Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is usually recommended in a situation where an individual is facing foreclosure of real estate and/or the repossession of an automobile. Additionally, a Chapter 13 may be preferred option for an individual who has debts that cannot be eliminated in a Chapter 7 bankruptcy, such as some taxes and/or student loans. Finally, a Chapter 13 may be an option to allow a consumer to protect assets which may not be exempt in a Chapter 7 bankruptcy. Under the “Bankruptcy Abuse Prevention and Consumer Protect Act”, consumers are required to submit to a “means test” to determine their eligibility for a bankruptcy. If this test demonstrates that there is excess income, then the Bankruptcy Court can compel a debtor to file a Chapter 13 case, where they would repay all or a portion of their debts over a five year period.
Unlike a Chapter 7 case, the debtor in a Chapter 13 submits to a court-supervised repayment plan, that will last between 3 to 5 years. If a debtor is employed, their Chapter 13 payment will be deducted from their pay. Debtors who are self-employed, or on fixed income, will have to make the monthly Chapter 13 payment on their own. Upon successful conclusion of the repayment plan, the debtor will receive a “discharge” of any unsecured debts. In addition, any secured debts (other than mortgages) will be satisfied, and the liens cancelled.
[pullquote style=”right”]The debtor in a Chapter 13 submits to a court-supervised repayment plan, that will last between 3 to 5 years.[/pullquote]In order to determine your eligibility to file a Chapter 13 case, the attorney will need to review the following: verification of income for at least the ninety days prior to the bankruptcy filing, including other income, even though it may not be taxable or otherwise disclosed; bills or other communications from all of your creditors and/or their collection agencies; copies of any lawsuits, judgments, and/or garnishments against you; income tax returns for the previous 2 years, if you were required to file returns; if you own real estate, you may be requested to provide copies of any county property tax appraisals, or any recent private appraisals which have been performed on your real estate; recent statements for any 401(k), IRA, or any other type of investment program. The full and accurate disclosure of this information is necessary to make sure that the debtor is eligible to file a Chapter 13 case, and that any assets can be protected.
Most or even all of those fees can be paid through the Chapter 13 plan, along with the other debts.
Presently, the filing fee for a Chapter 13 bankruptcy is $310, however, these fees may be subject to change, due to periodic evaluation of the cost of processing bankruptcy cases by the bankruptcy courts. Attorney’s fees in Chapter 13 cases are usually determined on a case-by-case basis, based upon the amount of time and effort necessary to represent the debtor through the discharge of their case. Most or even all of those fees can be paid through the Chapter 13 plan, along with the other debts. Presently, Chapter 13 attorney fees are capped at $3000, and any fees charged in excess of that amount must be approved by the court. All fees associated with the filing of the bankruptcy, as well as the manner of payment of those fees, is required to be disclosed to the Bankruptcy Court. The Bankruptcy Court has the authority to order the refund of any attorney fees which are unreasonable or unjustified.
The Bankruptcy Abuse Prevention and Consumer Protect Act of 2005 requires that an individual must participate in credit counseling with a credit counseling agency that is certified by the United States Trustee of the district in which the consumer resides. A case cannot be filed unless the debtor has received a credit counseling certificate. Your attorney will provide the necessary information to you to fulfill this requirement. After meeting with the attorney and reviewing the information, a bankruptcy petition will be prepared. The petition includes statements regarding assets, debts, income and expenses. It also discloses information about any property transfers. Once the petition is filed with the court, the Bankruptcy Court issues a Notice of Bankruptcy to all of your creditors. The creditors are notified that they cannot attempt to collect their debts in any manner – this includes letters, phone calls, lawsuits, garnishments, repossession or foreclosure. Any creditor who ignores the Notice of Bankruptcy faces potential sanctions and fees.
The debtor in a Chapter 13 bankruptcy case is required to attend a Meeting of Creditors, which is scheduled approximately 30-45 days after the case is filed. Your attorney will accompany you to this hearing. The purpose of the Meeting of Creditors is for the Chapter 13 debtor to be questioned about the bankruptcy petition which they have filed, and any property which they own. The meeting is presided over by the bankruptcy trustee, and creditors are invited to attend. In Chapter 13 cases, a confirmation hearing is scheduled in addition to the Meeting of Creditors. The debtor’s attendance is required at this hearing as well. There may be additional hearings involved in a Chapter 13 case, for Motions for Relief from Stay or Motions to Dismiss, which the debtor would have to attend as necessary.
The debtor in a Chapter 13 bankruptcy case is required to attend a Meeting of Creditors, which is scheduled approximately 30-45 days after the case is filed.
Assuming that the debtor has performed all of their obligations under the terms of their confirmed Chapter 13 repayment plan, the Bankruptcy Court will mail out a “discharge” order. However, the discharge order will not be entered if the debtor has failed to complete a personal financial management class during their case. Likewise, any debtor who has an ongoing domestic support obligation – such as the payment of alimony or child support – must submit a certification that they are current on that obligation. The issuance of the discharge order means that the case is concluded and the debtor is no longer under the jurisdiction of the Bankruptcy Court.