Home Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

Chapter 7 vs. Chapter 13

Chapter 7 vs. Chapter 13

While it may seem a lot of Chapter 13 information may be put in the context of “Chapter 7 vs. Chapter 13” as a simple exercise in compare-and-contrast, there is realistically a historical basis to this relationship. Especially in the eyes of bankruptcy applicants, a key deciding factor in the Chapter 7 vs. Chapter 13 dynamic is the ability to safeguard certain properties in the reconciliation of debt.
To be fair, Chapter 7 does permit the exemption of specific types of monies/assets from liquidation by creditors, including but not limited to animals as pets, disability/unemployment benefits, personal injury awards, Social Security, and vehicles. However, notably absent in this short list is the very home in which a person/couple/family lives. At least temporarily, filing for Chapter 13 instead of Chapter 7 will give the debtor a better opportunity to avoid foreclosure.         
As far as the courts are concerned, a critical piece of Chapter 13 information may be the basis of a petitioner’s income and expenses. It should be reiterated that, though Chapter 7 is employed much more often for individuals than companies, the option is nonetheless open for the latter and comes in a sort of business-oriented tint. 
Consequently, in the “means test” that is employed in some bankruptcy cases, the Chapter 7 vs. Chapter 13 consideration might manifest itself in the court’s decision of whether or not to convert a case from one to the other. Regarding the transfer of proceedings from a Chapter 7 to Chapter 13 sphere of influence, if the majority of a debtor’s expenses are consumer-based, the court may find such conversion is warranted.
Another bit of Chapter 13 information that is of interest to the courts and to debtors alike is that of what debts may be discharged.

Must Read Before Hiring A Chapter 13 Attorney

Must Read Before Hiring A Chapter 13 Attorney

Misrepresentation in Chapter 13 bankruptcy cases, and pretty much all bankruptcy cases, will understandably be met with disapproval by the court judge. Even if a Chapter 13 attorney is not specifically needed in adversary court proceedings, they may be a ticket to avoiding them as an outside consultant.
Oftentimes, through Internet search engines and other media, providers of a certain function, such as one to help remove all debts and avoid foreclosure, will offer their services for a fee, but they may not be a reputable organization. A qualified Chapter 13 bankruptcy attorney would certainly be able to tell the difference between a trustworthy enterprise and a shady operation.
Along similar lines, a Chapter 13 attorney is more apt to have a handle on how to correctly and legally fill out all bankruptcy petitions. 

Payment Plan Rehabilitation for those with Regular Income

Payment Plan Rehabilitation for those with Regular Income

Representing the aims and struggles of lower- and middle-class Americans, Chapter 13 payment plan rehabilitation is a stark departure from the big-budget appeals (and, as some would argue, unfair protections) of Chapter 11 reorganization schemes. Certainly, there are risks to this course of action, notably in the area of credit. All the same, inaction in addressing one’s debts may impair one’s credit rating even more severely. Moreover, it is not as if a declaration of bankruptcy under Chapter 13 means families will lose everything.
Chapter 13 bankruptcy is a “forward-thinking” form of bankruptcy that many would consider a long-term debt adjustment setup. In many respects, it is a fair balance between complete lack of accountability to past engagements with creditors and complete failure to manage one’s financial affairs.
 
 
Purpose and Usage
The specifics of Chapter 13 law are fairly unique as far as the roles of the court officers and the purpose of court proceedings. One certain benefit to Chapter 13 bankruptcy seekers is that they will be afforded a minimal amount of contact with creditors under most circumstances, and certainly less than they would stand to have to endure in a Chapter 7 due to an automatic stay.
In the meeting of creditors and the subsequent hearing, however, direct contact between debtors and creditors is inevitable, and these parties will ask and respond to pointed questions about provisions of the plan drafted by the debtors.
Following these conventions, the confirmation of the plan (or sometimes, installments will be forced to begin in the absence of an agreement) will start the (re)payment process. The debtor will regularly submit specified amounts to the trustee appointed by the courts, who will then allot these funds to the creditors commensurate with their claims.
 
