THE CHAPTER THIRTEEN BANKRUPTCY PROCESS
A Chapter Thirteen Bankruptcy is generally used in the following circumstances by individuals and not corporations with regular income and unsecured debts of less than about $300,000 and secured debts of less than about $900,000:
- To stop a foreclosure sale on a house or repossession of an automobile, or
- To pay debt that cannot be eliminated in a Chapter 7 Bankruptcy (i.e. non-dischargeable debts like the IRS) over time, and, if there is no security for the debt, with no interest or penalties, or
- To keep assets that otherwise would be lost if a Chapter 7 was filed; or
- To pay “best efforts” to creditors so that the credit report looks more favorable.
Basically, a Chapter Thirteen Bankruptcy focuses on submitting a plan to creditors and the court that states how you are going to repay creditors. Then the next step is to try and confirm the plan with the Bankruptcy Court. Remember, you will have to make a plan payment to the Bankruptcy Court for at least three years in most cases.
Before filing, you must also complete a credit counseling course and provide a certificate.
What does Plan Payment include and how is it calculated? Generally, your plan payment is a consolidated payment that contains all debts that we included in the plan ( and not those paid outside of the plan or directly to the creditor). Most tax debts and unpaid attorney fees are priority debts that have to be paid at 100% over the length of your plan. Secured auto payments, house arrearages, and other debts paid through the plan receive 100 % of the secured amount owed plus a 12% interest payment. Unsecured debts are paid what you can afford given your monthly budget and non-exempt assets. The Trustee of your case receives 10% of the total payout ($100 on a $1,000 payout). Generally, all of these amounts add up to your plan payment.
The cost of the average Chapter Thirteen Bankruptcy case is approximately $3,000 plus the filing fee. If you have decided to start a Chapter Thirteen Bankruptcy, the first step is for me to gather further information necessary for filing a complete and accurate Bankruptcy Petition, Schedules and Plan. I usually have you complete one of my forms, which includes a list of all of your creditors, whether or not you intend to repay them. The list of creditors will include the name, address, date incurred, account number and amount owed (including arrearages) to the creditor. I also ask you to provide to me proof of the income as stated on the Statement of Income. Upon completion and review of the petition and plan, it is signed by you and me and I file it with the Bankruptcy Court. Within five to ten working days the Bankruptcy Court sends a Notice of Meeting of Creditors to all parties, including you and me, that are listed on the mailing list portion of the Bankruptcy. Within this time we will have served your plan on all of your creditors, and they will know how you intend to pay them, if at all, through the plan.
I will meet you at the creditor’s meeting which is usually nothing to worry about. In most cases, it consists of three or four yes or no questions concerning your assets. I will brief you of the relevant issues right before the hearing.
IF YOU GO FORWARD WITH THIS PROCESS YOU MUST MAKE ALL MORTGAGE PAYMENTS DUE AFTER FILING. YOU MUST ALSO MAKE ALL PLAN PAYMENTS BY CHECK WITH YOUR CASE NUMBER ON THE CHECK AS THEY COME DUE TO:
THE FIRST PAYMENT IS DUE 30 DAYS AFTER YOUR BANKRUPTCY CASE IS FILED AND ALL OTHER PLAN PAYMENTS AFTER THE FIRST ONE ARE DUE MONTHLY ON THE ANNIVERSARY DATE OF THE FILING OF YOUR CASE. YOU MUST CONTINUE TO MAKE THESE PAYMENTS OR YOUR CASE WILL BE DISMISSED AND YOU MAY LOSE ASSETS.
After the first creditor’s meeting, I will mail certain documents to your creditors. If they do not object your plan will be confirmed in about 45 days. If they do object, I will call you to discuss with you how we will proceed and confirmation could take several months. Generally, after confirmation you will only have to continue the payments mentioned above to achieve your discharge.
This letter is to provide the “basics” and is not intended to answer all of your questions or handle the particulars of your situation. Please feel free to ask me if you have questions at any time.
The above information is provided as general information only and not intended to suffice as legal advice upon which you can rely for your particular situation. In the event that you have specific questions you are advised to contact Mr. Noyes
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