Chapter 13 Bankruptcy Information
This Chapter 13 bankruptcy information is provided for those considering personal bankruptcy, and should not be confused with other forms of bankruptcy. There are benefits and disadvantages of each … as we’ll discuss on this website.
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(The primary difference between Chapter 13 bankruptcy and the others is that others may wipe out most of your debts completely, but is only available to people in specific financial situations, and Chapter 13 still requires that you pay all or some of what you owe over time.)
Chapter 13 bankruptcies are often called a “wage-earner plan” or “reorganization bankruptcy,” as they are designed for people who have a regular income but have not been able to keep up with their debts. In short, you use your income to pay off your debt, either all of it or a reduced amount, over time. This time period is usually between 3-6 years. During this time, the law prohibits your creditors from making collection efforts against you.
Chapter 13 Advantages
Allows the chance to save your home from foreclosure Reschedule debts over life of plan which can reduce payments Cosigners can be protected You do not have any contact with creditors Creditors restricted from making any collection efforts
Chapter 13 Bankruptcy Eligibility
- Any individual with debts less than $336,900 and secured debts less than $1,010,650 (subject to change)
- Self employed or operating an unincorporated business is eligible
- Corporations or partnerships are not eligible
- Generally you need a source regular income
- You can not file if a prior bankruptcy petition has been dismissed during the last 180 days due to certain situations
- You must receive credit counseling from an approved source within the previous 180 days
How To File Chapter 13 Bankruptcy
1. Determine Bankruptcy & Chapter 13 Are Best For You
Bankruptcy is a serious matter, and should not be taken lightly. There are numerous alternatives to bankruptcy, you should work hard to find an alternative. Also, a Chapter 7 bankruptcy may be a better alternative.
2. Evaluate If You Are Eligible
Make sure your total debt falls within eligibility requirements and that you have sufficient income.
3. Accumulate The Following Information
- A list of all creditors, the amount(s) owed, and the nature of their claim(s)
- A list of all your property
- A detailed list of your monthly living expenses (food, clothing, shelter, utilities, taxes, transportation, medications, etc.)
Note For Married Individuals: This information must be accumulated for your spouse regardless of you are filing a joint or individual petition, even if just one spouse is filing as the court, trustee and creditors evaluate the entire household income.
4. File Your Bankruptcy Papers
Using official forms (some states require digital submissions), you enter your financial data and a draft of your repayment plan. Unless otherwise advised, you must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs.
What Happens Next?
When an individual files a Chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator appoints a standing trustee to serve in all Chapter 13 cases. 28 U.S.C. § 586(b). The Chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b).
Between 20-50 days after the debtor files the Chapter 13 petition, the trustee will hold a meeting of creditors. No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code.
Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor’s ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327.
More Information
Additional Chapter 13 bankruptcy information is available on this site.
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