 |
| Bankruptcy |
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a payment plan bankruptcy in which you and your lawyer submit a 3-year or 5-year payment plan. The Payment Plan lets you pay all or part of your debts over time while protecting you from being sued, having your car or home taken or your paycheck or checking account garnished. Eligibility to file Chapter 13 bankruptcy is determined by your Income and Expense Statements (Schedules I & J). The longevity of the Plan (3-year or 5-year plan) is determined by the means test, or monthly income test. In Chapter 13 bankruptcy cases the debtor’s assets are exempt and therefore nothing will be taken from the debtor by the Trustee and sold. A Chapter 13 bankruptcy does not end until the debtor has completed the Payment Plan, at which time they will receive a Discharge. If the debtor fails to complete the plan, then their bankruptcy is Dismissed and no Discharge is granted.
Is Chapter 7 or Chapter 13 better?
Your lawyer will tell you what kind of bankruptcy is best for you. In
most cases a Chapter 13 is better. In some cases, you may
have to file Chapter 13 instead of Chapter 7.
Do you have property that can be taken away like your home or car (repossessed),
if you don't pay? Then Chapter 13 usually works better. In most
cases, Chapter 13 lets you keep what you bought while you pay for it.
It lets you pay your debts at a rate you can afford. In most cases,
you can have lower payments or pay less than the full debt.
With a Chapter 13 Bankruptcy you make one payment each pay period or each
month. This way you pay all or part of your debts. While you
pay, your creditors can't take your property or your pay check.
Who can file a Chapter 13 Plan?
Anyone with enough regular income to pay basic living expenses plus Chapter 13 payments. Your income doesn't have to come from a job. Basic living expenses are rent, food, lights, heating and cooling, insurance, clothing and transportation. Try adding up these costs. Don't count your monthly payments to creditors. See if you would have money left each month for a Chapter 13 Plan. You need a lawyer to tell you if Chapter 13 will work for you. Most lawyers won't make you pay all of their fees up front. The balance of the lawyer's fee and court filing fee will be in your Chapter 13 payments.
What happens when you file a Chapter 13?
You must give your lawyer a list of ALL your debts. You must also give
your lawyer a list of everything you own. You must tell your lawyer
everything about your money situation. Before you file a Chapter 13,
you and your lawyer work out a payment plan. The lawyer writes your
Chapter 13 papers (the petition and other papers). You read and sign
the bankruptcy papers. You must swear under oath that as far as you
know the information is correct.
Your lawyer files the papers with the court. The court tells everyone
listed in your papers that you have filed a Chapter 13. You and your
lawyer must go to the creditor's meeting (also called a 341 meeting).
There, the Chapter 13 trustee will ask you questions. This is to make
sure your papers are complete and correct. Your creditors may also ask
about your debts and what you own.
When the court OKs your payment plan, you make payments to the trustee.
The Trustee makes sure the money goes to your creditors each month.
Usually the payments are taken out of your pay check and sent to the
Trustee. You must make all your Chapter 13 Payments in full and on
time. If you miss a payment the Trustee may drop (dismiss) your case.
If that happens the court cannot protect you from your creditors.
How often can I file a Chapter 13?
After you file a Chapter 13, you can't file another one for 2 years. If you file a Chapter 7, you can't file a Chapter 13 for 4 years. Talk to a lawyer if you need to get a Chapter 13 sooner. There will be problems to work out. 1) How much you owe, 2) How long the Plan will last, and 3) How much you can pay each month. You and your lawyer together come up with an amount that works for you.
Will I lose my home if I file Chapter 13?
Not if your Chapter 13 Plan includes house payments and any back payments. Many people file Chapter 13 to keep their homes.
Can I be sued after filing a Chapter 13?
While you are making payments, creditors can't sue you or take (garnish) your paycheck. They can't take your property or your home without the Court's OK. What about when you finish all of your plan payments? You should not be sued by anyone you paid through the plan.
Should my husband or wife also file Chapter 13?
Not always. Your lawyer will tell you what to do on this.
Can I list debts in my Chapter 13 that I have already been sued on?
Yes, you must list ALL your debts. You can't pick just the debts you want to pay.
What if my car was repossessed?
If they haven't sold it yet, a Chapter 13 Plan may help get it back. But, you must have enough income to pay for your car in your Chapter 13 Plan. And you will have to keep insurance on the car. If you don't, you may have to give up the car.
What happens to my credit rating after I file a Chapter 13?
That depends. If you need a Chapter 13, you probably have a poor credit rating already. When you finish your Chapter 13 plan, tell the credit bureau. Ask that your credit report show that you paid off your Chapter 13 plan. What if you want to go into new debts while you are in Chapter 13? The court has to OK it first.
| To learn more about your Bankruptcy options, click on the links below. |
Johnson & Flores, PLLC
4391 Ridgewood Center Drive, Suite E
Woodbridge, Virginia 22192
© 2010 Johnson & Flores, PLLC