My Account Login Logout Map to Office Contact Us Public Home Page Call: 1-214-999-0595

Chapter 13 Bankruptcy

The purpose of a Chapter 13 bankruptcy is to provide you, the debtor, relief from paying the full amount of your debt to all creditors as they are due. It allows you to retain enough money and assets to essentially provide for current living expenses, while using remaining funds to pay creditors on a monthly basis. This reorganization of debts is accomplished through a plan that lasts a minimum of three years and no more than five years. Chapter 13 is available to individuals (not corporations or partnerships) with regular income from any source. A sole proprietor is also eligible for Chapter 13. There also are qualifications based on maximum limits of your secured and unsecured debts.

To start a Chapter 13 bankruptcy case, you must first take a Credit Counseling Course. The course must be taken within the six months prior to filing the case with the Bankruptcy Court. The course is mandatory and your case will be dismissed if the course is not taken. There are several companies that offer credit counseling. Usually, you can take the course online or by telephone, and it normally takes about an hour. We can recommend a course for you.

After completing the Credit Counseling Course, we file your petition with the Bankruptcy Court. Along with the petition, you are required to file lists, called schedules, of your assets and liabilities, and a statement of your financial affairs. You must also file a schedule of your exempt assets. Federal and state laws allow you to keep a certain amount of your property, which cannot be used to satisfy any of your debts. Once your petition is filed, the court grants an automatic stay, stopping most creditor actions trying to collect the debt from you. In other words, after your petition is filed, creditors must immediately cease any and all collection efforts, including telephone calls, letters, law suits, garnishments, foreclosures and repossessions.

After your case is filed, notices are sent to all of your creditors and a bankruptcy trustee is appointed to administer your case. The Chapter 13 trustee's role is to collect plan payments from you, the debtor, and make distributions to creditors according to your debtor's plan. The plan must be filed within 15 days of your petition filing, unless extended by court order. Normally, you, as debtor, must begin making plan payments to the trustee within 30 days of your petition filing date. However, the court must first confirm your plan. The trustee will examine your petition and all attached schedules to identify your exempt and non-exempt assets. If the trustee identifies any non-exempt assets, they will be sold and the net proceeds distributed to your creditors. You must commit all of your disposable income during the time the plan is in effect. Disposable income is defined as income not reasonably necessary for the maintenance or support of the debtor or the debtor's dependents. If your plan is confirmed, the trustee begins distributing funds to creditors according to the terms of the plan.

The trustee or a creditor may object to confirmation of the plan. There are a number of objections that may be made, but the most frequent objection comes from creditors who say they will receive less if the plan is confirmed than if the debtor's assets were liquidated and sold. Depending on the Judge's ruling, the plan may be confirmed, it may be amended, or the case may need to be converted to a Chapter 7 filing.

Approximately 30 days after your petition is filed, the trustee will conduct a meeting of creditors. You and your attorney must attend the meeting so we will go with you. Creditors are allowed to attend and ask questions, but rarely do. At the meeting in front of your trustee, your attorney will ask you some basic questions about your bankruptcy filing and your financial affairs. The trustee may also ask questions. If the trustee is satisfied with the identification of all of your exempt and non-exempt assets as well as the accuracy of your bankruptcy filing, and the court has confirmed your plan, then your plan will be executed. At that point, you will begin making monthly payments to the trustee for distribution to your creditors.

If you are facing foreclosure or repossession, you can stop the foreclosure sale or repossession by filing a Chapter 13 bankruptcy. A Chapter 13 plan permits you to remedy defaults on mortgage debts, vehicle loans, or any loans secured by collateral. You do this by repaying the payments owed within a reasonable period of time over the course of the plan. Additionally, we will negotiate with your lenders to reach a new agreement that is more favorable to you. For example, we may be able to renegotiate your debt by either lowering the total amount owed, lowering your monthly payment amount, lowering your interest rate, or a combination of all of these.

Car loans have a unique position that may allow you to pay the lender only the actual value of the vehicle, instead of its loan value. This would let you repay only the vehicle's current value and not the amount of the current loan against the vehicle. This is particularly attractive in those scenarios where a debtor owes more on the loan than the vehicle is worth.

You may want to surrender or let go of an asset that is collateralized, an item you assigned to the lender as collateral in the case of default. If you do, we may be able to negotiate an agreement that allows you to release the asset to the creditor so there is no foreclosure or repossession on your record.

The most important thing about making a Chapter 13 bankruptcy work is that you must always make payments on time to your trustee. If you fail to make the monthly payments on time, the court may dismiss your bankruptcy filing. If that happens, your creditors may resume any and all collection actions against you. Remember, your plan can be modified if your circumstances change, such as loss of your job or a reduction of income. Additionally, while your case (plan) is pending, you may not incur any significant new debt without consulting your trustee.

Here's the payoff. At the end of your plan term, the court discharges all of your allowed debts. A discharge means that your debt has been permanently extinguished and creditors are prevented from taking any action to collect on your debt. It also relieves you from any and all liability for the debt. So when you successfully complete all payments according to your Chapter 13 plan, whether it is three or five years, you get all debts included in your plan discharged. The discharge releases you from all of your debts from all creditors provided for in your plan. Even creditors who were not part of the plan may be discharged. Remember, it is the creditor's duty to file a claim in the case once the creditor has been notified. Therefore, you, the debtor, are discharged from any and all liability for all debts included in your plan, as well as those debts owned by creditors who received notice, but failed to participate in your plan.