Chapter 13

Chapter 13 bankruptcy is a debt repayment plan. You turn over a specified portion of your future wages/earnings to a Chapter 13 trustee (hereinafter “the trustee”), who then distributes the money according to a confirmed plan to creditors who have filed legitimate, verified claims. The method of determining the dividend distribution is determined by the Chapter 13 plan, which is filed with and confirmed or not confirmed, by the Bankruptcy Court (hereinafter “the Court”). If the debtor completes the plan, the debtor receives a discharge of all dischargeable debts.

No, but it is strongly recommended. Most cases without representation by an attorney fail. Neither the bankruptcy trustee nor the Court represents you and neither can give you legal advice.

The most common reasons for consumer bankruptcy are (a) loss of a job or long-term layoffs; (b) loss of overtime hours; (c) lengthy illnesses and large medical expenses; (d) death or disability of a spouse; (e) separation, divorce and marital problems; (f) seriously over-extended credit; and (g) large, unexpected expenses.

Generally, you may file a new Chapter 13 bankruptcy case even if you have filed a prior bankruptcy case. However, you may not be eligible to file a new case if your previous case was dismissed in the last 180 days for willful disobedience of a court order, or you voluntarily dismissed your case following a creditor’s request for relief from the automatic stay. You must also complete an approved credit counseling course within 180 days prior to the filing of your case with the Court. You MUST also be able to show that you have filed all tax returns for the four (4) years prior to the filing of your current case.  If you were not required to file tax returns due to retirement or disability, please provide proof to your attorney, and you can execute an Affidavit of Non-Filing. If you were required to file tax returns with the IRS for the past 4 years, and you failed to do so, please advise your attorney.  If your case is filed with missing tax returns for the past FOUR years, the IRS is required BY LAW to file a motion to dismiss your case; then you will have to start over with your bankruptcy case, after having filed the FOUR years of tax returns, which will result in additional fees and a second bankruptcy on your record.  So, be SURE that you have filed all of your tax returns for the FOUR years previous to filing your Chapter 13 case.

One of the major benefits of filing for protection under bankruptcy is that creditor actions are stayed (stopped). BUT THE PROTECTION DOES NOT GO INTO EFFECT UNTIL YOU HAVE SIGNED YOUR WRITTEN PETITON AND IT HAS BEEN ELECTRONICALLY BEEN FILED WITH THE COURT, AND THE COURT HAS ASSIGNED YOU AN OFFICIAL CASE NUMBER.
The United States Bankruptcy Court will officially notify all creditors that you properly list on your bankruptcy petition. That is why it is very important that you list ALL of your creditors.  If you do not list a creditor, they will not be notified by the court, and they can continue collection efforts against you, and your debt may not be discharged in your bankruptcy proceeding.
Once your case has been officially filed with the Court, and the Court has assigned a case number to you, this means that debt collection efforts and foreclosure proceedings are halted immediately. However, if you have filed a previous bankruptcy case in the year prior to filing your current case, the automatic stay may only be in effect for 30 days. If you have filed two (2) or more previous bankruptcy cases in the year prior to filing your current case, the automatic stay may not be in effect at all. It is very important to inform your attorney about any prior bankruptcy cases that you have filed so that your attorney can properly advise you as to your options. Chapter 13 also protects co-debtors or co-signers from collection activity while you are making your Chapter 13 payments.

You will be required to list ALL of your property and ALL of your debts on official forms to be filed with the Court. At the initial meeting of creditors, you will be asked by the Chapter 13 Trustee, under oath, whether you have listed all of your property and all of your debts on the forms filed with the Court, and you must be able to truthfully answer that you have.
There could be between 30 and 60 pages in your petition, schedules, and other papers filed at the time of your bankruptcy. You must follow the local and federal bankruptcy court rules in completing the forms. Preparing these forms requires an understanding of both bankruptcy law and local state law in order to complete the information correctly and accurately.
After your attorney has prepared the bankruptcy petition, you, or you and your spouse (if filing jointly), will review them and, if they are correct, sign them. Your attorney will electronically file the documents to the Court along with the necessary filing fees.

No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file. You should consult with your attorney regarding whether you are better off filing individually or jointly.

