About Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a bankruptcy in which the debtor repays a possible range of 1% to 100%, plus prime interest rate, back to their creditors within the maximum time frame of 60 months. In a Chapter 13 the debtor makes one monthly payment to the bankruptcy Trustee. ONE OF THE MAIN BENEFITS of filing a Chapter 13 is that attorney fees do not need to be paid in full before the case is filed. Unpaid attorney fee balance can be paid through the monthly Trusteepayments.

There are several reasons why a debtor may not have any other alternative than to file a Chapter 13. They may be under the eight-year Chapter 7 bar. They may make too much money. They may have too much equity in a home, vehicle, or other personal or business property and do not want to run the risk of having the Chapter 7 Trustee sell the property to pay creditors. They may not have the money up front to pay for a Chapter 7 and have a wage garnishment pending or active and need immediate protection. They may have a home in foreclosure which they wish to attempt to save before sheriff sale. Etc.

The amount the debtor is required to pay back depends upon the answers to several questions. To determine the answers to those questions it is necessary to get a complete picture of you financial situation. A budget, means test, and Chapter 13 plan must be prepared by your attorney before your final monthly payment amount and plan duration can be determined with accuracy.

Before your case can be filed you will need to: (1) complete a credit counseling course either online or over the phone; (2) provide your last six months proof of income (paycheck stubs, payroll summary, etc.); (3) provide your last four years of State and Federal income tax returns; (4) pay a filing fee of $274.00; (5) if necessary pay a portion of your attorney fees up front; and, (6) provide any other documents necessary to the analysis and preparation of your case. You will also need to complete a second online or telephonic counseling course after your case is filed.

Upon the filing of the case all collection efforts must cease. This includes lawsuits, sheriff sales, wage garnishments, telephone harassment, collection letters, utility disconnections, and driver’s license suspension

Chapter 13 can stop driver’s license suspensions due to unpaid parking tickets, vehicle accident judgment, or court fines (debtor needs to visit Secretary of State and pay reinstatement fee). Parking tickets can be paid back at less than 100% of the total amount owed if the debtor is filing a less than 100% plan.

Typical debts which are commonly dealt with in a Chapter 13 include: mortgage arrears, parking tickets, credit cards, medical bills, past due utilities, repossessions, personal loans, payday loans, government fines, Federal and State income tax debt, past due child support, and overpayment of benefits from unemployment or social security.