Frequently
Asked Questions about Chapter 13 Bankruptcy
THE
INFORMATION CONTAINED HEREIN IS GENERAL IN NATURE AND DOES NOT CONSTITUTE LEGAL
ADVICE. THE ANSWERS TO MANY OF THESE QUESTIONS MAY BE DIFFERENT
DEPENDING ON WHAT DISTRICT YOUR CASE IS FILED IN. YOU SHOULD CONSULT WITH AN
ATTORNEY IN REFERENCE TO YOUR SPECIFIC SITUATION. THE AUTHOR HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, AND MAKES NO
REPRESENTATIONS REGARDING THE INFORMATION CONTAINED HEREIN. (Revised
9/2011).
1. What is chapter 13 and how does it
work?
3. What is a chapter 13 trustee?
4. What is a chapter 13 discharge?
5. How do I get a chapter 13 discharge?
6. What debts are not released by a chapter 13 discharge?
7. What debts may be paid under a chapter 13 plan?
8. Must all debts be completely paid off under a chapter 13 plan?
9. How long does a chapter 13 last?
11. Where is a chapter 13 case filed?
12. Do I lose any of my property in a chapter 13 case?
13. How does filing under chapter 13 affect lawsuits and attachments against me?
14. How are secured creditors treated under chapter 13?
15. How are debts that have been co-signed or guaranteed by someone else handled under chapter 13?
16. How does filing a Chapter 13 affect my student loan debt?
17. When do I begin making payments to the chapter 13 trustee and how often must they be made?
18. How does filing under chapter 13 affect my credit rating?
19. Are the names of persons who file under chapter 13 published?
20. Do I lose any of my legal rights (such as voting) by filing under chapter 13?
21. May employers or government agencies discriminate against me if I file under chapter 13?
22. What is required for court approval of a chapter 13 plan?
23. When do I have to appear in court in a chapter 13 case?
24. What if the court does not approve my chapter 13 plan?
25. What is a Proof of Claim? How are the claims of creditors handled under chapter 13?
26. What if I incur new debts or need credit during a chapter 13 case?
27. What should I do if I move during the course of a chapter 13 case?
28. What if I later decide to discontinue the chapter 13 case?
29. What happens if I am unable to complete my chapter 13 payments?
1. What
is chapter 13 and how does it work?
Chapter 13 is
that part of the federal bankruptcy law that permits you to repay all or a
portion of your debts under the supervision and protection of the bankruptcy
court. Under chapter 13, the person
filing the case, who is called the debtor, submits a plan for the repayment of
all or a portion of his debts to the court.
The court must approve the plan for it to become effective. The court prohibits creditors from attempting
to collect their claims from the debtor and permits the debtor to make regular
payments in the amounts called for in the debtor=s plan to the chapter 13 trustee for
the period of time specified in the plan.
The chapter 13 trustee collects the money paid in by the debtor and
disburses it to the creditors as set forth in the debtor=s plan. Upon the completion of the payments called
for in the plan, the debtor is discharged from any liability for the remainder
of his debts (with very limited exceptions).
It is a written plan
presented to the bankruptcy court by a debtor that states which of the debtor's
debts should be paid, how much should be paid on each debt, how much of the
debtor's earnings or other property should be paid to the chapter 13 trustee,
how long the payments should continue, which debts should be paid outside of
the plan, and certain other technical matters.
3. What
is a chapter 13 trustee?
A chapter 13 trustee is an
officer of the court appointed to collect payments from the debtor, make
payments to creditors in the manner set forth in the debtor's chapter 13 plan,
and administer the chapter 13 case until it is closed. The chapter 13 trustee
is required to perform certain other technical duties in a chapter 13 case. The
debtor is required to cooperate with the chapter 13 trustee.
4. What
is a chapter 13 discharge?
A discharge is a court order
releasing a debtor from all of his or her dischargeable debts and ordering the
creditors not to attempt to collect them from the debtor. A debt that is
discharged is one that the debtor is released from and does not have to pay.
