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Chapter 13 Bankruptcy
Chapter 13 is a restructuring bankruptcy, where you maintain and complete a payment plan based on your income. Chapter 13 bankruptcy will protect your property.
The key Chapter 13 benefits: you protect your assets, your home, your vehicles, and wipe out other debt. You can also pay back taxes without continually accruing fees and penalties. You can protect co-debtors. It stops or prevents foreclosure of your property, and stops repossession of vehicles.
The disadvantages to Chapter 13: If you do not complete your Chapter 13 plan, you are not likely to receive all of its benefits.
In my experience dealing with many clients over the years, I have found that Chapter 13 bankruptcy is often misunderstood. Although Chapter 13 has a repayment plan, it also can wipe out a substantial amount of unsecured debt while protecting your assets and property. It is commonly used to stop foreclosure actions, repossessions, bank garnishments, and wage garnishments. It is not the same thing as a debt consolidation program. Before you consider a debt consolidation program, read our thoughts on debt consolidation vs. bankruptcy and come in for a consultation. We may be able to help you avoid a lot of headache and save you money.
How to file Chapter 13 bankruptcy
In order to file for a Chapter 13 bankruptcy, a Debtor (person properly filing for bankruptcy) has to file a petition together with schedules of assets and liabilities, schedules of current income and expenses, a statement of financial affairs, a statement of current monthly income, or the means test (form B22), and a schedule of executory contracts and unexpired leases. Additional documentation may also be necessary. A Debtor must also complete a pre-filing credit counseling session and include a certificate of completion with his or her bankruptcy petition. The pre-filing credit counseling certificate is good for 180 days. A Debtor must also provide a copy of his or her most recently filed income tax return to the trustee. A Debtor also needs to file all pay stubs he or she received for the 60 days preceding the filing date.
The following information must be fully disclosed in a Debtor’s bankruptcy documents:
- A list of all creditors and the amount and nature of their claims;
- The source, amount, and frequency of the Debtor’s income;
- A list of all of the Debtor’s property; and
- A detailed list of the Debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc. If you are married and only one of you wants to file for bankruptcy protection, then you may do so under 11 U.S.C. § 302(a). This issue is discussed in the Bankruptcy Questions section of this website.
- A Chapter 13 Repayment Plan must also be submitted. This is something that the attorney working with you will be able to draw up and submit to the court.
Means testing is required for a Chapter 13 bankruptcy. This is a fairly new addition to the Bankruptcy Code and it serves different purposes in Chapter 7 and Chapter 13 bankruptcies. In a Chapter 13 bankruptcy, it is used to determine, together with other considerations, how much money you need to pay back to your unsecured creditors. There are other factors that an attorney must consider in addition to your Means Test results. For example, your actual current income as well as foreseeable future earnings must also be considered.
The 341 Meeting of Creditors
You will receive a notice of this meeting directly from the Bankruptcy Court. Your attendance at this meeting is required. This hearing cannot be waived or skipped.
The following documents must be brought to your hearing.
- A Government-issued picture ID, such as a valid driver’s license, military ID card, or passport; and
- Proof of your Social Security number, such as your actual Social Security card, a W2 form, or a 1099 form.
At this meeting, your trustee will ask you questions about your case to determine if it meets the requirements of the law. This meeting also gives your creditors the chance to ask you questions about their claims. If you and your spouse are filing your case together, both of you are required to attend this meeting and both of you are required to bring your Government-issued picture ID and proof of your Social Security number.
Chapter 13 Confirmation Hearing
The second required court hearing, in a Chapter 13 case, is the Confirmation Hearing. During the Confirmation Hearing, the trustee recommends to a Bankruptcy Judge either approval (“confirmation”) or dismissal of your Chapter 13 plan. Typically this hearing takes place approximately one month after the 341 meeting and is set by the Bankruptcy Judge presiding over your case.
You are also required to complete a pre-discharge credit-counseling certificate. I suggest you complete this course right after your confirmation hearing. Once this course is completed, you should provide your attorney a copy of this certificate, so that he or she can file it with the court.
There may be additional hearings that a Debtor must attend, but the two hearings discussed above are mandatory in all Chapter 13 bankruptcies.
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