Answers to frequently asked questions about chapter 13 bankruptcy topics can be found on this page and in this website. For further information , I recommend taking the time to read each of the topics listed below on the chapter 13 bankruptcy process.
For a variety of circumstances, your discharge may be revoked. Failure to comply with a court order, bad faith, or fraud are just a few examples. It is critical to speak with an experienced bankruptcy attorney. If your discharge is revoked, you will be responsible for all of the listed debts until they are paid in full. Most likely, they will never be discharged.
In a Chapter 13 bankruptcy, what obligations aren’t discharged?Diane Drain2022-07-28T10:02:15-07:00
Recognize that the law in this area is always changing. Depending on your circumstances, the debts listed here may or may not be discharged. Furthermore, a chapter 13 bankruptcy will discharge some debts that would not be discharged in a chapter 7 bankruptcy.
In most cases, if your bankruptcy discharge is granted, all of your debts will be discharged, with the exception of the following list, which is simply an outline of the majority of debts that are not discharged by operation of law or by a court order:
Certain taxes, including trust fund taxes. But these are normally paid as part of the chapter 13 plan.
If the bankruptcy court so rules, debts for obtaining money, property, services, or an extension, renewal, or refinancing of credit by means of false pretenses, fraud, or a false financial statement used with intent to deceive.
Debts not listed in the bankruptcy papers, unless the creditor had knowledge of the case in time to file a claim.
Debts for domestic support obligations (alimony, maintenance or support).
Interest on non-dischargeable debts.
If the bankruptcy court so rules, debts for intentional injury.
Debts for certain fines and penalties payable to governmental units.
Debts for student loans, unless not discharging the debt would impose an severe undue hardship. This undue hardship must be properly plead to the Court and the judge will decide based on your unique situation. This is a very difficult burden for the debtor to prove.
Debts that were or could have been listed in a prior bankruptcy case in which the debtor either waived their discharge or the discharge was denied.
Debt for personal injury judgments against you resulting from car accidents in which the debtor was a drunk driver.
Post-petition homeowner’s association fees (but this issue is disputed).
How will I receive my discharge?Diane Drain2022-07-28T10:02:17-07:00
Usually by mail, unless you have asked for electronic notification. In some states there may be a court hearing, which you must attend, where the court will explain the meaning of the discharge, or the reasons for denying your discharge, if it is not granted. Arizona does not have this discharge hearing, unless yours is a very unique situation.
What is a Bankruptcy Discharge?Diane Drain2022-07-28T10:02:19-07:00
The court’s ruling declaring that you do not have to pay your debts to the creditors mentioned in your bankruptcy documents, as long as the court did not enter a non-dischargeability order, is known as a discharge. Student loans, child support, alimony/maintenance, government fines or penalties, most taxes, and a few other obligations are not dischargeable under the current laws.
If a debtor is obligated to pay child support or alimony/maintenance, they must file a certification with the Court after all Plan installments are made, stating that the payments are current, or they will not be discharged. (1328(a))
A discharge frees debtors from personal obligation for any dischargeable debts, while creditors whose debts are discharged are barred from collecting those debts from the debtors. A permanent federal injunction is what this is called. The discharge is not entered in a Chapter 13 case until all of your plan payments have been made and all of the terms of the plan have been met. The discharge can be withdrawn if the debtor commits fraud or fails to comply as required by law.
Even after a discharge, a creditor with a legitimate lien on a debtor’s property (such as a house, automobile, furniture, or jewelry) can normally reclaim the property or its value. However, if the debtor owns property that is subject to a judicial lien or a non-purchase—money security interest, the Debtor must bring the matter before the Court for an order removing the lien’s effect. A Motion to Avoid a Lien is the name for this action.
If a debtor wants to keep assets with secured liens (such as a house or automobile), he or she can either make regular payments to the lender or pay the lender a lump-sum payment equal to the item’s fair market value (redemption).
While the discharge remains on your credit record for ten years, it becomes less and less important in a creditor’s decision to offer fresh credit with each passing year.