Bankruptcy laws prohibit discrimination based upon a debtor filing for protection under the bankruptcy laws. SEE FEDERAL LAW: 11 United States Code, Section 525 (11 U.S.C. 525)

ABSOLUTELY NOT. There are no debtors’ prisons in the United States. As a matter of fact, the right to file for bankruptcy protection is governed by the U.S. Constitution in Article 1, § 8, cl. 4.

Under normal circumstances, unless your employer is a creditor, your employer will not know that you have filed bankruptcy, unless you tell them.

YES. One of the main reasons people file a Chapter 13 bankruptcy is to keep their home. Usually, if you are behind on your house payments, your Chapter 13 plan will provide that your current monthly payments will be paid to the Chapter 13 trustee, and he will forward your regular monthly mortgage payment directly to your lender. Any payments you are behind will be included in your plan payment and paid to the mortgage company through the trustee.

YES, generally, if you want to do so, and if your proposed plan is approved by the Chapter 13 trustee and the Court, based upon your income and expenses. By filing a Chapter 13 Plan, you arrange for the repayment of your debts and for the repayment of liens on your property. Sometimes, a debtor may want to surrender a particular asset in order to get rid of the debt associated with the asset or to just return the asset itself.

Yes, if you agree to the terms of your Chapter 13 Plan. Sometimes it is best to examine the cost of the vehicle, the remaining balance, and the interest rate. Discuss this with your attorney. If you choose to keep your vehicle, it will be paid in full through your Chapter 13 Plan, and you will receive the title to your vehicle upon the successful conclusion of your case.

No. Frequently, one of the reasons for filing is overuse of credit cards. Each and every creditor to whom you owe money when you file must be listed in your bankruptcy petition to provide the creditor with notice of the bankruptcy filing, and to allow each unsecured creditor to share in plan payments as required by your Chapter 13 plan. If you try to exclude any creditor from your bankruptcy, the creditor will not receive notice and can proceed with collection against you as if the bankruptcy were not filed.

You can obtain credit while in bankruptcy ONLY with permission from the Chapter 13 trustee and the Court. To properly obtain credit, which includes any purchases in which you would pay over a period of time, such as the purchase of a replacement vehicle, you must notify your attorney so that he can formally make a request to either the trustee or the Court. This could be a lengthy process, and there are established procedures that you must follow in order to have the credit request approved or denied.  Again, you MUST consult your attorney to handle your request and have your request formally approved prior to obtaining new credit.

Generally, yes.
A Chapter 13 bankruptcy will generally stop a foreclosure, as long as you begin making current payments to the Chapter 13 trustee after filing under your Chapter 13 Plan. Assuming that you can make your monthly plan payments after you file a Chapter 13 plan, you can catch up your arrearages under Chapter 13 and maintain current monthly payments to avoid a foreclosure sale of your home.

Yes. Most judgments are stopped by bankruptcy. There are some exceptions to this, including claims for criminal restitution or a fine based upon the conviction of crime. Also, an exception exists if the judgment is one in which the debtor is found guilty of a willful or malicious injury to another which results in an injury or death

NO, quite the contrary. In order to have your plan confirmed (approved by the Court), you MUST be current in child support payments AFTER you file. You MUST MAKE ALL PAYMENTS that were behind at the time of filing through the trustee as part of your plan, and then you will be current with your child support payments at the end of your Chapter 13 Plan.

In some cases, yes. Generally, obligations arising out of a divorce or property settlement are governed by state law. Whether or not the bankruptcy discharges the joint debts from a divorce is largely dependent on the state laws that govern the divorce. You will need to provide a copy of the divorce decree to your bankruptcy attorney in order to properly determine if they will be discharged.

If the debt is primarily your debt, then you must provide for payment under your Chapter 13 plan. If the debt is primarily the debt of the person with whom you co-signed then you may propose a plan that provides for payment of the debt under your Chapter 13 plan, under the original terms of the loan. If your plan does not provide for full payment of the co-signed debt, the creditor could get permission from the Court to collect the remaining debt from the co-debtor. While you are in Chapter 13, and if your plan provides for full payment of the debt, the co-debtor is protected against collection efforts outside the Court. You must discuss this with your attorney.

