Chapter 13 is sometimes referred to as a wage earner’s plan. This form of bankruptcy enables individuals with regular income to present a plan to repay all or part of their debts. Under the Chapter 13 law, debtors propose a repayment plan for creditors to make installment payments to creditors over three to five years.
If your current monthly income is less than the applicable state median, the plan may be for three years unless the court approves or requires a longer period of repayment under the law.
If your current income is greater than the applicable state median, the insolvency plan generally must continue for five years. The plan cannot provide for payments over a period longer than five years. During this time, the law forbids creditors from initiating or continuing collection efforts.
What Do I Need To Provide To File Chapter 13?
In order to complete and file a wager earner’s plan, you must provide the following information:
- A list and some background detail on all creditors (amount owed, date incurred)
- Information and details regarding the filing, pay-stubs, and your income.
- A list of all of your property.
- A detailed list of your monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
- Driver License
- Social Security Card
- A Copy of Your Taxes From the Year Prior to Filing
- A Valid Certificate of Credit Counseling
- A Copy of any Debt Repayment Plan Prepared Through a Credit Counseling Agency
The Chapter 13 Process
This case begins with your attorney filing a petition with the U.S. Bankruptcy Court serving the area where you live. Once the Chapter 13 is filed, you will meet with the case trustee so that the trustee may evaluate your ability to fund your plan. If the trustee is satisfied with your income and your ability to pay, and has no other issues with the case, the trustee will then recommend the case for confirmation. Only a judge can formally “confirm” a Chapter 13 plan.
However, the judges rely heavily on the opinion of the trustee and often approve the trustee’s recommendation on the case. After the case is confirmed by the judge, you will be required to make regular monthly payments into your plan. The money from your payments will get disbursed in an orderly fashion to creditors on a “pro rata” basis.
Benefits of Chapter 13
This filing gives you the opportunity to save your home from foreclosure by creating a repayment plan for mortgage lenders. By filing under Chapter 13, individuals can stop foreclosure proceedings, and have the opportunity to cure delinquent mortgage payments over the time of the plan. Nevertheless, debtors must still make all mortgage payments in full that come due during the Chapter 13 plan period on time as they come due.
Another advantage is that it allows individuals to re-amortize secured debts (other than a mortgage for their primary residence) and pay them over the life of the plan. Taking this action may lower the payments, and make them more affordable.
Chapter 13 law also has a special rules to protect third parties who are liable with the debtor (co-debtors) on “consumer debts.” This co-debtor “stay provision” protects co-signers during the plan.
Finally, Chapter 13 acts like a consolidation loan under which the debtor makes the plan payments to a trustee who then disburses payments to creditors evenly.
Am I Eligible for Chapter 13?
Whether you are self-employed or operate a business, if your unsecured debts (not used as collateral for debts) are less than $336,900, and your secured debts (collateral for debts) are less than $ $1,010,650 you are eligible for relief. These amounts are adjusted periodically to reflect inflation and changes in the consumer price index. A corporation or partnership may not, under any circumstance, file for Chapter 13.
Let Us Assist You
At McFarlin LLP, we pride ourselves on providing our clients with excellent legal services. We understand that going through insolvency can be a frustrating experience. That is why we want to assist you. We offer free consolations to prospective clients, so contact us today (888) 728 0044, or contact us here.