How many times may I file a Chapter 13 bankruptcy?Diane Drain2022-07-28T10:02:20-07:00
A chapter 13 discharge is only available to people who have followed the bankruptcy laws and finished their chapter 13 plan. If an individual received a discharge in a chapter 7, 11, or 12 case in the previous 4 years before filing the current case, or in a chapter 13 case in the previous 2 years before filing the current case, they are not eligible for a chapter 13 discharge. 1328(f).
Do I get to keep my tax refund check?Diane Drain2022-09-21T09:06:18-07:00
Any right to a tax return that you had when you filed bankruptcy is an asset of your bankruptcy estate that belongs to your creditors. Depending on the terms of your plan, you may be required to hand over your tax refund check to the Trustee at the time you receive it. In a chapter 13, you will very certainly be asked to give up 3 to 5 years of refunds. Consider why you’re receiving a refund check. You lose the ability to use those funds for your own purposes if you overpay your taxes. Calculating your wage deductions depending on your current position is the best solution. You won’t be able to use your return check as a “savings account”.
Is it possible for me to get rid of my second mortgage?Diane Drain2022-09-21T09:10:24-07:00
Possibly, however it is contingent on a number of things. A “lien strip” is the term for this procedure. You must calculate the worth of your home as well as the amount of debt outstanding on your first mortgage, including arrears. You should also know how much you owe to any other secured creditors, such as your homeowners’ association, real estate taxes, and so on.
This is a complicated procedure that your attorney must assist you with. If property values are fluctuating, it may be more difficult to lien strip a junior mortgage.
Is it possible to refinance my home loan while in bankruptcy?Diane Drain2022-09-21T09:12:58-07:00
Yes, however the lender will only approve the loan modification if you get permission from the Bankruptcy Court and the Bankruptcy Trustee. The lender cannot be forced to amend the loan by the Bankruptcy Court. Before you choose this path, make sure the loan modification will benefit you financially.
There is no one-size-fits-all solution to this question; it is determined by the lender, trustee, and court. However, you must first seek legal counsel from your attorney. Before you go on this journey, you’ll need permission from the Trustee and the Court. Some predatory lenders will gladly charge you exorbitant interest rates if you want to buy a house. The longer you wait in your Chapter 13 case, the better interest rate you’ll get. Most good lenders will probably write a new loan after 18 months of excellent payments to your Chapter 13 Trustee and mortgage lender.
If I’m self-employed and in Chapter 13, what should I do?Diane Drain2022-09-21T09:08:50-07:00
Every debtor who is self-employed or owns a business is required to file a “Business Operating Statement” on a monthly basis. A person who is self-employed, whether full-time or part-time, is considered self-employed. For the purposes of submitting the operating statement, a person who is an independent contractor, subcontractor, works on a contract labor basis, or does any other employment where taxes are not deducted from the pay received is considered self-employed. The Debtor will receive a copy of the business operating statement as well as instructions from the trustee and this office. You will work with us in preparing the form, which we will file with the court.
The initial Business Operating Statement must be filed in the month the debtor filed their chapter 13 case. After that, a new Business Operating Statement must be filed on or before the 15th day of each subsequent month. These statements are submitted with the Bankruptcy Court, and copies to the Trustee.
The Business Operating Statement is a report that is based on cash. For this report, do not use accrual accounting. Make sure you keep track of all of your income and expenses. If you have any questions, consult an attorney.
What is the bankruptcy trustee’s role?Diane Drain2022-07-28T10:02:48-07:00
For payments paid into the plan, the Trustee serves as the disbursing agent. The Trustee also evaluates the plan and challenges those that do not, in the Trustee’s opinion, fulfill the Bankruptcy Code’s criteria for confirmable plans. Most of the Trustee’s objections will be foreseen by an experienced bankruptcy attorney, who will address them in the plan, amended plan, or modified plan (this is filed after the Court confirms the plan). If the Trustee and the debtor cannot agree on the parameters of the plan, the judge makes the final determination.