Useful Information
In all likelihood, the most useful information for debtors will be how they can reduce, restructure, and otherwise remove their debt. Thus, it is prudent to know when they may become eligible and how they may be disqualified. First of all, as opposed to municipal and corporate debtors, individual debtors under Chapter 13 law are seldom permitted to take out new loans in hopes of addressing their financial woes. Quite generally, such a measure would be ill-advised, and in any event, only the trustee with oversight of one’s case may give their consent.
As most loans will not be allowed in bankruptcy court, many reprieves from financial obligations will likewise not be assented to. Especially if debts are needed for everyday living (e.g. child support, restitution) or they stem from a particularly large investment (e.g. mortgage payments, secondary education loan repayments), these monies must be continually supplied by debtors.
All this aside, for the Chapter 13 filer in dire straits, debt relief may come to the rescue. Given some unforeseeable “hardship” that affects a regular income earner’s ability to do just that, the judge may approve of a discharge of a portion of the petitioner’s debts.
Legal Implications
Even if an applicant is not charged with a specific crime, a violation of terms of Chapter 13 of the Bankruptcy Code may still be enough to warrant dismissal of one’s case. This may not sound like much to some, but in instances where the need for relief is a pressing one, the ability or inability to secure a long-term repayment plan may be a make-or-break situation. Moreover, a dismissal may hurt the debtor’s ability to petition for Chapter 13 bankruptcy or Chapter 7 bankruptcy at a later date. As such, there are long-term implications attached to this ruling.
One set of conditions that may affect an invalidation of one’s case is any delay or incongruity in filing procedure. Debtors must be sure to accurately spell out all debts/creditors and income/expenses, and  must also submit plans according to their given deadlines for fear of their requests being denied. In addition, all requirements of dependent parties (i.e. domestic support obligations) must continue to be paid on time and all meritorious creditors’ objections must be heard and dismissed in their own right by the judge.
 
Pros and Cons
For a number of filers and a number of reasons, Chapter 13 individual debt readjustment may be a superior option as compared with Chapter 7 liquidation. One of the major incentives of the former is the ability of debtors to forestall banks from foreclosing on and repossessing their homes over which Chapter 7 assets do not have governance.
Besides, as Chapter 13 is specifically a repayment plan, it is certainly a more effective means of consolidating existing debt monies to be issued to creditors. On top of this, these repayments are allowed to be made without the threat of creditors collecting all the while. The doctrine of automatic stay preempts previous contractual terms.
For all of these potential benefits, there are flip-sides that are practical limitations. While a petitioning party’s house may be safe over the span of a Chapter 13 case, this means that debtors still owe regular mortgage payments. Debt refinancing and consolidation, meanwhile, may be of convenience to the bankruptcy seeker, but their credit rating may suffer significantly in the process. Last but not least, though they may not have to answer to creditors, debtors still must give them money every 14 days for upwards of three years.
 
Filing Process
Throughout Chapter 13 court proceedings, there are important forms that need to be completed according to legal protocol. However, before one even gets to the forms, there are filing and general administrative fees that must be paid in full unless otherwise directed by the court.
As for the initial official petition itself, it must be filed alongside statements relating to an individual’s/couple’s executory contracts, outstanding financial obligations, and yearly gains after living expenses.
If the court agrees to hear this case, a petitioning party is required to pass along a repayment plan to the bankruptcy court within two weeks of the receipt of the original petition. At this point, it is the responsibility of the trustee and creditors to review the plan and address any questions/concerns about the terms of this agreement and to submit claims to monies they are owed. Requests for waiver of pre-petition debts, also known as discharges, must too be cleared with the court and creditors both for objections or considerations.
Even evidence of the completion of a minimum number of hours of a credit counseling course must be included in an application for Chapter 13 bankruptcy as per amendments of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005.
 
