El Cajon Chapter 13 Bankruptcy

Understanding Chapter 13 Process. El Cajon  Chapter 13 Bankruptcy Attorney

 Overview of  "How Chapter 13 Works" - Chapter 13 Bankruptcy

Welcome to "How  Chapter 13 Works"   This is an overview of a Chapter 13 Bankruptcy Process.

A chapter 13 bankruptcy has been called a wage earner's plan. It enables individuals with regular income to make payments under the chapter plan and to repay part of the debt and sometimes all of it.  I have seen plans as low as 5% of the unsecured debt being repaid.  Chapter 13 is a more complex bankruptcy process than chapter 7.  The Plan has to be carefully drafted to meet the requirements of the bankruptcy code. Also many some of the plans, the trustee will object to for one reason or another.  The most common is that the person does not earn enough money to pay the plan or the creditors are not getting as much as they would under a chapter 7.   

 Under chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause."  If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. At the end of five years,  the balance of unsecured debts are normally dismissed.

Learn How Chapter 13 Bankruptcy Works. Chapter 13 Bankruptcy Attorney, Spring Valley.

Can my creditors go after me during the plan?

During this time the law forbids creditors from starting or continuing collection efforts.  As long as the plan is in effect they can not.

There are five aspects of a chapter 13 proceeding:

1.      The advantages of choosing chapter 13;

2.      The chapter 13 eligibility requirements;

3.       How a chapter 13 proceeding works;

4.       What may be included in a chapter 13 repayment plan and how it is confirmed?

5.       Making the plan work, and the special chapter 13 discharged.

Advantages of Chapter 13  (For many, Chapter 13 can be a better option than Chapter 7).    Call Attorney Casey for Free Bankruptcy Consultation. 619 447-6780

Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.

Chapter 13 Eligibility  (If you earn too much for Chapter 7, Chapter 13 bankruptcy may be an option).

Can I be self-employed and still file a Chapter 13?

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650. These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation, LLC or partnership may not be a chapter 13 debtor.

I recently filed a chapter 7 and it was dismissed due to my failure, can I file a chapter 13 now?

Details of Chapter 13 Process. Chapter 13 Bankruptcy Overview, Spring Valley.

An individual debtor  cannot file under chapter 13 or any other chapter if;

1.      During the preceding 180 days they have filed a prior bankruptcy petition that was dismissed due to the debtor's willful failure to appear before the court.

2.      Comply with orders of the court.

3.      Was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

4.      In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing.

5.      There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

How Chapter 13 Works

A chapter 13 case begins by filing a petition with the bankruptcy court. The debtor has a domicile or residence in a specific jurisdiction.

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;

(4)  A statement of financial affairs.

(5) The debtor must also file a certificate of credit counseling,

(6)  and a copy of any debt repayment plan developed through credit counseling;

(a) evidence of payment from employers,

(b) if any, received 60 days before filing;

(c) a statement of monthly net income and any anticipated increase in income or expenses after filing;

(d) a record of any interest the debtor has in federal or state qualified education or tuition accounts.

(f) 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).

Bankruptcy Information, How Chapter 13 Process Works. Chapter 13

Can A Husband and Wife File a Joint Petition?

A husband and wife may file a joint petition or individual petitions. If you live in a community property state like California, most likely your attorney will recommend filing a joint return if the debt was incurred during the marriage.

How Much is the Court Cost To File A Chapter 13 Bankruptcy?

The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee.  I highly recommend this fee is paid at filing. Normally the fees must be paid to the clerk of the court upon filing.

With the court's permission you can make up to four installment payment and the last payment must be paid within 120 days. The debtor may also pay the $39 administrative fee in installments but it costs  more on attorney fees.  If a joint petition is filed, only one filing fee and one administrative fee is charged. Debtors should be aware that failure to pay these fees probably will 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:

1. A list of all creditors and the amounts and nature of their claims;

2. The source, amount, and frequency of the debtor's income;

3. A list of all of the debtor's property; and

4. A detailed list of the debtor's monthly living expenses, food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

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.  This trustee has a lot of power so you need to be very truthful with this person. In some districts, the U.S. trustee or bankruptcy administrator appoints a standing trustee to serve in all chapter 13 cases. The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors.  They are not out to get you but to apply the law.  

What Happens After I File?  What is the Automatic Stay?

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 , and the stay may be effective only for a short time in some situations.  This is why we ask for all the facts prior to filing so the attorney will know what to expect and this also apply to you. 

The stay arises by operation of law and requires no judicial action.  What this means it start as soon as you file.  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.

Does The Automatic Stay Protect Any Co-Debtors?

