Chapter 13 Bankruptcy FAQs

 

These are some of the common questions regarding Chapter 13 Banckruptcy.

If you cannot find the answers you need below, or have a new question you think might be helpful to others, please CONTACT US for additional help.

- the Robert C. Russell staff



What is a discharge?
Generally, obtaining a “discharge” is one of the major reasons why people file for Chapter 13 relief.  A “Discharge Order” is an actual Order of the Bankruptcy Court that, when entered, releases a debtor from the personal obligation to repay the debtor's discharged debts.  The “Discharge Order” also orders creditors to not attempt to collect on a debt that has been discharged. 


What does a Chapter 13 Bankruptcy cost?
The filing fee is presently $274 to file a Chapter 13.  In a lot of circumstances, you simply need to pay the filing fee.  Attorney fees are often paid out of the money you are already paying monthly to the Chapter 13 Trustee.


Whis is eligible to file for a Chapter 13 Bankruptcy?
In order to qualify for Chapter 13 relief, you must:

(a)  be an individual or married couple;

(b)  be presently making “regular income” from wages, pensions, unemployment, self-employment business income, or some other regular source;

(c)  owe less than about $307,000 in unsecured debt;

(d)  owe less than about $922,000 in secured debt; and

(e)  be able to make the necessary monthly plan payment (see below).

When am I protected from my creditors?
You are protected immediately upon filing.  The filing of a Chapter 13 case automatically stays (or stops) virtually all collection and other legal proceedings that have been filed against the debtor.  A few days after a Chapter 13 case is filed, the Court will mail a notice to all creditors ordering them to refrain from any further action against the debtor.  If the debtor cannot wait this long, it is permissible for the debtor to notify one or more of the creditors of the filing of the case.  Any creditor who intentionally violates this Court order may be liable to the debtor for damages.  The most common actions not affected by the filing of a Chapter 13 case are criminal proceedings and, sometimes, actions for the collection of alimony, maintenance, or support.



Do I have to pay off all my debts in a Chapter 13 Bankruptcy?
No.  Generally, in a Chapter 13 only a few “important” debts must be paid in full.  Those debts include the balance dues, if any, on recent/newer taxes, mortgage arrears for retained homes, secured claims for things such as retained cars, and administrative fees such as Chapter 13 attorney and Trustee fees.  Your other creditors receive only the money that is left-over after the above “important” creditors are paid in full.  Generally, at the end of your Chapter 13 Plan, you will be relieved from any legal obligation to pay any remaining balance due on creditor’s claim.

Do my creditors have to agree to the plan?
No.  Unlike most non-bankruptcy options such a consumer credit counseling services, creditors do not have to agree to the terms of your plan.  The Court is the only entity that has to approve the plan.  And, generally, as long as you are paying as much as you reasonably can, your plan will be approved – even if your creditors are not getting paid in full or otherwise don’t like it.



What debts are released under a Chapter 13 Bankruptcy?
Although a debtor is generally protected during the plan from these debts, the Chapter 13 discharge does not release a debtor from debts including, but not limited to, the following:

(a)    debts that are paid directly by the debts outside of the Plan, including mortgages,

(b)    debts for alimony, maintenance, or support,

(c)     installment debts whose last payment is due after the completion of payments under the Plan (e.g. second mortgages on retained property),

(d)    debts incurred during the Chapter 13 that were not paid under the Plan,

(e)     debts for restitution included in a criminal sentence imposed on the debtor,

(f)      debts for criminal traffic fines such as “Driving While Suspended,”

(g)     debts for death or personal injury caused by the debtor's operation of a motor vehicle while unlawfully intoxicated, and

(f)      debts that qualify as a “student loan.”

What are my plan payments?
Generally, your payment is usually only what you can reasonably afford.  In most situations, your payment is that amount you have left over from your paycheck after you pay your basic living expenses such as rent, food, transportation, utilities, recreation, etc.

It is too complex a process to quickly explain exactly how your plan payment is determined.  Your monthly Chapter 13 Plan payment is generally based on three different factors: (1) your income and reasonable expenses, (2) the amount and type of debt you must pay during the plan, and (3) the dollar value of your non-exempt assets.

Again, because you do not have to pay your creditors in full, your payment in a Chapter 13 is usually far less than it would be if you tried to pay all of your creditors directly yourself or through a consumer credit counseling service.

When are my payment due?
Your first Chapter 13 Plan payment must be received by the Chapter 13 Trustee on the 30th day following your date of filing.  Payments are due, thereafter, at the same time each month.



How long do I have to make these payments?
A Chapter 13 Plan must last for three years, unless you pay off all (100%) of your debts before that time.  If a debtor needs additional time or if his/her income is "above average," a Chapter 13 Plan may last as long as five years.



What if I am temporarily unable to make the payments?
If the debtor is temporarily out of work, injured, or otherwise unable to make the payments required under the Chapter 13 Plan, the Court may suspend the payments for a short while until the debtor is able to resume the payments.  If that happens, the plan is normally extended for the debtor to make up the missed payments.  If a debtor is unable to make the payments for an extended period, the case may be dismissed, or the debtor may be able to modify the payment schedule or convert the case to a Chapter 7.  (You must let us know immediately if you cannot make a scheduled payment.)



How is a Chapter 13 Bankruptcy different from a Chapter 7?
There are several major differences between the two.  Only a few of them are outlined here.  Basically, both provide protection from creditors on the date of filing and result in a discharge of debt when completed.  However, how you get it completely different. 

A Chapter 13 and 7 differ in the types of debts discharged, they differ in duration, they differ in how long they give you to get caught up on mortgage arrears, and they differ in what and how you have to pay in order to keep a financed vehicle.  The next section may give you an idea when a Chapter 13 is preferable to a Chapter 7.

