How To File Chapter 13
Just as in a Chapter 7 bankruptcy case, your attorney will prepare petitions and schedules that detail your income, debts and assets for the bankruptcy court. And, the court will appoint a bankruptcy trustee to oversee your case.
Then, you and your bankruptcy attorney will submit a payment plan. The payment plan will allow you to spread your past due balances over a three to five year period, while making current payments as they come due. The plan may or may not require you to pay 100% of your unsecured debt in many cases, some unsecured debt is discharged.
Your creditors and the trustee will have the opportunity to review the plan and make any objections. Once your plan is approved, you keep your property and make scheduled payments without demanding creditors vying for your dollars or outrageous late charges and other fees inflating your balance and putting you further behind.
Are You Eligible For Chapter 13
The ability to propose a plan of reorganization in good faith is just one part of determining your eligibility. That one, you can determine at least on a baseline level by comparing your income to your expense is one part of the eligibility requirements for a Chapter 13 bankruptcy.
The other limitation imposed on Chapter 13 filers is a debt limit. You canât have too much debt of a certain kind and file a Chapter 13 bankruptcy petition. The limits are adjusted every three years, and pretty high, so most consumers donât run into this issue. But, if you have six-figure student loan debt, you may.
What Are The Steps To Filing A Chapter 13 Bankruptcy
Generally speaking, the initial process of filing a Chapter 13 bankruptcy is, more or less, similar to filing a Chapter 7 bankruptcy. It doesnât get much more complicated until you reach the point at which you have to properly calculate what your monthly Chapter 13 payments will be based on a number of different factors.
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Have An Attorney Help You With The Chapter 13 Bankruptcy Process
Once you’ve weighed the advantages and disadvantages of Chapter 13 bankruptcy, in addition to information about Chapter 7 bankruptcy, you’ll be better equipped to make a decision. But time is of the essence and you may need to consult with an expert before you decide. Get started today and speak with an experienced bankruptcy attorney near you.
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What Is Chapter 7 Bankruptcy
Chapter 7 bankruptcy allows you to become debt-free through whats often referred to as a liquidation process. When using this approach, your debt is discharged and your nonexempt property is typically sold with the proceeds distributed to creditors.
Though it varies by state of residency, personal possessions that may be considered nonexempt and thus sold to cover your debts could include your home, pension, car, personal belongings, coin collection and even jewelry. Each state has a set of its own exemptions, and in some cases, youre allowed to choose between your state exemptions and federal bankruptcy exemptions laid out by Congress.
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Chapter 13 Bankruptcy Process
Though it is possible to file bankruptcy yourself, the first step in the process should be to hire a bankruptcy lawyer. There are so many laws and exceptions involved that it pays to seek experienced professional help.
The attorney will handle the bankruptcy proceedings, but it is important to know that there is a $310 court fee to file for bankruptcy and another $3,500-$5,000 for attorneys fees.
Court fees are considered priority debt along with child support, alimony and taxes. Money is allocated to priority debts first, then secured debts such as mortgages and auto loans, and finally unsecured debt like credit cards and personal loans.
Information you need on hand:
- List of creditors and the amount you owe
- The source of your income and the amount you earn
- List of property you own
- Living expenses
- Copy of most recent federal tax return
- After filing, the petitioner proposes a repayment plan in a hearing with a bankruptcy judge to determine if the plan is fair and meets the requirements.
If the plan is approved, the debtor makes routine payments to a court-appointed trustee, who distributes the money to the creditors.
Success Rate For Chapter 13 Bankruptcy
Consumers should be aware that there is less than 50-50 chance filing for Chapter 13 bankruptcy will be successful, according to a study done by the American Bankruptcy Institute .
The ABI study for 2019, found that of the 283,313 cases filed under Chapter 13, only 114,624 were discharged , and 168,689 were dismissed . Thats a success rate of just 40.4%. People who tried representing themselves call Pro Se filing succeeded just 1.4% of the time.