There are two types of chapter 13 discharges: one that is granted to a debtor
who has completed all of the payments called for in his plan, and one that is
granted to a debtor who is unable to complete the payments called for in his
plan due to circumstances for which he should not justly be held accountable.
5. How
do I get a chapter 13 discharge?
You must comply with your
plan by making all of the payments called for. Additionally, you must show that
all "domestic support obligations" (alimony, maintenance &
support) coming due during the life of the plan have been made. Lastly, you
must have completed an instructional course concerning personal financial
management (your attorney can direct you to an approved provider of such
courses).
6. What
debts are not released by a chapter 13 discharge?
The
chapter 13 discharge granted after the completion of all payments under a
chapter 13 plan generally releases a debtor from all debts except:
(1) debts that are paid outside of the plan;
(2) debts for certain types of taxes;
(3) debts for "domestic support obligations" (alimony, maintenance, or support);
(4) unlisted debts;
(5) debts incurred for educational purposes;
(6) debts incurred in a fraudulent manner;
(7) debts as a result of death or personal injury caused by the debtor's operation of a motor vehicle if debtor was intoxicated;
(8) installment debts whose last payment is due after the completion of payments under the plan;
(9) restitution, or a criminal fine, included in a sentence on the debtor's conviction of a crime; and
(10) debts incurred during the time the plan was in effect that were not paid under the plan.
The chapter 13 discharge
granted when a debtor is unable to complete the payments under a plan due to
circumstances for which he should not justly be held accountable releases the
debtor from fewer debts than the discharge granted upon completion of all
payments.
7. What
debts may be paid under a chapter 13 plan?
Any debts
whatsoever, whether they are secured or unsecured. Even debts that are
non-dischargeable, such as debts for alimony, maintenance, or support, may be
paid under a chapter 13 plan.
8. Must
all debts be completely paid off under a chapter 13 plan?
No. while certain debts (such
as debts for taxes and fully secured debts) must be paid in full under a
chapter 13 plan, only what you are deemed to afford must be paid on most
unsecured debts. The unpaid balance of most debts not paid in full under a
chapter 13 plan may be discharged upon the completion of the plan.
9. How
long does a chapter 13 last?
A typical chapter 13 case
will last anywhere from thirty-six (36) months to no longer than sixty (60)
months (five years).
10. Is
credit counseling mandatory? Why do I have to get credit counseling if I
already know I want to file chapter 13?
While chapter 13 is a
powerful tool to use when you have debt problems, it is not always the only
option available to you. Congress wants to make sure you have explored all of
the possible options you may have. Therefore, Congress requires that within the
180 day period before filing a bankruptcy you must have completed a briefing
session (with very limited exceptions) with an approved credit counseling
agency. The agency's duty is to outline the opportunities for credit counseling
and assist you in performing a budget analysis. If you do not complete such a
briefing, you will most likely be ineligible to file chapter 13. Your attorney
can direct you to an approved counselor.
11.
Where is a chapter 13 case filed?
A chapter 13 case is filed in
the bankruptcy court in a federal district where the debtor has lived, had his
or her principal place of business located, or had his or her principal assets
located, for the greatest portion of the last 180 days. The bankruptcy court is
a unit of the United States Federal District Court.
12. Do
I lose any of my property in a chapter 13 case?
Usually
not. Under chapter
13, debts are normally repaid out of the payments made to the chapter 13
trustee and not out of your property. However, if you have considerable
non-exempt property and cannot make sufficient payments to pay enough of your
debts to satisfy the court, some of your property may have to be used to pay
creditors. Also, if a secured creditor is not being paid under the plan, he may
be permitted to repossess the property securing his claim if the debt owed to
him is not paid.
13. How
does filing under chapter 13 affect lawsuits and attachments against me?
