01. What is Chapter 13 and how does it work?
A person may repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. The debtor must make regular payments to a person called the Chapter 13 Trustee, who collects the money paid by the debtor and disburses it to creditors in the matter called for in the plan.
Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.
02. How does Chapter 13 differ from a Private Debt Repayment Program?
In a Chapter 13, you propose a monthly repayment amount based on your income, expenses, property and debt. Under a private debt repayment program, they tell you how much you need to pay whether you can afford it or not.
Also, in a Chapter 13, by law the interest stops completely on all unsecured debt such as personal loans, credit cards and medical bills.
Under a private debt repayment program, you must try to negotiate with creditors to see if they will reduce their interest.
03. What is Chapter 13 discharge?
It is a court order releasing a debtor from all dischargeable debts and ordering creditors not to collect them from a debtor. A debt that is discharged is one that the debtor is released from and does not have to pay.
04. What types of debts are not dischargeable under Chapter 13?
A full Chapter 13 discharge, granted upon completion of all payments required in the plan, discharges a debtor from all debts except:
1) Debts that were paid outside of the plan and not covered in plan,
2) Debts for alimony, maintenance, or support,
3) Debts for death or personal injury caused by the debtor’s operation of a motor vehicle while unlawfully intoxicated,
4)Debts for restitution or criminal fines included in a criminal sentence imposed on the debtor,
5) Debts for most student loans or educational obligations.
6) Installment debts whose last payment is due after the completion of the plan, and
7)Debts incurred while the plan was in effect that were not paid under the plan.
05. What is a Chapter 13 plan?
It is a written plan presented to the bankruptcy court by a debtor that states how much money or other property the debtor will pay to the Chapter 13 trustee, how long the debtor’s payments to the Chapter 13 trustee will continue, how much will be paid to each of the debtor’s creditors, which creditors will be paid outside the plan, and certain other technical matters.
06. When must the debtor begin to make payments to the Chapter 13 trustee and how must they be made?
07. - How long does a Chapter 13 plan last?
A Chapter 13 plan must last for three to five years depending on your income, unless all debts can be paid off in full in less time.
08. How are cosigned or guaranteed debts handled under Chapter 13?
If a cosigned or guaranteed consumer debt is being paid in full under a Chapter 13 plan, the creditor may not collect the debt from the cosigner or guarantor. However, if a consumer debt is not being paid in full under the plan, the creditor may collect unpaid portion of the debt from the cosigner or guarantor after the bankruptcy case is completed. A consumer debt is a nonbusiness debt. Creditors may collect business debts from cosigners or guarantors even if the debts are to be paid in full under the debtor’s plan.
09. Who is eligible to file under Chapter 13?
Any natural person may file under Chapter 13 if the person:
1)resides in, does business in, or owns property in the United States,
2)has a regular income,
3)has unsecured debts of less than $419,275.00
4)has secured debts of less than $1,257,850.00
5)is not a stockbroker or a commodity broker, and
6)has not been a debtor in another bankruptcy case that was dismissed within the last 180 days on certain technical grounds.
Corporations, partnerships, and limited liability companies may not file under Chapter 13.
10. Will a person lose any property if he or she files under Chapter 13?
No, a person does not lose any property if he or she files a Chapter 13. Because the Chapter 13 is a repayment program, the court will not seize any of a debtor’s assets.
11. How does filing under Chapter 13 affect collection proceedings and foreclosures previously filed against the debtor?
The filing of a Chapter 13 case automatically stays (stops) all lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor’s property. A few days after the case is filed, the court will mail a notice to all creditors advising them of the automatic stay. Certain creditors may be notified sooner, if necessary. Most creditors are prohibited from proceeding against the debtor during the entire course of the Chapter 13 case. If the debtor is later granted a Chapter 13 discharge, the creditors will then be prohibited from collecting the discharged debts from the debtor after the case is closed.
