Chapter 13 Bankruptcy, “Adjustment Of Debts Of An Individual With Regular Income”, is a form of bankruptcy utilized primarily under the following circumstances:
- Where a person has already filed a Chapter 7 Bankruptcy within the immediately preceding eight years and is therefore presently ineligible to file another Chapter 7;
- Where a person is in substantial arrears on their home mortgage obligation and cannot catch up prior to foreclosure;
- Where a person has property interests in excess of those which are exempt and would therefore be lost to the trustee in a Chapter 7 Bankruptcy;
- Where a person has items of personal property which is subject to lien obligations substantially in excess of their fair market value and the person does not have funds with which to effectuate the cash redemption provided for in Chapter 7 Bankruptcy;
- Where a person has debts which cannot be discharged under a Chapter 7 Bankruptcy such as taxes or student loans and the creditor will not permit a voluntary time repayment or abate the accrual of interest and penalties;
For persons in the above circumstances, Chapter 13 may be the bankruptcy of choice.
In order to file a Chapter 13 for your business, you must be self employed or a dba. Your business cannot be a corporation, partnership or LLC. The Chapter 13 will include your personal debts and assets as well as your business debts and assets. In order to file a Chapter 13 you cannot have more than $269,250.00 of unsecured debt or $807,750.00 of secured debt (Remember, this is personal and business debt).. It is generally easier to confirm a Chapter 13 plan than a Chapter 11 plan because creditors cannot vote on whether they want to accept a Chapter 13 plan (although they can object on certain specific legal grounds). As long as certain conditions are complied with in your plan, the judge must approve it. However, your only repayment option in a Chapter 13 is to make monthly payments to a Chapter 13 trustee who will divide the payments among your creditors. This payment usually begins 45 days after the Chapter 13 is filed. In a Chapter 11 there is no restriction on what kind of repayment your plan can provide for your creditors, as long as it is approved by the judge.
Similar to a Chapter 7, an automatic stay of creditor claims goes into effect immediately upon the filing of a petition under Chapter 13. This stay will stop a foreclosure sale which may be pending, efforts to repossess secured personal property such as automobiles and other efforts to collect debts.
The information required under a Chapter 13 is similar to that required under Chapter 7 and the same type of petition and schedules are used. The debtor in a Chapter 13 must, however, upon filing or soon thereafter submit to the Bankruptcy Court a Chapter 13 Plan in which he sets forth exactly how he intends to pay his creditors. Chapter 13 Bankruptcy in contrast to a Chapter 7 liquidation is a “Reorganization” bankruptcy. Where the jurisdiction of the Bankruptcy Court over a Chapter 7 debtor terminates fairly soon after the debtor gets his discharge and the Chapter 7 trustee administers the nonexempt estate, if any, the jurisdiction of the Bankruptcy Court in a Chapter 13 continues until the debtor faithfully fulfills all terms of his Chapter 13 Plan. The Chapter 13 plan can be from 36 to 60 months in duration and generally provides for the classification and payment of debts. The Chapter 13 Plan includes the following information:
- The amount of each monthly payment which the debtor proposes to pay. (Such payment is paid to the Chapter 13 Trustee who distributes it in accordance with the confirmed Chapter 13 Plan)
- The duration of the Chapter 13 Plan (It must be no less than 36 months or greater than 60 months)
- The payment of arrears on debtor’s home mortgage during the life of the Chapter 13 Plan (Such arrearage plus interest at the contract rate must be paid in full within the term of the plan)
- The treatment and payment of creditors having security interests in personal property. (If the debtor wishes to retain such secured property, the debtor must promise to pay the secured creditor an amount equal to the fail market value of the property plus a reasonable amount of interest until such creditor receives the full payment provided for by the plan)
- The treatment of priority tax claims and student loans. These generally must be paid in full under the Chapter 13 Plan.
- The amount, after the foregoing claimants are paid, that the general nonpriority unsecured creditors are to receive. (These creditors need not be paid in full, but they must receive an amount in time payments which at least equals what they would receive if the debtor’s nonexempt bankruptcy estate was liquidated)
The information concerning Chapter 13 Bankruptcy presented herein is intended to be read and understood only as a brief survey of that area of law. The Law Offices of Bill King do not provide online preparation of Chapter 13 Petitions, Schedules or Plans. It is the recommendation of the Law Offices of Bill King that if your circumstances appear to fall within the five categories described above or you desire additional information on Chapter 13, you should make an appointment with an attorney who practices in that area. It should be noted that the majority of Chapter 13 bankruptcies filed without attorneys or through paralegal, fail. The attorneys of Bill King P.C. are knowledgeable in this area of law and are available to consult with you concerning the specifics of your case.