Why choose a Chapter 13 Bankruptcy over a Chapter 7?
Chapter 13 is usually better than a Chapter 7 for the debtor who:

(a)     has the ability to repay all of his/her creditors, but just needs a little more time or a lower payment than the creditors are willing to accept;

(b)     needs more time that the creditor is willing to give to get caught up on mortgage arrears and/or car payments;

(c)     owes a lot more on a car than the car is worth;

(d)     has non-exempt assets that would be lost to the Trustee if a Chapter 7 were filed;

(e)     has one or more substantial debts that would possibly not be discharged under Chapter 7; or

(f)      is not eligible for a discharge under Chapter 7 because of a previous bankruptcy filing or for some other reason.

Will I lose my property in a Chapter 13 Bankruptcy?
Usually not.  Under Chapter 13, debts are normally paid out of the payments made to the Chapter 13 Trustee, and not out of the debtor's property.  If the debtor has considerable nonexempt property, however, and cannot make sufficient payments to pay enough of debts to satisfy the Court, some of the debtor's property may have to be used to pay creditors.  Also, if a secured creditor is not being paid under the Plan, the secured creditor may be permitted to repossess the property securing the claim if the debt owed is not paid.

Also, you must list all claims you have against any one or any entity – even if you have not filed a lawsuit or received any money for the claim.  For example, if you have a claim against someone for an auto accident injury, you MUST list the claim for injuries as an asset in your bankruptcy or you may be FOREVER PROHIBITED from getting paid on the claim.  If you do not list the asset, you might never collect even one dollar on the claim.  If you have a million dollar claim, you will lose the million-dollar claim if you do not list it in your bankruptcy!

How will a Chapter 13 Bankrutcy affect my credit?
A Chapter 13 bankruptcy is typically noted on your credit report for 7 to 10 years.  The debts listed in your bankruptcy should be noted on your credit report as “zero balance due” and/or “included in bankruptcy.”  However, filing bankruptcy does NOT mean that your credit is “ruined” for 7 to 10 years.  First, you will likely be surprised how easy it is to get credit after you file for bankruptcy (not that you should want a lot of credit anyway!).  Secondly, if you need to file for bankruptcy relief, your credit is typically better than if you did not file; not filing and continuing to add negative entries to your credit report most certainly does not improve your credit rating. 



Who will know I filed for Bankruptcy?
Bankruptcy is a matter of public record.  However, generally, it is not publicized beyond notice to your creditors and co-debtors.  Employers and newspapers are NOT generally notified of the bankruptcy.



Isn't Bankrupcy "immoral"? Am I just "taking the easy way out"?
Some people argue that filing bankruptcy is taking the easy way out.  I suppose that it could be the ‘easy way out’ if you never tried any other way to pay your debts.  However, most people try their best to avoid bankruptcy.  Some people even sacrifice their health and relationships in an effort to pay bills that are beyond their ability to pay.  Bankruptcy is a gut-wrenching experience that most people try very hard to avoid.   

Also, bankruptcy is a legal remedy made available by your United States’ Constitution.  It was recognized by our Founding Fathers that there are certain circumstances where a person or family simply needs relief from their debts.  And bankruptcy relief is only available to people that actually qualify for assistance. 

Is it wrong to file bankruptcy?  No, not if you need the help.  You should not be forced into virtual life-long slavery to your creditors because either you had a medical emergency, loss of employment, or even made bad financial decisions. 

Will I have to go to court?
A debtor does not generally go to court.  However, there is as administrative hearing called a "Meeting of Creditors" or “341 Meeting” that occurs about 20-40 days after the case is filed.  At this hearing, the Chapter 13 Trustee places the debtor under oath and asks questions about the debtor’s money, property, and debts.  Generally, a debtor’s creditors do not attend this hearing.  However, if one does, the Trustee will give the creditor only a few minutes to ask a few quick questions.  Most 341 Meetings take only 5-10 minutes.  You must bring to your 341 Meeting a picture ID, a document showing you social security number, your most recent tax return, your most recent pay stubs and your bank account statement showing the balance/activity for the date your case was filed.  (We will send you a written reminder of what you need to bring.)



How can I get in trouble filing my Chapter 13 Bankruptcy?
The following people should expect “problems” in bankruptcy: 

(a)         Persons who conceal, transfer, or destroy their property with the intent to defraud their creditors or the Trustee in the Chapter 7 case. 

(b)         Persons who conceal, destroy, or falsify records of their financial condition or business transactions. 

(c)         Persons who make false statements or claims in their Chapter 7 case, or who withhold recorded information from the Trustee in the case. 

(d)         Persons who fail to satisfactorily explain any loss or deficiency of their assets. 

(e)         Persons who refuse to answer questions or obey orders of the Bankruptcy Court, either in their case or in the case of a relative, business associate, or corporation. 

(f)      Persons who have engaged pre-filing activity with intent to defraud creditors. 

How do I contact you if I have more questions?
If you have any additional or follow up questions, or are ready to make an appointment to discuss your particular options, please give us a call at:
360-882-8890, contact us from this website or send us an email at:
info@RRLawGroup.com

Other Helpful linkns, forms, worksheets and Information:

• General Information Worsheet
• Debt forms
• Business Budget Form
• FREE Annual Credit Report
• Equifax Home Page
• Experian Home Page
• Trans Union Home Page
• Mortgage Modifications
• Short Sale Negotiations
• Washington State Bar
• Clark County Bar
• Natl. Bankruptcy Assoc.

Additional Questions or for a FREE Initial Consultation simply CONTACT us from this web site or give us a call at: 360-882-8990.
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