
- He had no control over his changed circumstances
- His situation will probably not get better and
- He does not have enough disposable income to modify the plan
The second and third bullet points are usually the hardest prongs for Bill, or anyone else, to prove. Events like a job loss could be outside the persons control, or they could be at least partially due to a poor attendance record or some other fault. Additionally, peoples health often improves, and they are usually able to find other jobs.
Once again, skilled advocacy from an Athens bankruptcy attorney could be the difference between a hardship discharge and being trapped by a difficult repayment plan.
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The Chapter 13 Process
First, you should find a bankruptcy lawyer who can provide you with a free evaluation and estimate to file.
The cost to file Chapter 13 bankruptcy consists of filing fees and fees charged by a bankruptcy attorney. Petitioners need to pay a $313 filing fee to the bankruptcy court. They also need to provide:
- A list of creditors and the amount of their claims
- Disclosure of the amount and sources of the debtors income
- A list of the debtors property, as well as an accounting of all contracts and leases in the debtors name
- A breakdown of the debtors monthly living expenses
- Tax information, including a copy of the debtors most recent federal tax return and a statement of any unpaid taxes.
Chapter 13 petitioners must stipulate that they havent had a bankruptcy petition dismissed in the 180 days before filing due to their unwillingness to appear in court. Also, anyone seeking bankruptcy protection, must undergo from an approved agency within 180 days of filing a petition.
Shortly after filing bankruptcy, the debtor also must propose a repayment plan. A bankruptcy judge or administrator will hold a hearing to determine whether the plan meets the requirements of the bankruptcy code and is fair. Creditors may raise objections to the plan, but the court has the final say.
Debtors can arrange to make up delinquent payments over time, but under Chapter 13 rules, all new mortgage payments from the time of filing must be made on time.
A Clearly Stated Special Right
You can dismiss a Chapter 13 case easily because the Bankruptcy Code says you can, and says so very clearly:
On request of the debtor at any time the court shall dismiss a case under this chapter .
of the Bankruptcy Code.)
Two parts of this deserve to be highlighted:
As a result if you ever want your Chapter 13 case dismissed, usually within a day or so of your Louisville bankruptcy lawyer filing a motion to dismiss your case will be dismissed.
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When you enter into a Chapter 13 bankruptcy, you are required to create a repayment plan that is approved by both the court and by the creditors. The amount of money you must repay each month under this plan is set based on your income as well as the amount of eligible debt you are including in the plan. While the time limit for repayment can vary, the normal time for a Chapter 13 bankruptcy repayment plan is between three and five years. However, if you find yourself with extra money for some reason, you may decide to repay your plan early. This may be possible, but whether paying off your bankruptcy plan early is a good idea or not will depend on several factors.
Paying Off Your Chapter 13 Plan Early
It seems obvious that once the plan is approved, if the Debtor could come up somehow with the total due under the plan, he or she should be able to wrap it up early and get their discharge early.
Well, guess what. Thats not how it works. Or at least it usually is not how it works. Simply stated the rule is this: the only kind of Chapter 13 Plan that can be paid off early is a 100% plan. Chapter 13 plans fall into two categories: 100% plans and less than 100% plans. In a 100% plan, all the unsecured debt is to be paid under the plan. In a less than 100% plan, only a portion of the unsecured debt is to be paid. The vast majority of Chapter 13 plans are of the less than 100% variety.
So in most plans, where less than all of the unsecured debt is scheduled to be paid, the trustee will welcome extra payments from folks who have come into extra money that was not expected, such as an inheritance or big bonus at work. In fact the trustee might REQUIRE that such funds be paid into the plan. But after that extra payment is made, unless the plan is of the 100% variety, the regular plan payment is due again the next month and that continues until the end of the plan or until 100% of the unsecured debts are paid, whichever comes first.
This post is for general information purposes only and does not create an attorney-client relationship. It is not legal advice. Seek the advice of your own attorney concerning the details of your case.
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Chapter 7 Vs Chapter 13
Chapter 7 bankruptcy forces you to liquidate a great many assets to repay creditors. But the process can be concluded relatively quickly, and any wages and property you acquire after the bankruptcy filing, except inheritances, arent subject to distribution to your creditors. Typically, the entire process is completed within six months.
But Chapter 7 has disadvantages, too. Lenders who have already filed to foreclose on your home are only temporarily stalled, and other debts such as mortgage liens can be collected after the case is concluded. Cosigners on your debt are still obligated to pay.
Seeking Chapter 13 protection allows you to keep all your property. It simply extends the amount of time you have to repay what you owe after the bankruptcy court issues its ruling. It is possible to file a Chapter 13 bankruptcy after a Chapter 7 is completed, allowing you to seek a reduction in whatever debts remain from a Chapter 7 discharge.
Chapter 13 also protects your loan cosigners against collection efforts if the bankruptcy settlement obligates you to repay the debt yourself. If you need to file a second bankruptcy, Chapter 13 is only a two year waiting period versus eight years for Chapter 7.