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Getting Started With Our Office
Our office is always ready and able to help. Never hesitate to reach out. Whether you are already our client or you would like to be our client, contact our law offices today at Dont forget, we do provide free bankruptcy consultations.
We are a debt relief agency. We help people for relief under the U.S. Bankruptcy Code.
Life After Chapter 13 Bankruptcy
Once the court approves a repayment plan, it is up to the debtor to make the budget plan work. Failure to make agreed-upon payments will bring the matter back to court for further review, which could include selling the debtors property to pay debts. Alternatively, the trustee can simply request the case be dismissed.
Bankruptcy may give debtors a breather from creditors, but there is a penalty to be paid on their . Under the federal Fair Credit Reporting Act, a Chapter 13 bankruptcy will be listed on the report for seven years. Debtors in this situation may find it difficult to get additional credit for years.
Chapter 13 bankruptcy can be a useful financial tool for people with serious debts who worry about losing their homes to bankruptcy. Anyone considering this course should consult a bankruptcy lawyer.
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Immediate Relief From Financial Stress
In most Chapter 13 bankruptcy cases , an automatic stay is entered as soon as the case is filed. The automatic stay is a court order that puts an immediate stop to creditor calls, debt collection letters, law suits and even wage garnishments. When you take action to turn your finances around, the pressure could be off in just a few days.
How Often Can You File For Bankruptcy
The frequency of applying for bankruptcy depends on which type of bankruptcy youre filing, something known as the 2-4-6-8 rule. Heres a breakdown:
- Filing Chapter 13 after Chapter 13: two years.
- Filing Chapter 13 after Chapter 7: four years.
- Filing Chapter 7 after Chapter 13: six years.
- Filing Chapter 7 after Chapter 7: eight years.
Filing Chapter 13 immediately after Chapter 7 is also referred to as Chapter 20 bankruptcy. You wont receive a discharge when filing Chapter 20, since you arent waiting the full four years between Chapter 7 and Chapter 13, but this type of filing could give you the time you need to pay down debt.
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For More Than 15 Years The Sasser Law Firm Has Been Helping Individuals And Business Owners Sort Through Financial Hardships To See The Light At The End Of The Tunnel We Have Extensive Experience Handling:
- Emergency Chapter 13 cases
- Refiled Chapter 13 cases
- Cases where a debtor owns a business or is self-employed
- Cases where the debtor has tax problems
- Cases where the debtor has domestic obligations
We also welcome complex cases that are likely to require litigation and appeal. So far, our skilled North Carolina Chapter 13 bankruptcy attorneys have helped more than 7,000 people and businesses get the financial relief they need.
Child Support And Alimony In Bankruptcy
Child support and alimony will be the first of the unsecured claims to be paid among all your other unsecured creditors. Keep in mind that child support and alimony obligations cannot be discharged through either Chapter 7 or 13 bankruptcy. See bankruptcy laws 11 U.S.C. § 727 & 1328. You will be required to continue payments to your former spouse during your bankruptcy case and after your discharge.
If you receive child support or alimony, you can protect that income in bankruptcy. See bankruptcy law 11 U.S.C. § 522. The entire amount that you receive for child support or alimony will be protected. Therefore, the bankruptcy trustee cannot take that income away from you.
if you are behind on child support and/or alimony obligations, filing Chapter 13 may help. You would be required to pay all child support and alimony in full through the Chapter 13 repayment plan. However, this can be beneficial to the debtor filing bankruptcy. Including child support or alimony can reduce the amount you have to pay the banks and other creditors.
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Advantages Of Filing For Chapter 13 Bankruptcy
There are advantages that address the drawbacks of Chapter 13 bankruptcy. While it generally takes longer in Chapter 13 to pay off your debts, you’ll have more time to make your payments, and Chapter 13 trustees may be flexible on the terms of your payments. For instance, you may be able to:
- stretch out your debt payments,
- reduce the amounts of your payments, or
- give up an item of your property that you’re making payments on.