 
Governing Laws
In the less-than-half a century since Chapter 13 was officially added to the United States Code, this division of the Code has seen sweeping changes. It was not until the year 1978 and the passage of the Bankruptcy Reform Act to address the outmoded policies still retained from the implementation of the Bankruptcy Act of 1898 that both Chapter 11 business reorganization and Chapter 13 rehabilitation for wage earners were formed from lesser pieces of legislation and formally added to the Bankruptcy Code (Title 11), which is where they rest today.
Fairly recently, the 2005 BAPCPA brought pertinent modifications to Chapter 7 and Chapter 13. As noted, the eligibility requirement of completion of a credit counseling course was realized as of the Act, as were tougher standards by which both Chapter 7 and Chapter 13 relief could be awarded, especially in the arena of debts to be discharged.
 
Statistics
While said restrictions affected by the Bankruptcy Abuse Prevention and Consumer Protection Act were intended to make it harder for individuals to apply for bankruptcy, despite these difficulties just the opposite has occurred in recent times with Chapter 13. By more than a 2:1 ratio, Chapter 7 applications are still processed more frequently by the U.S. Bankruptcy Court system, and overall, other forms of bankruptcy have larger year-to-year percentage increases. Nonetheless, Chapter 13 filings are still increasing at steady rates; just five years ago annual declarations were made at a rate below 300,000, but as of fiscal year 2009, these numbers approach 400,000, a dramatic upswing for such a short time.
Another idiosyncrasy within Chapter 13’s statistical data are the variances measured across state lines. Different court districts can lay claim to the highest number of reported bankruptcies in the last few years for Chapter 13 than with all other forms of domestic bankruptcy.
 
Chapter 7 vs. Chapter 13
The comparisons made between Chapter 7 and Chapter 13 by jurists, policymakers, legal students, and others are not simply superficial or coincidental. In fact, Chapter 13 individual debt adjustment was more or less deliberately authorized as an antidote of sorts to the wealth of filings seeking immunity from debt collections via liquidation of debtors’ estates. Today, it is used as an incentive for debtors who wish to avoid foreclosure on their homes (Chapter 7 property exemptions do not govern delinquent mortgage payments).
Chapter 13 also was specifically designed as a means of relief for the individual consumer-debtor, not just simply something for the business owner-doer, and this somewhat loose distinction between the two chapters is reflected in the common ruling of judges to convert a liquidation case to a series of rehabilitation hearings.
Yet an additional benefit recognized in Chapter 13 cases is the ability to discharge certain preexisting debts for which Chapter 7 applicants are not eligible. This is tempered somewhat by the fact that more debts will usually have to be paid in Chapter 13 bankruptcy proceedings before a discharge may be awarded.
 
 
Chapter 13 Attorney 
 
Though debtors are legally entitled to represent themselves in Chapter 13 bankruptcy court, they are not encouraged to waive their right to legal representation, especially as an attorney may be afforded to individuals at no additional cost to them. In bankruptcy court, a debtor may be prompted to respond to claims he or she knowingly filed “in bad faith” or consciously failed to list certain debts. In these instances, a bankruptcy attorney with intimate knowledge of Chapter 13 law will be essential for an informed defense.
Such an attorney will also be useful in the defense against predatory businesses/organizations trying to get one’s money for untrustworthy advice and other services, and therefore, should be consulted prior to entering into any third-party agreements designed to offer assistance in fighting a foreclosure bid or accurately fill out a Chapter 13 bankruptcy declaration petition for a “small fee.”