Once the plan is approved, the trustee pays creditors on a regular basis using the debtor’s payments. Before the Plan is finalized, the Trustee is allowed/required to make adequate protection payments. These would be payments to your vehicle’s lender, for example. §1326(a) (1)(B) All debts owed at the start of the case must be paid through the trustee, with the exception of current mortgage payments and some leases.
Surviving in Chapter 13: A debtor’s limits or criteria in Chapter 13 are as follows:
Make all plan payments on schedule; keep up with your mortgage payments, as well as any car payments that aren’t included in the plan.
Early in your Plan term, take the mandatory Personal Financial Management class.
You cannot miss any payments if you owe child support or alimony/maintenance. All such payments must be current by the conclusion of the plan period.
Otherwise, the Court will not grant a discharge unless the Debtor files a certificate stating that these obligations are current.
During the plan term, do not fall behind on new tax obligations.
Don’t take on any new debt without first getting permission from the court.
Maintain current insurance on any asset that is being used as collateral for a loan.
Changes in income should be reported to the Trustee.
Annual tax returns should be provided to the Trustee.
The debtor is free to move or change occupations, but they must notify their attorney and the Trustee of any changes in their income.
Obtaining a new vehicle loan, forming a business that is an asset of the estate, or refinancing, selling, or purchasing a home all require court approval. It may take 30-45 days to receive such approval.
There will also be extra responsibilities, which your attorney will explain.
In a Chapter 13 case, what are the debtor’s responsibilities?Diane Drain2022-07-28T10:02:52-07:00
The Debtor may not submit any papers to the Bankruptcy Court until he or she is confident that the information is (1) accurate; and (2) supported by existing law or a good faith case for its modification. Rule 9011 applicable. To put it another way, someone who is representing themselves in a bankruptcy must be familiar with the bankruptcy and state laws that pertain to their circumstances. Ignorance of the law is not an acceptable excuse. Regarding the information submitted by the Debtor, the Debtor’s counsel must make the same oath. Under Section 707(b)(4), sanctions may be imposed.
The Bankruptcy Code’s Section 521 and other parts detail the paperwork that must be filed and some deadlines:
(Before filing the bankruptcy, take the mandatory credit briefing class.) §109(h))
521(a)(1)(A) requires that all creditors be notified of the bankruptcy. Any addresses on all mail received in the last 90 days prior to filing must be included in this notice requirement. §342(c) If the creditor does not receive notice at the correct address, the creditor may be able to pursue legal action outside of bankruptcy court until the creditor receives notice at the correct address.
Schedules, a statement of affairs, and an employer declaration must all be filed.
Fill out the master mailing matrix.
Submit the electronic declaration that is necessary.
7 days before the creditor’s meeting, file the Mean’s Test (Official Form B22A-C) and send a copy of the most recent tax return filed or a transcript to the Trustee.
Debtor must file all required, unfiled tax returns for the previous four years the day before the creditor’s meeting.
Attend the mandatory creditor’s meeting.
Provide evidence of identity and other documentation to the Trustee (bank statements, wage statements, tax returns, car titles, etc).
The trustee has the option of continuing the meeting for another 120 days. (§1308)
The Plan of Reorganization should be filed and noticed to all creditors.
Complete the financial management class (after the bankruptcy has been filed). §§111.1328(g))
The Chapter 13 case may be dismissed if the Debtor fails to keep all child support and alimony/maintenance obligations current throughout the Plan. (§1307(c)(11))
Before filing bankruptcy, the debtor must file any tax returns that are due within the last four years. Otherwise, the Chapter 13 case may be dismissed. (1308(a)) (§1307(e)) It is impossible to confirm a plan until all tax returns have been filed. (§1325(a)(9)
Is it necessary for my employer to know that I’m declaring bankruptcy?Diane Drain2022-07-28T10:02:54-07:00
The majority of the time, the answer is no. You can choose to use a plan payment arrangement in which your employer pays the trustee directly. That is something that most of my clients do not want to do. Other attorneys require their clients to use direct payment, which I believe should be the client’s choice, not the attorney’s.
