When you file a Chapter 13 case, you'll have to prove to the court that you can afford to meet both your monthly household obligations and pay into a repayment plan. If your income is irregular or too low, the court won't confirm approve your proposed repayment plan more below. Not a business. This chapter isn't available to companies, meaning that only an individual can file for Chapter 13 bankruptcy.
However, business-related debts that you're personally responsible for will be part of your plan, and therefore, from a practical standpoint, a sole proprietorship might be able to benefit from this chapter.
The Chapter 13 Process Filing and completing a Chapter 13 bankruptcy case is far more complicated than Chapter 7 bankruptcy. Mandatory Courses and Filing Fees When you file your official bankruptcy forms with the court clerk, you'll pay a bankruptcy filing fee and present a certificate demonstrating that you received the mandatory credit counseling education from an agency approved by the United States Trustee's office.
The Chapter 13 Repayment Plan The central part of your Chapter 13 case is the repayment plan that you'll propose to your creditors and the court. The Confirmation Process The various bankruptcy chapters provide a filer with two types of bankruptcy relief: liquidation and reorganization. If there are no objections, the judge will confirm the plan if it meets the following elements: the plan is feasible for instance, the debtor has enough income to pay the creditors as provided the debtor proposed the plan in good faith the debtor isn't trying to manipulate the bankruptcy process , and the plan complies with bankruptcy law.
Priority debt. Your Chapter 13 plan must pay certain debts—called priority claims —in full. Priority claims include child support and alimony arrearages, and most tax obligations. Secured debt. If you want to keep a car or house, you'll have to continue to pay your regular payment on the car loan or mortgage. Whether you'll have to pay these amounts as part of your plan will depend on your local court.
If you're behind on payments, you'll have to repay the arrearages in your plan. Unsecured debt. The plan must apply your disposable income the amount remaining after paying secured and priority debt, as well as allowed living expenses toward unsecured debts, such as credit card balances and medical bills. You don't have to fully repay these debts, or even pay them at all, in some cases.
You just must show that you are putting any remaining income towards their repayment. Value of nonexempt property. You're allowed to keep all of your property in a Chapter 13 bankruptcy if you can afford to do so. You'll have to pay the value of any property that you can't protect with an exemption through your plan.
How a Chapter 13 Case Ends After completing your repayment plan, you must show the court that you are current on your child support and alimony obligations and that you have completed the budget counseling course mentioned above. Talk to a Bankruptcy Lawyer Need professional help? Start here. Practice Area Please select Zip Code.
How it Works Briefly tell us about your case Provide your contact information Choose attorneys to contact you. Take our bankruptcy quiz to identify potential issues and learn how to best proceed with your bankruptcy case. Related Products More. Chapter 13 Bankruptcy. How to File for Chapter 7 Bankruptcy. The New Bankruptcy. A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence.
Unless the court orders otherwise, the debtor 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.
The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts.
The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case including tax returns for prior years that had not been filed when the case began. A husband and wife may file a joint petition or individual petitions. The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at www.
They are not available from the court. Normally the fees must be paid to the clerk of the court upon filing. With the court's permission, however, they may be paid in installments. The number of installments is limited to four, and the debtor must make the final installment no later than days after filing the petition. For cause shown, the court may extend the time of any installment, as long as the last installment is paid no later than days after filing the petition. If a joint petition is filed, only one filing fee and one administrative fee are charged.
Debtors should be aware that failure to pay these fees may result in dismissal of the case. In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:.
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position. When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. In some districts, the U.
The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. Filing the petition under chapter 13 "automatically stays" stops most collection actions against the debtor or the debtor's property. Filing the petition does not, however, stay certain types of actions listed under 11 U. The stay arises by operation of law and requires no judicial action.
As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor. Chapter 13 also contains a special automatic stay provision that protects co-debtors.
Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a "consumer debt" from any individual who is liable along with the debtor. Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. Individuals may use a chapter 13 proceeding to save their home from foreclosure.
The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition. The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.
Between 21 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U. During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan. If a husband and wife file a joint petition, they both must attend the creditors' meeting and answer questions.
In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors' meeting. The parties typically resolve problems with the plan either during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting. In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors.
A governmental unit, however, has days from the date the case is filed file a proof of claim. After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor's chapter 13 repayment plan. Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly.
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