Read The Pros and Cons of Chapter 13 Laws

Read The Pros and Cons of Chapter 13 Laws

In serving as a source of information on Chapter 13 bankruptcy laws, the U.S. Court system freely acknowledges that Chapter 13 may be a better alternative solution to the problem of mounting debt other than liquidation of assets under Chapter 7. Perhaps one of the greatest benefits of Chapter 13 law as opposed to Chapter 7 bankruptcy is that it includes safeguards for homeowners. Specifically, Chapter 13 bankruptcy laws allow for debtors to manage their financial obligations while at the same time preventing banks or other lenders from foreclosing. 
Even the automatic suspension of creditor collections affected by Chapter 13 law has its good points and bad points. Of course, the freedom from incessant calls, letters and other notices bordering on harassment may be well worth the hit people take with regard to their credit ratings. At the same time, Chapter 13 bankruptcy laws clearly outline that payment plans must occur over a period of at least three years, and potentially, this could be extended up to five years for special circumstances. To have to make regular payments twice a month for half a decade might be a disconcerting prospect to some.  

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

As it has well been documented, filing for bankruptcy requires the proper documentation to be filed in bankruptcy court. In filing Chapter 13 bankruptcy, the initial application must be passed along to the court, along with a $235 case filing fee and a $39 administrative fee of which negligence could result in the forfeiture of the case itself. On top of this, as with all other varieties of bankruptcy, there are four records that must be attached to Chapter 13 bankruptcy forms, such as the official petition relating to an accurate depiction of the debtor’s financial status. They are:
1) a list of all debt-oriented contracts and unexpired leases;
2) a breakdown of income through employment versus living expenses;
3) a compilation of all existing creditors and loans outstanding; and
4) an overall statement of fiscal affairs.
As for the plan creation and confirmation stages, the plan itself is one of the requisite forms in the Chapter 13 bankruptcy process. As stated, the plan (devised by the debtor) must be submitted to the court within two weeks of submitting the official petition. In a meeting of creditors shortly thereafter, it must be examined by all interested creditors. For up to 90 days after the fact, the creditors will then have their own responsibility to file with the court their claims on monies owed to them by the debtor. They are also permitted to attend the actual plan confirmation hearing.
Sometimes, meanwhile, depending on the debts specified, a petitioning party filing Chapter 13 bankruptcy may also request a discharge of existing loans with the fulfillment of payments outlined in the confirmed debt adjustment plan. Imaginably, this measure is very much a conditional one. To be eligible for waiver of remaining debts, a debtor may stay on top of all regularly scheduled alimony and child support installments, as well as complete a financial counseling course.
Filing for Chapter 13 Bankruptcy
1. Chapter 13 Bankruptcy is a specific chapter of the United States Bankruptcy Code, which is the formal set of rules regulating bankruptcy filings in the United States.
2. A Chapter 13 filing enables an individual to partake in a financial reorganization or repayment plan. Similar to the other forms of Bankruptcy filings, a Chapter 13 filing is initiated when an individual or business entity faces insurmountable debts.
3. The goal of a Chapter 13 filing is to enable an individual or business entity debtor who receives income to reorganize their debt payments through a court-approved plan. This plan is in direct contrast to a Chapter 7 filing, which offers an immediate and complete relief of oppressive debts.
4. A Chapter 13 filing creates a repayment plan for individuals or entities in debt. This repayment plan offers those in debt more time to pay off their debts and the ability to fulfill their obligations through incremental pay periods.
5. As a result of this structure, a Chapter 13 filing can effectively halt foreclosures. A foreclosure would be reinstated upon completion of the restructured payment plans.
6. A Chapter 13 program documents in detail the treatment of all liens, debts, and the secured status of all the assets and liabilities owned or owed by the debtor.
7. In order for one to file for a Chapter 13 Bankruptcy, the debtor must meet the following requirements: provide a number of assets or payments to the underlying creditors that would equal a similar amount had the debtor filed for a Chapter 7 Bankruptcy liquidation.
8. The debtors must also promise to pay the creditors in full, or commit all disposable income into their Chapter 13 restructure plan for at least three years.
 