There are two situations in which your employer may be involved. First, the bankruptcy trustee will ask for copies of a number of documents (tax returns, bank statements, etc.). Before filing, one of these items will be copies of some of your pay stubs. If you refuse to provide this information, the Trustee may send a form to your employer, requesting wage information. Second, the monthly Plan payment to the Bankruptcy Trustee is the cornerstone of a chapter 13 bankruptcy. The Court, the Trustee, or your circumstances may require a wage assignment of those Plan payments in some circumstances. Every circumstance is different. Unless you work in a financially sensitive field, the law prohibits your employer from denying you employment based solely on your bankruptcy filing (securities, brokers, etc.).
What are the reasons for Chapter 13 bankruptcy failure?Diane Drain2022-07-28T10:02:56-07:00
No. Bankruptcy is a civil process, not a criminal one. By declaring bankruptcy, you do not give up any of your civil or constitutional rights. Furthermore, you cannot be discriminated against by a utility, a government agency, or your workplace because you have filed for bankruptcy. However, if you pay off a utility payment, you may be charged a significant “deposit” when you apply for new utility connection.
Will information about my bankruptcy be made public?Diane Drain2022-07-28T10:03:03-07:00
When you file for bankruptcy, your papers become public record. Some credit-reporting companies may make a public record of your filing. In addition, your name will be published in at least one Arizona newspaper, if not more. However, because your name will be displayed alongside hundreds of other debtors on a page, it is unlikely that it would stand out.
What effect does bankruptcy have on my credit score?Diane Drain2022-07-28T10:03:05-07:00
When you file for bankruptcy, your credit rating will most likely drop to 480, but every circumstance is different. A chapter 13 bankruptcy is a three to five-year open bankruptcy. Your credit score can improve while the bankruptcy is pending if you keep up with your Plan payments and monthly mortgage payments. It is not uncommon for a debtor to secure a new loan while under Chapter 13 protection. Warning: Any additional loans, asset sales, or large-dollar asset purchases must be approved by the court. Check to see if taking out a new loan will cost you more than paying off your present debt.
How much does Chapter 13 cost?Diane Drain2022-07-28T10:03:10-07:00
In most Chapter 13 cases, attorneys’ fees are paid in part before the case is filed, with the outstanding balance, if any, paid by the Trustee from the debtor’s payments into the plan. Attorneys in Arizona may charge a flat fee (determined by the Bankruptcy Court) or, more often, by the hour. Because the chapter 13 process takes three to five years, it’s impossible to predict how much the fees will be. Some situations are more complicated than others, or there are a lot of challenges to confirmation or claims, or the debtor doesn’t keep up with his or her house payments or Trustee payments. Life transitions marriage, divorce, death, a rise or drop in income, and a hundred other concerns occur every three to five years. It is essential to speak with an experienced chapter 13 attorney about this situation.
After your bankruptcy has been filed, never pay your attorney directly.
Requests for additional attorney fees must be considered by the court, and if accepted, the fees would be added to the obligations paid under the plan.
Attorneys who offer lower rates or TV or Internet advertising firms (many of which have gone bankrupt after stealing their clients’ money, such as Phillips and Associates) should be avoided at all costs. These firms charge exorbitant rates and employ coercion to persuade customers to use their services.
What happens if I own non-exempt real estate?Diane Drain2022-07-28T10:03:12-07:00
If you have non-exempt assets in your case, you must pay the fair market value of such assets through your Chapter 13 Plan. To put it another way, your creditors are entitled to the amount they would have received if you had liquidated those assets through Chapter 7. The Trustee will notify your creditors to file a proof of claim. The Debtor, Trustee, and other creditors have the right to evaluate claim proof and object to any that they believe are incorrect. The court will approve all claims not objected to by the Trustee, you, or another creditor, and the creditors will receive a pro-rata portion of whatever the Trustee distributes, after paying certain debts in the confirmed plan.
