From Personal Bankruptcy Laws For Dummies, 2nd Edition. By James P. Caher, John M. Caher. Going through the process of filing personal bankruptcy isn’t fun, but it’s sometimes necessary and can be a huge relief. Filing for personal bankruptcy means you have to answer some tough questions about your finances; consider your situation in light of the new bankruptcy law; figure out which. May 10, · There is another type of bankruptcy that individuals use to reorganize their debts. This type is called Chapter 13 bankruptcy. Unlike Chapter 7, Chapter 13 does not involve karacto.xyzy, a Chapter 13 debtor (that 's what we call people who file bankruptcy) is permitted to keep all of his property, whether it is exempt or not, as long as the Chapter 13 plan complies with the . You cannot declare for Chapter 7 if you have gone through Chapter 13 bankruptcy in the last six years. Eligibility for Chapter 13 Bankruptcy Individuals are eligible for Chapter 13 relief if their unsecured debts (credit cards, medical bills, etc.) are less than $, and secured debts (home, car, property, etc.) are less than $1,,Author: Devin Joy.
A case may be likewise dismissed if debtors fail to file tax returns or supply domestic support. Sign in. Log into your account. Password recovery. Recover your password. Forgot your password? Get help. Home Chapter 13 Bankruptcy. Chapter 13 Bankruptcy. Chapter 13 Bankruptcy admin - April 3, Over their history, Chapter 13 bankruptcy laws, perhaps more than any other kind of bankruptcy in the United States, have seen a dramatic ebb and flow with regard to the rights of the individual debtor.
What makes this all the more notable is the fact that said history of Chapter 13 law is pretty short in itself. Such is realistically par for the course, so to speak, when it comes to the majority of individual chapters as well; not just Chapter 13 bankruptcy laws. As a result, the same amendments that were so critical to the foundation of other subsets of the Bankruptcy Code brought changes to Chapter 13 law. Chapter 13 law is contained within the United States Code, more narrowly in Title 11, also know as the Bankruptcy Code.
Chapter 13 law is only less than four decades old. Like Chapter 11 provisions that were assembled from previous pieces of legislation on business reorganization, Chapter 13 bankruptcy laws were breathed into life as a result of the Bankruptcy Reform Act of While the decision to file Chapter 13 bankruptcy may be encouraged by the U.
Courts relative to other options, this is not a wholesale endorsement on the part of the Federal Government. Even if the numbers are relatively low for individuals who file Chapter 13 compared to Chapter 7, Chapter 13 bankruptcy is still responsible for the second most filed bankruptcy cases in the United States. In addition, as of late, the rates of those who file Chapter 13 bankruptcy are climbing year by year.
Only in , applications for Chapter 13 bankruptcy totaled less than , and, if trends continue, will extend above , The redeeming idea in all of this is that filings under Chapter 13 are not increasing as rapidly as with other forms of bankruptcy e.
Chapter Statistical analysis on a regional front reveals other ways in which Chapter 13 distinguishes itself from other divisions of the Bankruptcy Code.
As for the lowest figures, while the First Circuit Court i. New England usually has this honor, for individuals who file Chapter 13 bankruptcy, it is instead the Second Circuit Court Connecticut, New York, Vermont that earns this prize, though the First is not far off. Chapter 7 vs. 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.
At least temporarily, filing for Chapter 13 instead of Chapter 7 will give the debtor a better opportunity to avoid foreclosure. 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.
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. 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.
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. Moreover, it is not as if a declaration of bankruptcy under Chapter 13 means families will lose everything.
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. 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. 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. All this aside, for the Chapter 13 filer in dire straits, debt relief may come to the rescue.
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. As such, there are long-term implications attached to this ruling. In addition, all requirements of dependent parties i. 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.
On the other hand, Chapter 13 bankruptcy will last from three to five years, the length of a monthly payment plan you propose to the court to pay certain debts. The plan period will vary from three to five years, depending on your whether your family income is generally above or below the median income for your state of residence. The Chapter 13 plan , or simply the payment plan, is the heart of a Chapter 13 case. Chapter 13 is an attempt to "reorganize" your debt over time.
It's a great tool for the debtor who is behind in house payments or car payments. Those payments can be caught up with the payment plan over time, thereby saving the house from foreclosure or the car from repossession. The Chapter 13 plan can also include payments to unsecured creditors like credit cards and medical bills. A calculation is applied to your income and expenses to determine if you have any disposable income after all your other obligations are met.
If you have no disposable income, that's okay The debts will still be discharged because you've devoted your best effort to pay your bills through Chapter The Chapter 13 plan must meet several tests in order for it to be confirmed or approved by the bankruptcy court.
First, the plan must be proposed in good faith. This means, essentially, that you intend to completely follow through on the plan and is are attempting to misrepresent your finances or perpetrate a fraud on the court. The plan must also meet the "best interest of creditors" test. This test requires that the Chapter 13 plan must pay unsecured creditors at least what they would have had under a Chapter 7 bankruptcy.
In many cases, the unsecured creditors would have received nothing in Chapter 7, so this test can often be easily met. The other test is called the "best efforts" test. The best efforts test requires that the Chapter 13 plan pay unsecured creditors a certain amount multiplied by the debtor's disposable income. Similar to the Chapter 7 trustee, the Chapter 13 trustee acts as the main point of contact for a debtor.
The trustee will review the proposed payment plan and has the authority to challenge the plan in bankruptcy court if he or she believes that it is improper. If the Chapter 13 plan is confirmed by the bankruptcy court, the trustee acts as an intermediary between the debtor and creditors receiving payments. Specifically, the debtor makes payments each month to the trustee. The trustee then divides up the payment, as established in the Chapter 13 plan, and issues payments to the creditors.
Chapter 13 bankruptcy carries with it a few restrictions which are not present in Chapter 7 bankruptcy, the monthly plan payment being the most obvious. In addition, you will not be allowed to incur any more debt, like a car loan, without court approval.