What is Chapter 13 bankruptcy?
Chapter 13 is designed for individuals with regular income who desire to pay
their debts but are currently unable to do so. The purpose of Chapter 13 is to
enable financially distressed individual debtors, under court supervision and
protection to propose and carry out a repayment plan under which creditors are
paid over an extended period of time. Under this chapter, debtors are permitted
to repay creditors, in full or in part, in installments over a three to
five-year period, during which time creditors are prohibited from starting or
continuing collection efforts.
Eligibility
Any individual, even if self-employed or operating an unincorporated business,
is eligible for Chapter 13 relief as long as the individual’s unsecured debts
are less than $336,900 and secured debts are less than $1,010,650.
Discharge in Prior Case
You are eligible to receive a discharge in Chapter 13 Bankruptcy even if you
previously received a Chapter 7 Bankruptcy discharge, as long as your Chapter
7 discharge was entered at least four years before the filing of your current
Chapter 13 case. You can also receive a Chapter 13 discharge in your current
case if you previously filed for Chapter 13 Bankruptcy, so long as the discharge
in your old case was entered at least two years before the filing of your new
Chapter 13 case.
Credit Counseling Requirement
For cases filed after October 17, 2005, you must obtain a certificate from an
approved credit counseling agency before you can file your case. This can be
done over the internet and will likely cost approximately $35-$45. Your attorney
will provide you with information on how to obtain this counseling.
An individual cannot file a Chapter 13 case unless, during the 180-day period
before filing, he or she has received an individual or group briefing from and
approved nonprofit budget and credit counseling agency.
Chapter 13 Trustee
Upon the filing of all the required documents with the Court (petition,
schedules, tax returns for the four years prior to filing your case, statement of
financial affairs and Chapter 13 plan), an impartial trustee is appointed by the
court. A primary role of the Chapter 13 trustee is to serve as a disbursing
agent, collecting payments form debtors and making distributions to creditors.
Automatic Stay
The filing of the petition under
Chapter 13 “automatically stays” most actions
against the debtor of the debtor’s property. Creditors receive notice of the
filing of the bankruptcy petition from the clerk or trustee. The automatic stay
immediately stops any lawsuit filed against the debtor and virtually all actions
against the property by a creditor, collection agency or government entity.
Especially if a debtor is at risk of being foreclosed on, losing such basic
resources as welfare or unemployment benefits, or a driver’s license or a job
(because of a raft of wage garnishments), the automatic stay provides for immediate protection.
Repayment Plan
In Chapter 13, along with other documents, you file a “Plan” of repayment with your
creditors. The main provisions of the Chapter 13 plan are as follows:
You are paying all your projected disposable income into the plan for a minimum
of 36 months, and a maximum of 60 months. The length of the term depends on
numerous factors.
Financial Management Course
For cases filed after 10/17/2005, you are required to complete a financial
management course before receiving your discharge. You must have completed this
course (usually about two hours) and submitted the certificate of completion.