What is the Mortgage Modification Mediation Program?Diane Drain2022-07-28T10:03:14-07:00
CASES (THE FOLLOWING MAY BE OUT OF DATE – CHECK THE COURT’S WEBSITE)
Effective February 1, 2017 the United States Bankruptcy Court for the District of Arizona adopted uniform procedures and mandatory forms for its Mortgage Modification Mediation (MMM) Program (General Order 16-2). This program applies to Chapter 13 bankruptcy filings and all types of real property.
Designed to facilitate communications between debtors and mortgage lenders
The purpose of the program is to “function as a forum for individual debtors to explore mortgage modification options with their lenders for real property in which the debtor has an interest or is obligated on the promissory note or mortgage. The goal of the MMM Program is to facilitate communication and exchange of information in a confidential setting and encourage the parties to finalize a feasible and beneficial agreement under the supervision of the United States Bankruptcy Court for the District of Arizona”.
The Bankruptcy court will not force either the lender or borrower to participate in the program
The Bankruptcy Court will not force any modification and will make no adjudication except with the consent of both parties. Any signed agreement reached at mediation must be approved by the Bankruptcy Court before it is binding and enforceable.
The filing of the bankruptcy results in an automatic stay of all collection actions under 11 U.S.C. 362.
Unless the Debtor has filed a prior bankruptcy within the previous 12 months, 11 U.S.C. 301, 302, 101(42). If you’ve already filed one case in the last 12 months, the stay will be good for only 30 days. §362(c)(3)(A). If there have been two or more cases in the last 12 months, there will be no stay at all. §362(c)(4)(A)(i) A case that has been dismissed has been filed. There is no justification for failing to comprehend the standards. Within 30 days, a motion to prolong the stay must be filed.
The debtors must file a Plan of Reorganization.
BNC will mail a copy of the plan to all creditors, who (in some cases) appear at a Plan Confirmation hearing, if there is one.
The Plan’s contents is governed by Section 1322, which requires the Debtor to submit all “disposable income” income to the Chapter 13 Trustee for the following 3-5 years, excluding certain authorized expenses. (§1325(b)(2)) The term “disposable income” is defined differently in Chapter 13 than it is in Chapter 7.The length of the Plan is determined by a number of factors that are too many to detail in this brief summary of responsibilities. The bankruptcy code allows any person who files for bankruptcy to maintain fundamental assets that are deemed necessary for a “fresh start” after bankruptcy. This property is referred to as the debtor’s “exempt property”.
When debtors file for bankruptcy, they are generally concerned that they will lose their personal belongings and home commodities.
No-asset cases make up the majority of Chapter 7 cases. That is, unless the debtors owe back child support or alimony/maintenance, the debtors pay up nothing to the trustee. In that instance, the Trustee has the authority to sell all of the Debtor’s assets, whether or not they are exempt. If the Debtor’s assets exceed the exemption list, Chapter 13 is a good option if the Debtor wants to keep his or her property. The Debtors will pay the resale value of the assets that were not on the Arizona exemption list under the Plan. Once this is completed, the Debtors are free to keep such assets unless the taxing authorities or secured creditors have the right to seek them.
What is the Means test and how does it work?Diane Drain2022-07-28T10:03:18-07:00
In Chapter 7 FAQ, the means test was discussed. A change in the concept of “disposable income” in Chapter 13 makes things more difficult. §1325(b)(2) Official form B22C is used. The difficulty is that under either the 7 or 13 median income approach, the disposable income criteria will not be an accurate indication of future ability to pay the Plan payments. The test is a retrospective rather than a prospective examination. Charitable contributions, up to 15% of gross income, are included 1325(b)(2)(A)(ii), in addition to other deductions. Our firm will provide you with a means test calculation form and explain how it works.
What is the bankruptcy trustee’s role?Diane Drain2022-07-28T10:03:19-07:00
For payments paid into the plan, the Trustee serves as the disbursing agent. The Trustee also evaluates the plan and challenges those that do not, in the Trustee’s opinion, fulfill the Bankruptcy Code’s criteria for confirmable plans. Most of the Trustee’s objections will be anticipated by an experienced bankruptcy attorney, who will address them in the Plan, or amended Plan. Even if the Trustee and the debtor cannot agree on the provisions of the plan, the plan may be confirmed by a judge.
