Chapter 13 bankruptcy allows an individual who has a regular income, but is struggling to keep up with their debts, and allows them to enter into a repayment plan that works with their budget. Often people who file Chapter 13 bankruptcy are behind on their house or a car payment or both. A Chapter 13 Plan also allows an individual to create a plan to pay their unsecured debts such as credit card and medical debts. Often these plans pay a small percentage of the unsecured debt over a three-to-five-year period.
Chapter 13 Bankruptcy, also known as a wage earners bankruptcy, is for individuals who have regular jobs and would like to pay all or part off their debts in installments, over a period of 3 to 5 years.
With a Chapter 7 bankruptcy discharge, most unsecured debts are wiped out, and you don’t have to repay them. The question naturally arises as to why anyone would choose to file Chapter 13 and repay a portion of his debts. Chapter 13 can offer many advantages over Chapter 7. In most instances, a Chapter 13 bankruptcy case is filed to stop a foreclosure on the individual’s home, or to stop a car repossession. A Chapter 13 Plan proposes to pay any past due amounts on your mortgage or auto loans over a period of 3 to 5 years, allowing the individual to keep their house and car. You are still responsible for resuming the “regular payments” after filing Chapter 13. If your car has been recently repossessed, a Chapter 13 case filing will require the lender to return the car to the individual.
Another reason for a Chapter 13 case filing is due to significant equity in your home or other assets. If you have too much equity in your real estate and you file a Chapter 7 petition, the bankruptcy judge may order the Chapter 13 trustee to sell your home in order to pay your creditors. In this situation, Chapter 13 may allow you to keep your home. A Chapter 13 case may also be necessary because the individual has a monthly income that is too high to qualify for Chapter 7. There is a process of assessing if your income is too high to file Chapter 7. This is known as the “Means Test” and this will be explained to you at your first meeting with your local bankruptcy attorney. Other benefits include “valuing” auto liens to pay the value of the car rather than what is owed and valuing IRS tax liens in some situations.
If you feel overwhelmed because of high debt balances and are unable to pay your monthly bills, filing Chapter 13 may be the fresh start that you need. There are requirements you must meet and our bankruptcy lawyer, Alex Sanders, will be happy to discuss your individual situation with you.
When you hire Alex D. Sanders Law, you can rest easy knowing that the counsel you receive is backed by over 15 years of experience. Every case we take is examined with care and great attention to detail. We help clients find the solution that works best for their specific situation.
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief if the individual’s combined total secured and unsecured debts are less than $2,750,000 as of the date of filing for bankruptcy relief. 11 U.S.C. § 109(e).
It is generally easier to qualify for a Chapter 13 than Chapter 7. Several requirements are listed below.
– You must complete a credit counseling course within six months of filing.
If the debtor’s current monthly income is less than the applicable state median, the plan can last for three years. If the debtor’s current monthly income is greater than the state median, the plan generally must be for five years. During this time, creditors are to stop all collection efforts. The median income amounts in Georgia (set by the IRS) as of 11/1/2024 are as follows:
Household size
Start by locating financial documents, determining whether you’re eligible for Chapter 13, completing your official bankruptcy paperwork, and taking a prefiling credit counseling course (you can take it anytime during the 180 days before filing your Chapter 13 bankruptcy case).
Your case will begin when you submit your completed paperwork and filing fee to your local bankruptcy court. If you have counsel, your lawyer will file your case online. Learn how to benefit from an emergency bankruptcy filing when you don’t have time to complete the entire bankruptcy petition
You will receive a Notice of Appointment of Trustee from the court in the mail. It informs you who the Chapter 13 trustee responsible for administering your case is and provides contact information.
You and your creditors will also receive important information in a Notice of Chapter 13 Case, including the meeting of creditors date, the creditors’ claim deadline, and the confirmation hearing date (more below).
You’ll begin paying the amount proposed in your Chapter 13 plan about 30 days after filing. The court won’t have approved your plan yet, but making your monthly payment before the confirmation hearing allows you to complete the case within the 36- or 60-month requirement.
If the bankruptcy court doesn’t approve or “confirm” your plan, the trustee will return your money, minus administrative costs and certain interest-incurring secured payments like car payments. It’s important to pay these debts on time to prevent a buildup of unpaid fees and interest that could undermine plan completion.
At least seven days before the 341 meeting of creditors, a hearing all filers must attend, you’ll provide the trustee with “521 bankruptcy documents,” including bank statements, paycheck stubs, four years of tax returns, and other documents (some jurisdictions might require you to file some documents with the court).
Other financial information a trustee might require include proof of insurance, mortgage and car loan balances, retirement, stock, and investment statements, and income and expense statements if you own a business.
The initial Chapter 13 meeting of creditors will be set within 40 days of filing. During the meeting, the trustee will verify your identity and ask questions about your filing. Any creditors who appear can also ask about your financial affairs.
The trustee or a creditor can object to your plan if it’s believed you aren’t paying as much as you should. The trustee will often discuss potential problems informally at the 341 meeting and file a formal objection if the filer fails to fix the problem and amend the plan. The bankruptcy court rules on unresolved objections at the confirmation hearing.
Creditors file proof of claim forms stating the amount owed and the debt type, along with a contract or other supporting documents, within 70 days of the bankruptcy filing. Government creditors have 180 days to file claims. If a creditor doesn’t file a proof of claim by the deadline, you’ll have 30 days to file it for the creditor.
You or the trustee will file a written objection to a creditor’s claim if you have a reason to object. You’ll want to file it as soon as possible to give the creditor the proper notice.
You or your attorney attend the confirmation hearing, which will be set no later than 40 days after the 341 hearing. The bankruptcy court will review your proposed plan and objections raised by creditors or the trustee before deciding whether to “confirm” or approve your repayment plan.
If the court approves your plan, you’ll continue making your proposed payment. However, if the trustee or creditor raises a valid objection, the court might give you time to modify your plan and continue the Chapter 13 confirmation hearing. It’s common to “amend” or change a Chapter 13 plan in response to an objection by the trustee or a creditor.
While your Chapter 13 plan is in effect, the court, trustee, U.S. Trustee, or creditor could request annual tax returns. Also, depending on your jurisdiction, the trustee will send you periodic statements showing creditor payments. You might be able to access the information on the trustee’s website. Contact the trustee for instructions.
It’s important to keep track of the payments and pay any late fees assessed for a delinquent mortgage or car payment. This situation can occur when you fall behind on a plan payment, preventing the trustee from sending the funds on time. If you don’t pay the fees separately, the outstanding balance will continue to grow, and you’ll owe a significant amount at the end of your case.
You will file a certificate showing you completed a debtor education course before making your last plan payment. Also, you’ll likely verify that you’re current on support payments and provide other information.
The court grants your bankruptcy discharge erasing the remaining balances of qualifying debts after you complete your plan and fulfill other requirements. The court might schedule a brief final court appearance called a “discharge hearing.” Otherwise, you’ll receive a discharge notice by mail about a month after completing your plan payments
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