Chapter 13 Bankruptcy
While Chapter 7 bankruptcy usually eliminates your debt, Chapter 13 “reorganizes” much or most of it so you are able to pay it back.
Chapter 13 enables you to keep your assets and get current on payments for debts that aren’t bankruptable. Chapter 13 can also stop a foreclosure, and give you time to bring your mortgage payment current. The basic way it works is that the court approves a monthly payment plan. Under the plan you pay back some of your unsecured debt, and all of your secured debt, over a period of 3 - 5 years. The payment amounts are tailored to your income and debts. The court puts you on a strict budget and checks all of your spending through the whole repayment period. You're eligible for Chapter 13 bankruptcy if your unsecured debt is less than $419,275, and your secured debt is less than $1,257,850, and if you're current on any tax filings. Chapter 13 stays on your credit record for seven years. You can't file Chapter 13 again until after two years. What is A Chapter 13 Bankruptcy: DetailsIn a Chapter 13 bankruptcy, you have a predictable source of income, which can support a 3-5 year plan to repay your creditors all or part of your debts.
You can use Chapter 13 to stop foreclosure; catch up missed car or mortgage payments; pay delinquent taxes; stop interest from being added to most delinquent taxes; keep valuable non-exempt property; and more. Once you fulfill your repayment plan, your remaining dischargeable debt will be eliminated at the end. The amount for you to repay is calculated using several factors: including your disposable income--usually determined in the Virginia Means Test. Under the Chapter 13 proposed repayments, the total amount paid to your creditors must be at least as much as they would have received if you had filed a Chapter 7 bankruptcy. Again, to file Chapter 13 you must have a reliable source of income and enough disposable income to be able make the proposed payments. So, use Chapter 13 bankruptcy if you want to keep secured assets, such as a home or car, and/or when you have more equity in your secured assets than you can protect with Virginia bankruptcy exemptions in a Chapter 7. So Chapter 13 bankruptcy is a way to reorganize your debt repayments, whereas Chapter 7 bankruptcy is a way liquidate your assets. |
|
Filing Chapter 13 Bankruptcy
Chapter 13 Requirements
You submit your Chapter 13 bankruptcy repayment proposal to the court.
In the proposal, secured debt, and priority claims (such as taxes and back child support) must be paid in full. Unsecured debts (like credit cards and medical bills) are normally paid in part. Unsecured debts can often be paid off for as little as 10 cents on the dollar. Your bankruptcy lawyer will advise you.
Your plan must pass each of these tests:
You submit your Chapter 13 bankruptcy repayment proposal to the court.
In the proposal, secured debt, and priority claims (such as taxes and back child support) must be paid in full. Unsecured debts (like credit cards and medical bills) are normally paid in part. Unsecured debts can often be paid off for as little as 10 cents on the dollar. Your bankruptcy lawyer will advise you.
Your plan must pass each of these tests:
- It has to be delivered in good faith.
- Unsecured creditors have to be paid at least as much they'd have gotten if you'd filed Chapter 7 instead. Generally, this will be the liquidation value of all the nonexempt property you own.
- You must pay all your disposable income into the plan for at least three years. But your plan can take up to five years in order to meet the second test for you to pay at least as much as in a Chapter 7.
What Happens after Filing Chapter 13
Automatic Stay
Once your paperwork has been filed with the bankruptcy court, the automatic stay immediately goes into effect. Creditors are forbidden to directly contacti you or make any claim on any of your property from the date of filing forward. This permanently stops any foreclosure actions against you.
Bankruptcy Trustee
Upon your filing, the court assumes legal control of your debts and whatever property is not covered by your Virginia exemptions. The court then appoints a trustee to your case. The trustee’s job is to get your creditors paid as much as possible. The trustee will review your paperwork in detail, especially assets you have in your possession, as well as exemptions you claim. The trustee can and will challenge any element of your case. It's critical at this point to have an experienced bankruptcy lawyer to represent you and defend your interests in these interactions with the trustee. Since the trustee is paid a commission on whatever he liquidates, you can expect the trustee to be aggressive in seizing your assets and liquidating them.
341 Meeting of Creditors
About a month after your filing, the trustee will schedule the first creditor meeting, which you must attend, called the “341 Meeting." You’ll be notified when and where the meeting will be, but it’s also a good idea to contact the court directly to confirm time, date, and place. One or two creditors may show up in a Chapter 13 meeting, especially if they question the legitimacy of some aspect of your plan. Objections are normally negotiated between you, your lawyer, the creditor, or the creditor’s attorney. If a compromise can’t be reached, the judge will step in.
Chapter 13 Plan Confirmation
After you file your Chapter 13 repayment plan, you’re required to attend a hearing before a bankruptcy judge, who will either confirm or deny your repayment proposal. If your plan is confirmed by the court, and you then make the promised payments, any balance you owe on your dischargeable debts will be eliminated at the end of your repayment term.
Have Questions?
If you're like most people right now, you probably have a lot of questions. Don't worry. That's normal. If you would like to set up a call with one of our attorneys at no charge to you, just call The Richmond Bankruptcy Firm at (804) 294-3003.
Once your paperwork has been filed with the bankruptcy court, the automatic stay immediately goes into effect. Creditors are forbidden to directly contacti you or make any claim on any of your property from the date of filing forward. This permanently stops any foreclosure actions against you.
Bankruptcy Trustee
Upon your filing, the court assumes legal control of your debts and whatever property is not covered by your Virginia exemptions. The court then appoints a trustee to your case. The trustee’s job is to get your creditors paid as much as possible. The trustee will review your paperwork in detail, especially assets you have in your possession, as well as exemptions you claim. The trustee can and will challenge any element of your case. It's critical at this point to have an experienced bankruptcy lawyer to represent you and defend your interests in these interactions with the trustee. Since the trustee is paid a commission on whatever he liquidates, you can expect the trustee to be aggressive in seizing your assets and liquidating them.
341 Meeting of Creditors
About a month after your filing, the trustee will schedule the first creditor meeting, which you must attend, called the “341 Meeting." You’ll be notified when and where the meeting will be, but it’s also a good idea to contact the court directly to confirm time, date, and place. One or two creditors may show up in a Chapter 13 meeting, especially if they question the legitimacy of some aspect of your plan. Objections are normally negotiated between you, your lawyer, the creditor, or the creditor’s attorney. If a compromise can’t be reached, the judge will step in.
Chapter 13 Plan Confirmation
After you file your Chapter 13 repayment plan, you’re required to attend a hearing before a bankruptcy judge, who will either confirm or deny your repayment proposal. If your plan is confirmed by the court, and you then make the promised payments, any balance you owe on your dischargeable debts will be eliminated at the end of your repayment term.
Have Questions?
If you're like most people right now, you probably have a lot of questions. Don't worry. That's normal. If you would like to set up a call with one of our attorneys at no charge to you, just call The Richmond Bankruptcy Firm at (804) 294-3003.