7 Steps on How to File for a Chapter 13 Bankruptcy
1. To file for a Chapter 13 Bankruptcy plan, you must first gather all information on your underlying debts.
2. The necessary documentation includes: revolving credit accounts (such as credit cards or medical bills), all forms of credit involving capital (i.e. house or car note), and lastly all taxes owed to the State or Federal Government. In addition to all this information, you must also submit any court documents—these documents are necessary if someone is suing for failure to fulfill a debt obligation.
3. Before filing, you must rule out all other options. In essence, filing for bankruptcy is a last resort. When an individual files for bankruptcy, their credit rating will be negatively affected for years.
4. After you have decided that filing is the best option, you must meet with an attorney. Find a legal professional through a referral or search. Regardless of the method, you must include an attorney in your filing because bankruptcy is a complicated procedure.
5. To initiate the claim you must obtain a certificate from a credit counseling agency. The credit agency will take your current income and evaluate the figures with your current minimum payments and living expenses.
6. Once this is achieved, you must file a motion in Bankruptcy Court. Your legal professional will file the motion, but you must satisfy all fees that are required with the claim.
7. The tangible process begins by attending a scheduled hearing. A representative of the bankruptcy trustee will swear the documents in and go over the determined budget with the attached documentation and the legal professionals.

 

7 Steps to Filing for Chapter 13 Bankruptcy

7 Steps to Filing for Chapter 13 Bankruptcy

Chapter 13 Background At A Glance

Chapter 13 Background At A Glance

For some Americans mired in debt, they may have no choice but to declare bankruptcy in hopes of getting their lives (and credit) back in order. Chapter 13 of the U.S. Bankruptcy Code, also known as “individual debt adjustment” or a “wage earner’s plan,” is a major alternative to Chapter 7 liquidation. This might lead one to believe that Chapter 13 bankruptcy and Chapter 7 bankruptcy are quite similar.
Structurally, however, and for a number of reasons, Chapter 13 is more analogous to Chapter 12 relief for family farmers/fishers. Such an assertion makes sense if we consider that Chapter 7 deals specifically with liquidation proceedings, while Chapter 13 bankruptcy is expressly not liquidation-oriented.
The relationship between Chapter 13 and Chapter 12 has merit, for one, concerning the timetables for debt relief in both of the subsets of the Bankruptcy Code. As with Chapter 12, Chapter 13 bankruptcy is available to all individual workers provided their unsecured debts (those from loans not tied to collateral assets such as a home) are less than $336,900 and their secured debts (those that are related to loans where properties are collateral) are less than $1,060,650. It should be noted that these rates tend to vary from year to year in accordance with the cost of living for homeowners.

Quick Look into Chapter 13 Purpose and Usage

Quick Look into Chapter 13 Purpose and Usage

As is the norm with bankruptcy cases, Chapter 13 bankruptcy rules dictate that debtors are protected from creditors through the doctrine of automatic stay. Thus, for the three years or however long the repayment process takes, Chapter 13 bankruptcy is a protection from debt collection that, by virtue of their insolvency, petitioners cannot afford.
Something unique to Chapter 13 bankruptcy rules, though, is the protection also afforded from creditors to co-debtors, defined as those individuals who help loan applicants by co-signing on the application itself. In all, Chapter 13 law is set up for as minimum an amount of contact between debtors and creditors as possible, as a court-appointed Chapter 13 trustee is enlisted to disperse monies to lenders after confirmation of a plan.
Of course, for the sake of applicants, while contact between them and creditors is generally discouraged, there are points in every case when this will not be possible. After the filing of the petition (Chapter 13 bankruptcy rules specify that this occurs between 21 and 50 days after the initial bid), the impartial Chapter 13 trustee will preside over a meeting of the creditors.
Most definitely, debtors are required to attend this meeting and will expected to field questions about their debt adjustment plan from both creditors and the Chapter 13 trustee too. To minimize potential applications at this stage, debtors are encouraged to meet with the Chapter 13 trustee prior to the meeting of creditors and cooperate fully with them.
Consequently, while Chapter 13 bankruptcy may be a source of relief for debtors, it by no means is a relief of responsibility altogether. Moreover, it certainly does not absolve them of their financial responsibilities. Upon confirmation of a plan, as in Chapter 12 hearings, the individual’s disposable income will be used to offset secured, unsecured and priority claims from creditors. Chapter 13 bankruptcy rules state the debtor must make payments every two weeks which will be distributed by the Chapter 13 trustee to creditors according to said plan.