Congress has created a mathematical equation, sometimes referred to as a “means test,” that determines a variety of issues in your case. A full review of your finances for the six (6) months prior to filing your bankruptcy determines whether your plan needs to be 36 months or 60 months long. If your income from the preceding six (6) months is more than the average household income for a similar size household in the State of North Carolina, then you are referred to as an “over median” debtor. If your income is over median, then you typically have to file a plan that extends to 60 months.

You must complete the Chapter “means test”. If you are an over median debtor, the information on the form will be used to determine how much you will be required to pay back to your unsecured creditors. If you are an under median debtor, then the Court may look at the various schedules filed in the case and make a determination depending on how much money you make and the monthly expenses you can reasonably deduct from the income to decide what amount should be paid to unsecured creditors. However, the calculation of the amount to be paid to your unsecured creditors is only a portion of the amount you may need to pay into your Chapter 13 Plan, which could be as low as 1% of your unsecured debt, and the rest of the unsecured debt will be discharged at the end of your plan. Your Chapter 13 Plan payment also must include payments to your secured creditors, such as your mortgage and vehicle payments, which is a major component in the calculation of your Chapter 13 monthly plan payment.

Once you have finished making all of your plan payments, you will be eligible to receive a discharge. A bankruptcy discharge releases a debtor from personal liability for most types of debts. In other words, when a debt is discharged, it is no longer enforceable against the debtor personally. Examples of non-dischargeable debts include child support, alimony, and student loans.

A bankruptcy discharge means that a debtor is no longer legally required to pay any debts that are discharged. Your creditors will receive an order from the Court prohibiting them from taking any form of collection action on discharged debts, including legal action and communications with you, such as telephone calls, letters, and personal contacts. It is important to understand that if a creditor has a security interest (lien) against your property after your bankruptcy, typically only the remaining mortgage balance on your house, and you are fall behind on those payments after your bankruptcy, they may still proceed against that security interest and try to take back possession. This will not be an issue as long as you stay current on your mortgage payments after your bankruptcy has been completed. The creditors may not, however, seek to collect any money from you for a debt that has been discharged.

The extent of the bankruptcy discharge varies, depending upon the type of case filed. It may be different, depending on whether a debtor files a Chapter 7 or 13 case. In Chapter 13 cases, a debtor is usually entitled to a discharge upon completion of all payments due under the plan. However, not all debts are discharged, and you will be required to repay those that are not discharged.  Common exceptions are listed in the answer to the question above. You must discuss this with your attorney.

Some debts that are nondischargeable include domestic support obligations (debts for spousal or child support, alimony or maintenance), most government-funded or guaranteed educational loans (student loans) or benefit overpayments, court fines, debts for personal injury caused by a debtor’s operation of a motor vehicle while intoxicated, and post-petition taxes, just to name a few. These exceptions to discharge can and will apply automatically. Your attorney will explain this to you fully depending upon your individual situation.

Surprisingly to most people, YES. This is up to each particular credit grantor. It is possible to get credit if the credit grantor believes and understands your reasons for filing bankruptcy. However, you cannot apply for new credit during your Chapter 13 without permission from the Chapter 13 trustee and/or the Court.  You must consult with your attorney to file a motion to request permission to incur new debt during your bankruptcy.

The bankruptcy may be listed in credit reports for a period from seven (7) to ten (10) years. However, by the time most debtors have filed bankruptcy, their credit rating is already damaged by late payments, repossessions, lawsuits, foreclosures and other debt problems, which may be reported for a period of up to seven (7) years from the first missed payment on the account.

There are at least two ways to get credit after a bankruptcy. First, one of your existing creditors may continue to grant you credit based upon your past dealings with them. Second, there are several banks offering secured credit cards. This means that the credit limit is based upon the amount of security (usually cash) given to the card issuer that is deposited into a savings account on behalf of the debtor to guarantee that the credit card is paid on a timely basis.

You may file a Chapter 7 case once every eight (8) years. There is no restriction on an individual for filing Chapter 13 cases, other than if the Court dismissed a prior case for a willful failure to obey a court order, or you voluntarily dismissed the prior case.  Also, if you are in a Chapter 13 plan, and you have a major change of circumstances, such as substantial loss of income, you MAY be able to convert your case to Chapter 7 and still receive a discharge of your debts.  But you MUST consult with your attorney to discuss your particular situation to see if you are eligible to convert your case and fill out the proper forms.