Chapter 13

Chapter 13 (Repayment Plan)

A Chapter 13 will allow you to restructure your debt, replacing unreasonable monthly payments with a more realistic payment plan that you can pay off for three to five years. In the mean time, your creditors cannot take any collection actions against you. No more collection calls, and no more anxiety.

Chapter 13 may not be available to everyone, but for some people it can offer a way out and start you onto the path of a brighter debt free future. Making yourself familiar with how a Chapter 13 works is the first step towards deciding whether this is the right choice for your situation. The information contained on this page will give you a good start. However, to ensure that you go about this in the best way possible, you may find it helpful to speak with someone who negotiates bankruptcy cases professionally. Attorney George Weber specializes in helping people get out of debt and can give you expert advice on Chapter 13. Once you have looked over the information bellow, consider signing up for a free consultation. In addition to regular business hours, evening and weekend appointments are available.

What is Chapter 13?

At the end of a successful Chapter 13 case you will have restructured your debt so that you can pay it off in smaller quantities over a longer period of time, generally three or five years. Since this new plan will be mandated by the court, this means that your creditors will be forced to quit collection efforts. The best part about a Chapter 13 is that it allows you to keep valuable property that you might have been forced to forfeit in a Chapter 7 case. This is a good tool for stopping foreclosure on your house and extending the amount of time you will have to pay your mortgage.

Who is eligible for Chapter 13?

Generally speaking, as long as your total unsecured debts are less than $336,900 and your total secured debts are less than $1,010,650 you will be eligible for Chapter 13 bankruptcy. Unsecured debts are amounts you owe that are not secured by collateral. This means that did not sign a contract promising to give up an item of your property in exchange for not being able to pay these debts. In contrast, secured debts are amounts which you owe that are secured with some collateral. A mortgage on your house is an example of this type of debt.

How do the proceedings for a Chapter 13 case work?

Here is a step by step run through of what will take place in a Chapter 13 case:

The first step is for you to file a petition with the bankruptcy court that presides over the area where you live. With the petition you must include a few vital documents. These are:

• A list of all of the things you own as well as the debts that you owe.
• A budget including your income and all of the money that you spend each month.
• A formal statement summarizing your financial situation.
• A list of all contracts and leases that you are bound to.
• Your most recent tax return, and in some cases tax returns from prior years.
• A certificate of credit counseling.

Your attorney will be able to assist you in compiling this list in a form that is acceptable to the court and conducive to the success of your case.

Next you will be required to pay a set of fees to the court. Altogether, these amount to $274. However, in some cases you will be able to petition the court to allow you to pay these fees in installments.

Once your petition has been successfully filed, this will immediately suspend collection efforts on the part of your creditors.

At this point the court will appoint an unbiased trustee to your case. The trustee will act as a go-between, facilitating payment from you to your creditors.

The next step will be what is called a “meeting of the creditors.” This will be a meeting between you, your creditors and a trustee assigned by the court. The purpose of this meeting is to develop a plan for you to pay off your debt within three or five years. It is best to already have a plan ready before this meeting and if possible, to run it by the trustee beforehand. After this meeting has taken place the case will then be ready to proceed to court.

Will you be required to pay your debts in full under a Chapter 13?

One of the benefits of a Chapter 13 case is that under some circumstances you will be able to have a portion of your debt discharged without payment. Whether this is possible will depend on the nature of your debt. Secured debts (described above under “Who is eligible for Chapter 13?”) are less likely to be discharged. If the loan was taken out for the express purpose of buying the property that is secured, you will probably still be required to pay this debt in full. On the other hand, if the property in question is incidental to the loan, you will only be required to pay the current value of the property even if this is less than the total loan amount.

For unsecured debts, the rules governing discharge are a little less strict. If you can prove that you will be unable to pay the full amount of the loan within three or five years (depending on your income) then you may be allowed to pay only a reasonable monthly amount for this time period and then have the remainder of the debt forgiven. However, in most cases, the total amount paid over three or five years must be at least equal to what the creditor would receive in a Chapter 7 case.

Don’t get too worried if this sounds pretty complicated. The reason that attorneys like George Weber are around is to help to you understand these rules and develop an effective plan for negotiating this process. Going through bankruptcy can be trying, but it’s easier if you can trust someone who has devoted their life to assisting people in your situation.