Chapter 13 Bankruptcy is a debt repayment plan organized through the Bankruptcy Court. Chapter 13 can be used to catch up payments that you are behind on a mortgage or car payment, or in other situations where an individual is not eligible for Chapter 7 relief.
Some common reasons that individuals need to file for Chapter 13 relief include the following:
- Stopping foreclosure or catching up mortgage arrears
- Stopping repossession of a vehicle
- Falling behind on mortgage payments or car payments as a result of unemployment, underemployment, or health issues
- Restructuring terms of a vehicle loan
- Repayment plan for personal income taxes owed
- Repayment plan for delinquent child support or alimony
- Means Test Issues
- Protecting a Family Member From An Insider Preference Adversary Proceeding or Fraudulent Transfer Adversary Proceeding
- Ineligibility for a Chapter 7 Discharge
An individual who files for Chapter 13 relief must have regular income. The Bankruptcy Court defines regular income broadly. Regular income includes wages, salary, commission, and self employment income. Additionally, regular income may also include rental income, child support, alimony or spousal support, monetary contributions from roommates or family members, unemployment benefits, severance benefits, workers' compensation benefits, retirement income, pension income, Social Security benefits, and disability benefits.
It is also necessary to show that you have sufficient income to make the Chapter 13 plan payments. It is common that your budget will be very tight while in Chapter 13. However, you must be able to afford the ongoing secured debt payments for property that you wish to keep. For example, if you want to keep a house, you must be able to afford the ongoing regular mortgage payments, plus the necessary amount to cure the mortgage arrears.
Similar to a Chapter 7 bankruptcy, you must file a petition, schedule, and statement of financial affairs with the Bankruptcy Court. You must completely and truthfully list all of your assets and all of your debts. Additionally, you must propose a Chapter 13 repayment plan. Typically, the Chapter 13 Plan lasts from 3 to 5 years.
The Chapter 13 Plan that is filed with the Bankruptcy Court is a proposed plan. In many cases, the proposed plan payment must change before the plan can be confirmed by the Bankruptcy Court. This can occur when a mortgage arrear claim is higher than expected, or a claim for unpaid taxes occurs that was unanticipated or higher than expected. Additionally, there may be times when you have modify your Chapter 13 plan during the course of the case. For example, new income taxes that are owed may require you to increase your plan payment. There may also be situations when the plan payment can be decreased, such as decreased income or a decision to surrender a house or car.
All creditors must be listed on your bankruptcy schedules, notified of your bankruptcy filing, and have the opportunity to attend your Section 341 Meeting of Creditors. However, it is not common for creditors to appear at the § 341 Meeting, and most of the time, the only people that are present at the § 341 Meeting are the Debtor(s), the Trustee, and the bankruptcy attorney.
A Chapter 13 discharge is entered upon successful completion of the Chapter 13 plan. The discharge cannot be entered unless the plan is successfully completed.
Chapter 13 cases can be dismissed during the course of the case if the plan become infeasible at any time during the course of the case. Additionally, a Chapter 13 case can be dismissed due to failure to make the monthly plan payments.
A Chapter 13 Bankruptcy appears on your credit report for 7 years from the date that the bankruptcy was filed. In the short term, your individual credit score will probably be in the high 400s or low 500s. There are also restrictions regarding your ability to incur new debts while you are in a Chapter 13 case. However, it is possible to purchase cars, subject to obtaining approval from the Bankruptcy Court and approval from the lender, and under current FHA guidelines, obtain an FHA mortgage loan after 12 or more months of on-time payments in your case (as long as you can meet the mortgage loan requirements).
To schedule an initial consultation, please call Levy Law Offices at (919) 846-0125, or complete the contact form on the right-hand column of the website. Levy Law Offices provides a free initial consultation in Chapter 7 and Chapter 13 bankruptcy cases for individuals. Levy Law Offices welcomes complex bankruptcy cases and emergency bankruptcy cases.
Levy Law Offices tries to keep the up front attorney fee as low as possible and considers the circumstances of the case in determining how much must be paid up front, and how much of the attorney fee is paid through the plan as a part of your monthly Chapter 13 plan payments.