The filing of a chapter 13
case automatically stays (stops) all lawsuits, attachments, garnishments, and
other actions by creditors against you and your property for as long as the
chapter 13 case lasts. A few days after the case is filed, a notice is mailed to
all creditors advising them of the automatic stay. The creditors may be
notified sooner by either the debtor or his attorney, if necessary. Creditors
are not permitted to file lawsuits or attachments against you during the
chapter 13 case, and, if the debtor is granted a chapter 13 discharge, they
will be prohibited from attempting to collect any discharged debt from you
after the case is closed.
14. How
are secured creditors treated under chapter 13?
As a general
rule, secured creditors= claims must be paid in full under a
chapter 13. However, it is important to
realize that certain types of secured creditors are considered to have a
secured claim only to the extent of the value of its secured interest (which
cannot exceed the Areplacement@ value of the property securing the claim). For example, if a secured creditor has a purchase
money mortgage on an automobile incurred more than 910 days before filing, and
if the automobile would cost $500 for debtor to replace, then that creditor has
a secured claim for only $500, regardless of how much is owed. The difference in the amount owed and the
value of the property is called a deficiency.
The deficiency need not be paid in full if you cannot afford to do so.
15.
How are debts that have been co-signed or guaranteed by someone else handled under chapter 13?
If a consumer debt
(non-business) that has been co-signed or guaranteed by another person is being
paid in full under a chapter 13 plan, the creditor will be prohibited from
collecting the debt from the other person. However, if the debt is not being
paid in full under the plan, the creditor will be permitted to collect the
unpaid portion of the debt from the other person.
16. How
does filing a Chapter 13 affect my student loan debt?
Student loans are not
dischargeable except under very limited circumstances. Therefore, if you have a
small balance remaining to be paid on your student loan debt (less than five
(5) years of repayment), it is advisable to include it in your chapter 13 plan
of reorganization. If you have a large balance remaining
(more than five (5) years of repayment), it will probably be necessary for you
to continue to pay your student loan debt outside of your chapter 13 plan.
If your budget will not allow you to make both your chapter 13 plan payment
plus your student loan payment, it may be possible to defer payments on your
student loan debt until after you complete your chapter 13
plan. However, interest on your student loan debt will continue to
accrue during this period.
17.
When do I begin making payments to the chapter 13 trustee and how often must
they be made?
Your chapter 13 payments
begin 30 days after your chapter 13 case is filed with the court and continue
to become due on that day of each month thereafter. The payments must be made
regularly and timely. If you are employed and work for wages, you will be
required to make the payments through a payroll deduction.
18. How
does filing under chapter 13 affect my credit rating?
The fact that you filed a
chapter 13 will be reflected as a bankruptcy on your credit report and will
remain there for up to ten years. This is in contrast to most other negative
information remaining on your credit report for seven years. Additionally, you
are not allowed to use credit while going through your chapter 13 plan.
Notwithstanding the long time that chapter 13 appears on your credit, most
debtors are able to qualify for credit soon after completion of their plan.
19. Are
the names of persons who file under chapter 13 published?
When a chapter 13 case is
filed, it becomes a public record which any one has access to. Credit reporting
agencies will reflect in their reports that you have filed a chapter 13. Also,
some newspapers will list all filings made in any court on a regular basis.
Therefore, it is likely that your name will be published at least once in the
local paper.
20. Do
I lose any of my legal rights (such as voting) by filing under chapter 13?
No. Filing under chapter 13
is not a criminal proceeding, and a person does not lose any of his civil or
constitutional rights by filing.
21. May
employers or government agencies discriminate against me if I file under
chapter 13?
It is illegal for either
private or governmental employers to discriminate against a person as to
employment because that person has filed under chapter 13. It is also illegal
for local, state, or federal governmental units to discriminate against a person
as to the granting of licenses (including a driver's license), permits, and
similar grants because that person has filed under chapter 13.
22.
What is required for court approval of a chapter 13 plan?