Facts to Consider Before Filing for Chapter 13

Facts to Consider Before Filing for Chapter 13

Certainly, the information that Chapter 13 applicants might find the most useful is that which will lead to the success of a restructuring plan or even a Chapter 13 bankruptcy discharge. As such and in turn, the most useful information in this section of the Bankruptcy Code may be the Chapter 13 rules that govern and/or restrict such benefits for debtors.
Some of these Chapter 13 rules are indeed pretty specific, and may contain pitfalls that may go overlooked by people who fail to properly review these laws. A Chapter 13 bankruptcy discharge may be refused for particular recurring debts/expenses, or the appointed trustee may throw out a petitioner’s case altogether. The following are some notes on the potential complications of relief for debtors alongside Chapter 13 rules: 
Different forms of bankruptcy give debtors varying amounts of latitude with how they restructure their debt. In the case of Chapter 9 debtors, which are whole municipalities, under the Bankruptcy Code, their reorganization strategies permit taking out a new loan as a means of debt management. Unless given explicit permission by the case trustee, Chapter 13 rules dictate that applicants may not accrue any new debt while they move to repay creditors. 
The reasoning behind this, which really is based on common sense, is that debtors should not be taking out additional loans that may affect their ability to compensate lenders moving forward, especially when they have not evidenced an ability to meet financial obligations on a regular basis. Depending on their circumstances, petitioners seeking a complete Chapter 13 bankruptcy discharge may find some debts may not be able to be negated so easily, if at all. 
According to Chapter 13 rules, some financial requirements may not be able to be avoided, as their consistent payment is legally necessary. The types of monies that may not be eligible for Chapter 13 bankruptcy discharge include alimony/child support, mortgage payments, restitution to victims for injurious acts of criminality, student loans and taxes. While Chapter 13 rules thus have the power to significantly limit individuals applying for relief, at the same time, they take extreme circumstances under consideration, cutting debtors some slack, so to speak.
A special type of Chapter 13 bankruptcy discharge known as a “hardship discharge” may be available to petitioners in the event something happens beyond their control that prevents them from making their payments as planned. Usually, this “something” is a serious illness or injury that prevents a debtor from working/being gainfully employed. 

Beware of Chapter 13 Legal Implications

Beware of Chapter 13 Legal Implications

While corporations will absolutely need a legal
representative
, individuals sometimes opt to file pro se, representing
themselves. Given the complexity of Chapter 13 bankruptcy law, though,
those filing a petition would be well advised to seek legal counsel.
         

 

Imaginably, benefits granted
through Chapter 13 bankruptcy law are not meant to be handouts
courtesy of the
Federal Government. All petitions are subject to approval by a
licensed bankruptcy court
. In
fact, Chapter 13 bankruptcy law as a whole is quite insistent on
expediency and accuracy when it comes to filing different documents. Only 14
days are allotted to applicants between the time in which they submit their
initial petitions and the point at which they submit their rehabilitation plan,
and as such, hiring a Chapter 13 lawyer to manage these affairs while
still trying to maintain a job or as an aid through times of illness when it
would naturally be hard to meet this short window may be a necessity.

 

Even when expenses are not directly related to Chapter
13 bankruptcy law, courts will still demand that these costs be met, even as
repayment is under way. A case may be likewise dismissed if debtors fail to
file tax returns or supply domestic support.