Overview 
 Chaper 7 
 Chapter 13 

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Chapter 13 Bankruptcy

Chapter 13 is designed for individuals with regular income who desire to repay their debts but are currently unable to do so. Under this chapter, debtor(s) are permitted to repay creditors, in full or in part, in installments over a three to five year period, during which time creditors are prohibited from starting or continuing collection efforts, as long as timely payments are made to the Trustee.


Eligibility

When meeting with our attorney, she will determine if the debtor should file Chapter 7 or Chapter 13 by asking:

• Does the debtor(s) owe federal and/or state taxes?

• Is the debtor(s) behind on secured debt payments (mortgage, vehicle, furniture, etc.)?

• Is the debtor’s property in foreclosure?

• Can the debtor(s) afford to make plan payments to the Trustee?

Plan of Repayment

When a Chapter 13 is filed, a payment plan is filed as well. The plan of repayment is based upon the debtor(s) income and expenses. The plan sets out the monthly payment and how that payment will be distributed to creditors. There are many factors that are used when calculating a plan payment, including, but not limited to, current monthly income and expenses, income and expenses for the six (6) months prior to filing, the amount necessary to catch up mortgage payments and pay the current mortgage payment.


Plans must be approved by the court and provide for fixed payment amounts to the Trustee on a monthly basis. The Trustee then distributes these funds to creditors according to the terms of the plan.


Discharge

The primary objective in a Chapter 13 bankruptcy is to receive a discharge.

Chapter 13 bankruptcies typically are completed or discharged in three to five years. A discharge releases the debtor from personal liability on debts and prevents the creditors from taking any action against the debtor or his/her property.


Most claims against Chapter 13 debtors are discharged. A creditor whose claim is discharged may no longer initiate or continue, any legal or other action, against the debtor to collect the obligation.


The discharge is the most important piece of paper the debtor will receive concerning their Chapter 13 case. It is important to keep all documents you receive, regarding your bankruptcy, for a minimum of ten years.


Modifying the Plan Payment

On occasion, changed circumstances will affect a debtor’s ability to make plan payments. A debtor may have a substantial change in income such as, loss of job or pay decrease. Should a change in income occur the attorney’s office should be notified so that the matter can be addressed. Sometimes the plan payment can be lowered.


What can a Chapter 13 bankruptcy do for me?

Chapter 13 bankruptcy will do the following:

• Stop wage garnishments and similar actions of creditors to collect debts.

• Eliminate the legal obligation to pay most or all of your debts.

• Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.


Your Bankruptcy Will Not...

• Eliminate certain rights of secured creditors.

• Eliminate child support, alimony, student loans, criminal fines, or taxes.


Can debts I acquire after filing Chapter 13 bankruptcy be added to the plan?

No. Debts incurred after the filing date (referred to as “post-petition debt”) can not be included in the Chapter 13 and typically cannot be added. You are responsible for the debts outside of the bankruptcy.


The one exception to this rule is medical bills; however, post-petition medical bills added to the bankruptcy MUST be paid in full with interest.


What are my duties as a Chapter 13 Debtor?

From the date the case is filed, your main responsibility is to make each and every plan payment on time. Other responsibilities are:

• Keep the Trustee and your attorney informed, at all times, of your current address and telephone numbers.

• Maintain full-coverage insurance on all property which has a lien against it. If you fail to maintain full-coverage insurance, the bankruptcy Judge may allow the lien holder to repossess the collateral (This includes homes, vehicles, and mobile homes).

• Always notify the Trustee and attorney of a change in job.


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