01. What is Chapter 7 and how does it work?
Chapter 7 is that part (or Chapter) of the Bankruptcy Code that deals with liquidation. The Bankruptcy Code is that part of the federal laws that deal with bankruptcy. A person who files under Chapter 7 is called a debtor.
In a Chapter 7 case, the debtor must turn his or her non-exempt property, if any exists, over to a trustee who then converts the property to cash and pays the debtor’s creditors. Most debtors do not have any non-exempt property. In return, the debtor receives a Chapter 7 discharge.
02. What is a Chapter 7 discharge?
It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay.
Some debts, however, are not dischargeable under Chapter 7.
03. What debts are not dischargeable under Chapter 7?
All debts of any kind or amount including out-of-state debts are dischargeable under Chapter 7 except the debts listed below. The following is a list of the most common debts that are not dischargeable under Chapter 7.
1) Most tax debts and debts that were incurred to pay federal tax debts.
2) Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement, if the creditor files a complaint in the case.
3) Debts not listed on the debtor’s Chapter 7 forms, unless the creditor knew of the case in time to file a claim.
4) Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the case.
5) Debts for alimony, maintenance, or support and certain other divorce-related debts including property settlement debts.
6) Debts for intentional or malicious injury to a person or property of another, if the creditor files a complaint in the case.
7) Debts for certain fines and penalties.
8) Debts for educational benefits and student loans, unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents.
9) Debts for personal injury or death caused by the debtor’s operation of a motor vehicle while intoxicated.
10) Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.
04. How much is the Chapter 7 filing fee and when must it be paid?
The filing fee is $338.00 for either a single or a joint case. The entire filing fee must be paid, or the case will be dismissed and the debtor will not receive a discharge. The fee charged by the debtor’s attorney for handling the Chapter 7 case is in addition to the filing fee.
05. May a husband and a wife file jointly under Chapter 7?
YES. A husband and wife may file a joint petition under Chapter 7. If a joint petition is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.
06. How does filing for a Chapter 7 case affect collection and other legal proceedings that have been filed against the debtor in other courts?
The filing of a Chapter 7 case automatically stays (or stops) virtually all collections and other legal proceedings pending against the debtor. A few days after a Chapter 7 case is filed, the court mails out a notice to all creditors ordering them to refrain from any further action against the debtor. If necessary, this notice may be served early by the debtor or debtor’s lawyer. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable to the debtor for damages. Criminal proceedings and actions to collect alimony, maintenance, or support from exempt property or property acquired by the debtor after the Chapter 7 case was filed are not affected by the automatic stay. The automatic stay also does not protect cosigners and guarantors of the debtor, and a creditor may continue to collect debts of the debtor from those persons after the debtor files a Chapter 7 case.
07. How does filing under Chapter 7 affect a person's credit rating?
08. Does a person lose any legal or civil rights by filing under Chapter 7?
The bankruptcy code is designed to help people get back on their feet and, therefore, provides protection against discriminatory treatment against debtors who file bankruptcy. The law provides that a governmental unit may not deny, revoke, suspend, or refuse to renew a license or permit, or deny or terminate the employment of a debtor solely because they were a debtor under bankruptcy. Furthermore, a governmental unit may not deny a student grant or loan to a person who is or has been a debtor in bankruptcy.
09. Does a person lose all of his or her property by filing under Chapter 7?
Most people do not lose any property when they file Chapter 7. The law provides that certain property is exempt or protected and most people do not exceed the limit of can be protected. If something is in danger of being taken, we will inform you prior to filing your case. Remember that any property that is secured with a valid mortgage or lien such as a house or automobile must still be paid or the lender can repossess it.
10. Will I have to go to court?
Most clients never go to Bankruptcy Court or see the judge, the attorneys will file the case in court for you. However there is a short meeting with the trustee of the case that you will have to attend. Your attorney will be with you at this meeting. During the COVID19 pandemic, these meetings are being done telephonically.