A chapter 13 case begins with the filing of a petition, schedules, and statement of financial affairs (“Petition”) in the United States Bankruptcy Court in the state or jurisdiction in which a debtor lives. A debtor must also file a Chapter 13 Plan, which is noticed to creditors and details how the debtor’s creditors will be repaid. In addition to filing a petition, debtors are required to pay a filing fee to the Court and file a credit counseling certificate upon filing and a debtor education certificate before discharge. Only a single individual, or a husband and wife, may file a joint petition or individual chapter 13 petition. Any debtor filing a chapter 13 must have regular income – and that may be from a job or unemployment or social security, etc. There are a number of good reasons to file a chapter 13, but if you are behind on your house or car payments, or owe taxes to the federal or state government, or received a discharge in Chapter 7 within the last eight years, than chapter 13 may be appropriate for you.
When consulting your lawyer about bankruptcy, it is very important to list and disclose all property, debts and information concerning your financial affairs. The failure to do so may result in adverse consequences. Failure to list a secured or priority creditor, may result in loss of that property. A criminal referral or loss of discharge may result if assets, debts and material information is not disclosed on your petition. The failure to list a creditor may mean the debt to that creditor will survive bankruptcy and that creditor can still collect the debt.
What happens in a Chapter 13 ? After evaluating your debts and the property you want to keep, our office will assess your income and your living expenses and should you have a surplus (income less expenses = surplus), then all or a portion of that surplus will be paid to a Chapter 13 Trustee every month for 36 to 60 months. After deducting up to 10% for his fee, the Trustee will use the reminder of the funds from the monthly plan payment to pay creditors per your plan. The goal is to get your chapter 13 plan confirmed (approved by the court.). When you make all plan payments, your debts are discharged. An example of what generally happens is below:
$2,000 Net Income – $1,750 Expenses = $250 Monthly Surplus
Your monthly surplus will be paid to the Chapter 13 Trustee to fund your Chapter 13 Plan. The Trustee would receive a 10% commission from your payment. Of the $250 example, the Trustee would receive $25. The remaining $225 from the example would be used by the Trustee to pay your attorney fees, secured debts on property you desire to keep (i.e., home and car) and priority debts (such as support obligation or taxes, etc. ) over 36 to 60 months. The actual length of your chapter 13 plan will depend upon what exempt and nonexempt property you desire to keep and pay for, the amount of your monthly payment to the Trustee and the results of an income measuring test – called a means test, and any liquidation test. Your remaining debts are forgiven 36 to 60 months after filing when you make your last plan payment.
WHY SHOULD YOU HIRE A LAWYER?
Bankruptcy law is complex area of law and chapter 13 has lots of technical rules – that an experienced attorney can navigate. Darcy can help you conduct pre-bankruptcy planning to maximize the assets you may keep before filing bankruptcy. There is a wrong way and a right way to plan and most pro se debtors do it the wrong way and lose property to a trustee. Darcy will personally assist in you completing your bankruptcy schedules – so that your creditors, property, and matters related to your financial affairs are properly listed and correctly disclosed.
Darcy can assist you in effectively utilizing the “cram down” provisions of Chapter 13 so that you may make an affordable payment to the trustee to keep your property, even when a creditor objects. Darcy can identify 910 and non 910 car loans and properly instruct you as to what must be repaid on your car – the value of the car over the plan life or the contract balance.
The chapter 13 code provisions also allow you to retain a home, and pay the mortgage arrears through a chapter 13 plan, while you maintain current mortgage payments going forward. At the end of the plan you will be current on you mortgage payments, provided you make all plan payments. In some circumstances you may avoid or strip the second mortgage on your home. If you are current on your mortgage payments upon the filing of your chapter 13, then your will continue to make your mortgage payments directly to your lender.
In addition, Darcy will identify what other debts such as taxes or support obligations you must pay in your chapter 13 plan. All other debts will be forgiven upon the completion of your chapter 13 plan. She will explain the effect of such terms as mean testing, liquidation analysis, and the pool. Whether you are an above median debtor or a below median debtor, will be items that also need addressed.
The ultimate success of your chapter 13 plan does depend upon your ability to make plan payments. It is important that any debtor have the ability and in fact make regular plan payments to the trustee. On some occasions, an event post petition may occur such as an illness or injury that causes you to miss work. Your attorney may assist you in that event.