Once the plan is approved, the trustee pays creditors on a regular basis using the debtor’s plan payments. Before the Plan is finalized, the Trustee makes necessary adequate protection payments. These would be payments to your vehicle’s lender, for example. §1326(a) (1)(B). Normally, all debts owed at the start of the case must be paid through the trustee, with the exception of current mortgage payments and some leases.
What role does an attorney play in a Chapter 13 bankruptcy case?Diane Drain2022-07-28T10:03:21-07:00
According to statistics from the Bankruptcy Court, only around 2% of people who file without a counsel ever succeed in a chapter 13.
This figure predates the 2005 Reform Act, which significantly increased the complexity of bankruptcy filings. Many people ask me if they “can file for bankruptcy on their own.” “Yes, anyone has the legal right to perform their own open heart surgery, so why not their own bankruptcy?” I always respond. (I’d like to thank Judge Baum for the quote.) Bankruptcy laws and rules have always been a source of stress. After the 2005 amendments, I feel that only a fool would file for bankruptcy on their own, no matter how “easy” it may appear. In reality, many lawyers stopped practicing bankruptcy law when the law changed because it had become so complicated; even fewer will assist with chapter 13.
Never take advice from someone who has already declared bankruptcy. They had a “fool for a client” and almost certainly committed at least one federal felony, yet they escaped detection. I say this not because I want everyone to hire me, but because of the daily horror stories I hear about people losing their tax refunds or their families being sued because a debtor repaid a debt or transferred an asset. Normally, all of this would be done without malice, but bankruptcy considers those actions to be fraudulent. The Attorney General’s Office is proactively enforcing the new laws, and it is actively pursuing bankruptcy fraud.
You will wind up paying their advertising expenditures if you use those who advertise on TV.
Also, “legal document preparers” should be avoided. These are people who desire to be lawyers but have chosen not to attend law school. Instead, they act as though they know the law, or worse, they are disbarred attorneys or other criminals who prey on the vulnerable. Always double-check your lawyer’s credentials with their state bar. Inquire about the lawyer’s recommendations. The majority of people get decent lawyers by asking their friends or relatives for recommendations.
In a chapter 13 consumer case, the debtor’s attorney will do the following:
Determine whether bankruptcy is the best solution for the debtor’s financial troubles by examining the amount and kind of the debts owing by the debtor.
Before filing the bankruptcy, Assist the debtor in arranging his estate for bankruptcy so that just a small portion of his assets must be turned over to the Trustee later.
Examine the Debtor’s payment and transfer history to identify potential exposure to the Debtor and others.
Collect the data and information needed to construct the bankruptcy schedules and statements for filing.
In a chapter 13, assist the client in understanding their responsibilities.
Prepare a reorganization plan based on the debtor’s circumstances, the law, and the realistic options available.
Prepare the necessary petitions, schedules, and statements for bankruptcy court filing.
Check to see if the education classes are required. If this is the case, submit the relevant certificates to the court.
File bankruptcy petitions, schedules, and declarations with the court.
Solve any redemption, surrender, or reaffirmation issues.
The Plan of Reorganization should be filed and noticed.
Attend the Debtor’s Meeting of Creditors.
Respond to the Bankruptcy Trustee’s and creditors’ concerns about the Plan and other documents filed with the Court.
Attend hearings for Plan Confirmation.
Modifications to the Plan should be addressed when circumstances change during the Plan’s term.
Prepare and file revised schedules as the Debtor’s circumstances change and/or the court orders.
Who qualifies for a Chapter 13 Bankruptcy?Diane Drain2022-07-28T10:03:23-07:00
•Before filing complete the Credit Counseling for Consumers Class.
•Have sufficient regular income to meet monthly living expenses allowed by the chapter 13 Trustee, as allowed by the IRS and make a plan payment. [§109(e), §101(30)] •Have less than a certain amount of unsecured debt, and secured debt. [§109(e)].