Note that once you successfully complete a repayment plan under Chapter 13, individual creditors can’t obligate you to pay them in full.
Further, although a Chapter 13 bankruptcy will stay on your record for years, it is a small trade-off for missed debt payments, defaults, repossessions, and lawsuits that could hurt your credit even more and be harder to explain to a future lender than bankruptcy.
In many cases, declaring bankruptcy can get you started sooner on rebuilding your credit. While you can only file under Chapter 7 once every 6 years, you can always get a Chapter 13 plan if you encounter another financial disaster before you’re entitled to file for Chapter 7. In other words, you may file for a Chapter 13 plan repeatedly .
Notice Of Bankruptcy Case Filing
Your Notice of Bankruptcy Case Filing is a vital and useful document that the court issues after we have filed your bankruptcy petition. In it, you will find your case number, district information as well as the date the petition was filed and often, your Trustees information. You can use this document to prove to anyone that you have filed bankruptcy and are under the protection of the Automatic Stay, which prohibits any creditors from contacting you or continuing with any collection actions.
Your case number will be important when you go to register for the second online credit course as well as when you register for the online payment program, which we discuss in more detail below.
What Documents Does The Trustee Need For My Meeting Of Creditors
Each Trustee has different required documents they will request in advance of your 341 Meeting. No matter your Trustee, they all will require your most recently filed Federal Tax Returns. Our office should already have a copy, but if not, we will need them as soon as possible so we can get the documents to the Trustee prior to the meeting. If you do not submit the documents at least 7 days before the scheduled meeting, the Trustee will reschedule. Our office will let you know what specific documents your Trustee requires in that initial email or letter you receive after filing.
Choosing Which Option Is Right
The choice to file a voluntary Chapter 7 or Chapter 13 is that of the qualifying debtor. The provision of the Bankruptcy Code which specifically deals with who may be a debtor in Chapter 13 is 11 U.S.C. 109. Title 11, the Bankruptcy Code, is a debtor relief statute. A myriad of reasons exist as to why a debtor may chose a Chapter 13 over a Chapter 7. Possible reasons include:
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Filing For Chapter 7 Bankruptcy
Bankruptcy Under Chapter 7
Chapter 7 bankruptcy is also known as straight bankruptcy or liquidation. It allows a debtor to pay off its obligations through the sale of non-exempt assets. After that, they are free from any dischargeable debts.
To qualify for Chapter 7 bankruptcy, you must satisfy specific qualifying criteria. Here are some situations where you may not be eligible for Chapter 7.
- If your income is too high, as determined by the means test, you may file Chapter 13 bankruptcy
- You can repay your loan.
- You have dismissed a bankruptcy matter within the past 180 days.
- You have filed for bankruptcy already, and the deadline to file a new case has not expired.
- You tried to deceive creditors.
BankruptcyHQs Chapter 7 bankruptcy section provides a wealth of information about Chapter 7 bankruptcy.
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Preference Of Chapter 13 Over Chapter 7
Chapter 13 is preferable over Chapter 7 for the below reasons:
- The individual intends to clear all / most of his debts. He can do this in an acceptable time frame.
- The person has valuable non exempt belongings. He fears that he might lose these during proceedings in Chapter 7
- Possibility of the debtor failing the mean test.
- Within the last eight years, the debtor got discharged under Chapter 7.
- Assets of the debtor are sufficient to discharge maximum debts. But to complete the process, the debtor needs time and temporary relief from any action from the creditors.
- Debts are so much that it is impossible to pay off under Chapter 7, but Chapter 13 can be helpful here.
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.
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The Chapter 13 Plan And Confirmation Hearing
Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. Secured claims are those for which the creditor has the right take back certain property if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plan.11 U.S.C. § 1322.