Basics of Filing a Chapter 13 Bankruptcy
Experienced attorney Margaret Travis will help you understand what to expect when filing a Chapter 13 bankruptcy. In Chapter 13, also known as reorganization of an individual wage earner, you and your attorney come up with a payment plan to repay your debts. You then make payments to the Trustee under the plan for 3 to 5 years to pay your creditors. At the end of the plan period, if you have met all the requirements, the court will discharge your remaining balances on debt included in the bankruptcy which is not paid off.
How Do I Qualify?
To qualify for Chapter 13, you must have a regular income, be able to pay your monthly obligations, and must be able to make additional payments under the repayment plan. The Trustee and the Court must approve the plan. The Bankruptcy Code limits how much secured and unsecured debt you can list in your filing. If you have enough income to make payments, don’t mind paying your creditors over 3 to 5 years, and you want to keep your property, reorganization might work for you.
Contact experienced bankruptcy attorney Margaret Travis to evaluate your income, debts, and assets. She will let you know whether Chapter 13 will work best for your situation.
What Debts Can I Discharge Under Chapter 13?
Unsecured debt: You can discharge many types of unsecured debt in a Chapter 13 bankruptcy, including medical debt, credit card debt, department store purchases, signature loans, gym membership contracts, cell phone bills, utility bills, bank overdraft charges, and payday loans.
Secured debt: You can discharge secured debt (such as your house or car) under Chapter 13. However, an asset as collateral backs secured debt. The asset is “pledged” to the lender in case you do not repay the loan. If you do not pay the loan, the lender may seize the asset. If you want to keep a secured asset (like your house), you must pay for it during and after the plan.
Are there Debts I Cannot Discharge Under Chapter 13?
The Bankruptcy Code determines priority debts, which you must pay in full. These may include tax obligations, child support or alimony, and criminal or punitive fines.
Student Loans: It is very difficult to discharge student debt under Chapter 13. The Bankruptcy Code lists student loans as not dischargeable unless the debt “would impose an undue hardship on the debtor and the debtor’s dependents.” That sounds promising, but most debtors find it virtually impossible to prove “undue hardship” and get student loan debt discharged. 11 U.S.C. § 523(a)(8). However, the law in this area is slowly changing.
Speak with Margaret Travis to better understand the debts you must fully repay and what to expect in your Chapter 13 bankruptcy.
Can I Keep My Assets?
In Chapter 13 you can keep assets you can afford. However, you must keep making regular payments if you still owe on the asset. We recommend you discuss your assets, including those you want to keep and those you do not with Ms. Travis. She will work with you to evaluate your assets and debts and let you know what to expect.
What About My House?
Most of our clients can keep their homes, as long as they can make the payments. Ask Ms. Travis about your house once you have provided her with all the paperwork regarding your home.
What About My Car?
Again, as long as you can afford your car payments, you can likely keep your car. Ms. Travis needs a copy of your car’s title, to know how much you owe, who the lienholder is, and whether you are behind on your payments. Once you provide this, ask Ms. Travis what to expect with your car.
What Happens After Filing Chapter 13 Bankruptcy?
After you decide to file for bankruptcy and hire an attorney (paying upfront), you will go through the following steps to discharge your debt after 3 to 5 years of payments:
- Credit Counseling: You start by taking mandatory credit counseling. Credit counseling will help make sure you really need to file bankruptcy instead of working out a repayment plan.
- Bankruptcy Petition: Your attorney will prepare and file your Chapter 13 Bankruptcy Petition, Schedules, and Statement of Financial Affairs.
- Automatic Stay: Once your attorney files the Petition, an automatic stay stops most collection activities during your bankruptcy case.
- 341 Hearing (creditor’s meeting): You must attend a meeting with the Bankruptcy Trustee and sometimes your creditors. The Trustee will ask you a series of questions about your schedules, debts, and property. Your creditors may attend, but many creditors chose not to appear.
- Repayment Plan: The Trustee will review your proposed repayment plan and (hopefully) approve it at a confirmation hearing.
- Make Your Payments: After the Trustee approves your plan, you will make the scheduled payments for 3 to 5 years. There are a variety of ways to make your payments and Ms. Travis will discuss this with you while preparing your Chapter 13 Plan.
- Predischarge Debtor Education Course: You wrap your Chapter 13 up with a financial management class to help you develop better money management skills and habits to stay out of trouble with credit and debt.
- Chapter 13 Discharge: Once you complete your Plan, the court will discharge any unsecured debt which is not paid off so you are no longer personally liable for it.
Your attorney needs ALL the requested documents and information before she meets with you. Start gathering documentation of everything you owe and everything you own. You must provide accurate information to both Margaret Travis and to the bankruptcy Trustee. It is a federal offense to fail to disclose all your assets or lie on any of your bankruptcy documents (Petition, Schedules, Statement of Financial Affairs, etc.).