There are disadvantages to Chapter 13 bankruptcy as well. Legal fees can be higher in Chapter 13 cases than Chapter 7 cases and your obligation to repay can last for years. In Chapter 7, the Chapter 7 discharge ends most debt obligations.
How Chapter 13 Works
A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: schedules of assets and liabilities a schedule of current income and expenditures a schedule of executory contracts and unexpired leases and a statement of financial affairs. Fed. R. Bankr. P. 1007. The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling evidence of payment from employers, if any, received 60 days before filing a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case . Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302.
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:
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Ending Your Plan Early
There are only two ways to pay off a Chapter 13 bankruptcy early:
- pay 100% of the allowed claims filed in your case, or
- qualify for a hardship discharge
To understand why your options for an early exit are limited, you need to know how this chapter works, including how your plan length and payment amounts get determined.
Whats The Process If I Miss A Chapter 13 Payment
In order to get a Chapter 13 discharge, you must complete your plan payments. That puts you in a bad position if you miss your Chapter 13 plan payments. Dont worry though, there are normally ways that you can fix it. Before we get there though, lets talk about the process.
First, its important to recognize that every Chapter 13 trustee handles missed payments differently. Additionally, every bankruptcy district handles the process slightly differently. This is not intended to be a substitute for contacting your Chapter 13 attorney. In fact, that should be your first call if you miss a payment. Instead, this is an overview of the general process that applies when you miss payments.
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Two Ways To Complete Your Chapter 13 Case Early
Your Chapter 13 plan must represent your best effort to pay your debts. It’s designed so you’ll pay the amount you can afford. Therefore, the court will only let you complete your Chapter 13 bankruptcy early under two conditions: You can pay all of your claims, including unsecured debts, in full, or you can prove a financial hardship. Otherwise, you have to make payments for the required 36 or 60 months so that your unsecured creditors get paid as much as possible.
An Increase In Income During Chapter 7
Chapter 7 bankruptcy is the process many people think of when discussing bankruptcy. It is used to wipe your slate clean. The bankruptcy trustee will eliminate most if not all of your debts, and possibly sell some of your assets to pay debts. This process is appropriate if you have an income but cannot cover all of your necessary expenses or can pay the basics, yet not pay down your debts. It is relatively quick, taking up to six months.
If you are part of a Chapter 7 bankruptcy and your income increases, speak with an attorney about whether you need to inform the court. The increase may not change your circumstances since a Chapter 7 bankruptcy is based on your financial circumstances at the time of your filing. A trustee may not have any right to new income you earned after you file. There are only a few exceptions, including if it is income you were entitled to when you filed making it a part of the estate or if it is income generated from the estateâs equipment or other assets.
If your income has increased significantly, then you may be required to move to Chapter 13 bankruptcy. This will depend on where you are in the bankruptcy proceedings, the provisions of your bankruptcy, how much your income grew.
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Consequences If You Don’t Make Your Plan Payments And How To Save Your Bankruptcy
Updated By Cara O’Neill, Attorney
Defaulting on your Chapter 13 plan has many unfortunate consequences. It can lead to your creditors obtaining permission from the court to foreclose on your house or repossess your car. Or the court might dismiss your case or never approve it in the first place. Learn about some of the possible consequences you could run into if you don’t make a Chapter 13 repayment plan payment, as well as options to save your bankruptcy.
What Happens If You Inherit Money While In Chapter 13
In most bankruptcy courts, if you receive an inheritance during your Chapter 13 plan period, youll have to pay it into your plan. If you receive an inheritance while you are in the midst of a Chapter 13 bankruptcy repayment plan, most courts will require that you pay this amount into your Chapter 13 plan.
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Creating And Filing The Repayment Plan
Once the means test is complete, you can start to work on drafting the repayment plan itself. The details of the plan will depend on your unique debts and the disposable income you calculated during the means test, so we strongly advise that you work on it with a trained expert like a bankruptcy lawyer. Not all Chapter 13 filers need the same advice for creating a repayment plan.
After you create your repayment plan, youll need to file it with the bankruptcy court no later than 14 days after filing. The court will assess the plan and hold a hearing to give your creditors a chance to make any objections. If all goes well, the plan will be approved. Keep in mind that although approval may not happen until roughly three months after filing, youll still have to start making payments on the plan within 30 days after you file.
Filing A Chapter 7 Case After A Dismissed Chapter 13 Case
If you have a dismissed Chapter 13 case, you might be able to re-file under Chapter 7 as long as youâre under the income limits. Youâll also want to make sure that available bankruptcy exemptions protect all of your property since thatâs not typically an issue in Chapter 13. Barring any problems, you might be able to file a Chapter 7 case to get rid of unsecured debts even though you have a dismissed Chapter 13 case.
Because you are filing under Chapter 7, you might be able to file without an attorney since you will not need to file a Chapter 13 repayment plan. You do need to make sure that the automatic stay will go into effect and that youâre not barred from filing another bankruptcy case because of the reason for your dismissed Chapter 13 case.
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