•Not be a corporation, partnership, stockbroker, or commodity broker. [§109(e), §101(30)]
You can file Chapter 13 and get a discharge if you haven’t had a discharge in a 7, 11, or 12 in the four years before to filing the new chapter 13, or another chapter 13 in the recent two years, but this is something you should address with your attorney. (§1328(f)
A liquidated debt is one in which the amount owed by the debtor is known or easily calculated. A loan, for example, is a liquidated obligation; the damages owed in an auto accident, on the other hand, are normally unliquidated until a judgment is entered.
A common method is to file Chapter 7 to discharge those debts that are dischargeable, then file Chapter 13 to settle those debts that were not dismissed in Chapter 7 or that could not be dealt with in a Chapter 7 (such as paying arrears on houses, etc…).
How does Chapter 13 work?Diane Drain2022-07-28T10:03:25-07:00
In Arizona, persons who pursue their chapter 13 case without an attorney have a failure rate of at least 98 percent.
Petition, Schedules, Statements of Affairs, and other documents are filed with the Bankruptcy Court by the debtors. The Chapter 13 Trustee and other creditors examine these documents. The Debtors also file a Plan of Reorganization in addition to the documents. The plan is for the Debtors to pay all of their disposable income (income minus allowed expenses-some trustees have expense guidelines and Census Bureau and IRS data) to their creditors through the Bankruptcy Trustee over the next 3 to 5 years. Unless their debts are non-dischargeable, their remaining debts will be discharged at the end of their Plan period.
Chapter 13 varies greatly from district to district, based on local customs and opinions regarding what is “fair” and in “good faith” as determined by trustees and judges. A successful Chapter 13 case always requires the assistance of an experienced bankruptcy attorney who is knowledgeable with the district’s prevailing court attitudes as well as the plethora of unwritten local norms.
Chapter 13 bankruptcy is a repayment plan that protects the debtor from collection actions throughout the repayment period and discharges any unpaid balances of dischargeable debts at the conclusion of the repayment period.
The discharge in Chapter 13 covers a few debts that cannot be discharged in Chapter 7. Debtors choose to file a repayment plan under Chapter 13 when:
they owe debts not dischargeable in Chapter 7 ( such as taxes, child support, fraud judgments)
they have secured debts on real property or vehicles which they wish to scrape off.
they have liens on assets that are worth more than the debt they are securing
they have years of unfiled taxes
they are behind on car or house payments
their assets are worth more than allowed exemptions
their income is much more than their allowed costs
What are some of the important issues that the court considers?
This is an excerpt from a bankruptcy court case that details what the court looks at to decide if a person is permitted to file a chapter 7 (this Order is dated before the 2005 Reform Act, so may not be applicable): (1) Whether the debtor has a likelihood of sufficient future income to fund a Chapter 11, 12, or 13 plan which would pay a substantial portion of the unsecured claims; (2) Whether the debtor’s petition was filed as a consequence of illness, disability, unemployment, or some other calamity; (3) Whether the schedules suggest the debtor obtained cash advancements and consumer goods on credit exceeding his or her ability to repay them; (4) Whether the debtor’s proposed family budget is excessive or extravagant; (5) Whether the debtor’s statement of income and expenses is misrepresentative of the debtor’s financial condition; and (6) Whether the debtor has engaged in eve-of bankruptcy purchases.
If I file chapter 13 will I never be able to by a home or car?Diane Drain2022-07-28T10:06:03-07:00
FALSE. While purchasing or selling property during a chapter 13 bankruptcy is difficult, it is not impossible. Your attorney can explain the steps that must be followed. While in a chapter 13 bankruptcy, you normally need to get a court order to buy a home or vehicle.
If I file chapter 13 will I have to pay all my debts?Diane Drain2022-07-28T10:06:05-07:00
FALSE. In a chapter 13, if your income is below a certain amount, you pay only the amount necessary to cure your mortgage arrears, pay certain back taxes, pay back child support and alimony, and pay off your vehicles. If your salary is higher than the median, you will be required to pay a certain amount to your creditors.
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