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.

I Heard That the Automatic Stay Can Stop The Foreclosure Process Is That True?

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. Other words not only you have to stay current but you will have to get caught up during the plan.

About 20 to  50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. 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. This is the same as in a chapter 7.

As your attorney I will try to resolve problems with the plan either during or shortly after the creditors' meeting.  Most of the time the Trustee wants the plan to work. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate.  Many times I will  consult 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 180 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.

The Chapter 13 Plan and Confirmation Hearing

Some attorneys will wait until after the case is filed then draft a plan.  My office tries  to have the plan ready for filing prior to the filing or not too long after the filing.

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 15 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. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.  Many times this means the creditors under a chapter 13 may get very little of what is owed them.

There are Three Types of Claims :  

1. Priority Claim   2. Secured    3. Unsecured

There are three types of claims: priority, secured, and unsecured.

1. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. This includes the Trustee fees and your attorney fees not paid prior to filing.

2. Secured claims are those for which the creditor has the right take back certain property (the collateral is normally the item you bought) if the debtor does not pay the underlying debt.

3.   Unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

Under the plan, the plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim.  This is the case of domestic support obligation.

Can I keep a Secured Claim That Has Collateral  Securing it?

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral.

If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any arrearage is made up during the plan. If the debtor is represented by my office I will discuss with you the  proper treatment of secured claims in the plan.

Does an Unsecured Claim  Have to Be Paid In Full?    NO!

The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7.

What is Considered Disposable Income?

"Disposable income" is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor's gross income.

I Have A Business, What Is Considered Disposable Income?

For a debtor who operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B).

How Will I Know How Long My Plan Will Last?

The "applicable commitment period" depends on the debtor's current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size - and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. § 1325(d).

The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.  I will be able to tell you how long it will last.

How Soon Will I Have To Start Making Payments On The Plan?

Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee.

If any secured loan payments or lease payments come due before the debtor's plan is confirmed (typically home and automobile payments), the debtor must make adequate protection payments directly to the secured lender or lessor - deducting the amount paid from the amount that would otherwise be paid to the trustee.  

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code.

Creditors will receive 25 days' notice of the hearing and may object to confirmation. While a variety of objections may be made, the most frequent ones are that payments offered under the plan are less than creditors would receive if the debtor's assets were liquidated or that the debtor's plan does not commit all of the debtor's projected disposable income for the three or five year applicable commitment period.

If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan "as soon as is practicable."  If the court declines to confirm the plan, the debtor may file a modified plan.  The debtor may also convert the case to a liquidation case under chapter 7.

What Happens If The Court Denies The Plan?

If the court declines to confirm the plan or modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors).

Occasionally, a change in circumstances may compromise the debtor's ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be modified either before or after confirmation.

Modification after confirmation is not limited to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor.

Making the Plan Work

The provisions of a confirmed plan bind the debtor and each creditor. 11 U.S.C. § 1327. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor's ability to complete the plan.

A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan.

In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 1307(c).  It is really important you make the payments under the plan.

The court may also dismiss or convert the debtor's case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony), or fails to make required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521.

The Chapter 13 Discharge

The bankruptcy laws regarding the scope of the chapter 13 discharge are complex and have recently undergone major changes. Chapter 13 is complex and a  competent legal counsel should be consulted prior to filing.

A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor:

(1)  Certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid;

(2)  Has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and

(3)  Has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor's district has determined that such courses are available to the debtor). The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor's homestead exemption.

The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions.

Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328.

Debts not discharged in chapter 13 include certain long term obligations

1.  Such as a home mortgage; 

2.  Debts for alimony or child support;

3.  Certain taxes;

4.  Debts for most government funded or guaranteed educational loans or benefit overpayments;

5.  Debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs;

6.  Debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime.

To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded.  There are some other debts you may be responsible for. I will discuss them with you if you have incurred these debts.

Some Debts Under Chapter 13 Are Dischargeable Where They Would Not Be Under Chapter 7.

The discharge in a Chapter 13 case is somewhat broader than in a Chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).

The Chapter 13 Hardship Discharge

After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11 U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor; (2) creditors have received at least as much as they would have received in a chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C. § 523

Must read information about Chapter 13.  Find an bankruptcy attorney near Spring Valley Get a pre-bankruptcy review. Free Chapter 7 and Chapter 13 consultation.

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Looking to file a Chapter 13 bankruptcy. Not sure if you qualify for a Chapter 13. Free bankruptcy consultation & Pre-filing Bankruptcy. El Cajon, CA. (619) 447-6780

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