There are many different tests a plan must pass before being approved by the
court. In general, the court will confirm (approve) a chapter 13 plan if:
(1) the plan complies with the legal requirements of chapter 13;
(2) all required fees, charges, and deposits have been paid;
(3) the plan has been proposed in good faith;
(4) each unsecured creditor will receive under the plan at least as much as he would have received had the debtor filed under chapter 7; and
(5) it appears that the debtor will be able to make the required payments and comply with the plan.
23.
When do I have to appear in court in a chapter 13 case?
Each debtor is required to
attend the first meeting of creditors held in the case. This is the first
opportunity any creditors have to question the debtor about the proposed plan
of repayment. Debtors are placed under oath and the meeting is presided over by
the trustee. Debtors will receive information about the specific date, time,
and location of the first meeting of creditors approximately two weeks after
the chapter 13 is filed. Debtors whose plans will pay 70% or more to their
unsecured creditors (with limited exceptions) do not have to appear at any
other hearings. Debtors whose plans will pay less than 70% to their unsecured
creditors must attend a confirmation hearing held approximately one month after
the meeting of creditors. The purpose of the confirmation hearing is to allow
the court to examine the plan and decide whether it meets the requirements
outlined in question 22 above.
24.
What if the court does not approve my chapter 13 plan?
If the court will not approve
a chapter 13 plan proposed by you, you are permitted to modify the plan and
seek court approval of the modified plan. If you do not wish to change your
proposed plan, you may either convert the case to a chapter 7 case or dismiss
the case. If the court refuses to approve a plan, it will usually give the
reasons for its disapproval so that the plan may be appropriately modified so
as to become acceptable.
25.
What is a Proof of Claim? How are the claims of creditors handled under chapter
13?
A Proof of Claim is a
document filed with the court by creditors which indicates what type of debt
you have and the amount owed. Non-governmental creditors must file their claims
with the bankruptcy court within 90 days after the first date set for the
meeting of creditors in order for their claims to be allowed. Governmental
creditors have 180 days after the filing of the case in which to file claims.
Unsecured non-priority creditors who fail to file claims within those periods
will be barred from filing a claim, and after the completion of the plan their
claims will be discharged. A debtor may file a claim on behalf of a creditor if
he wishes to do so. Additionally, when the claims have been filed, the debtor
is given an opportunity to file objections to any claim that he disputes.
26.
What if I incur new debts or need credit during a chapter 13 case?
The court will
not allow the debtor from incurring any new debt during the case unless prior
approval by the court is given. Therefore, if a debtor needs credit or wishes
to incur a debt after the case has been filed, he should obtain the approval of
the court beforehand. Only two types of
credit obligations or debts incurred after the filing of the case may be
included in a chapter 13 plan. These
are: (1) debts for taxes that become
payable while the case is pending, and (2) consumer debts arising after the
filing of the case that are for property or services necessary for the debtor's
performance under the plan and that are approved in advance by the court. Any other debts or credit obligations
incurred after the case is filed must be paid by the debtor outside the plan..
27. What
should I do if I move during the course of a chapter 13 case?
You should immediately notify
your attorney, the bankruptcy court, and the chapter 13 trustee in writing of
your new address. Most communications in a chapter 13 case are by mail, and if
you fail to receive an order of the court or a notice from the chapter 13
trustee because of a faulty address, the case may be dismissed.
28.
What if I later decide to discontinue the chapter 13 case?
You have the right to either
dismiss a chapter 13 case or convert it to a chapter 7 case
at any time, regardless of your reason for doing so. However, you should
discuss this matter with your attorney to make certain that it is the best
course of action.
29.
What happens if I am unable to complete my chapter 13 payments?
A debtor who
is unable to complete his chapter 13 payments has three options:
(1)
he may dismiss the chapter 13 case;
(2)
he may convert the chapter 13 case to a chapter 7
case; or
(3)
if he is unable to complete the payments due to
circumstances for which he should not justly be held accountable, he may seek
to obtain the second type of discharge which was described above.
Chapter 7, chapter 13, debt relief, form, default,