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Most individuals file for Protection utilizing the Chapter 13 Bankruptcy laws to protect assets that might not otherwise be fully protected through a Chapter 7 Bankruptcy proceeding. Chapter 13 Bankruptcy filers use this provision of the Bankruptcy Code to save homes from foreclosure, save cars from repossession, or to force a long term payment plan (even over a Creditor's objection) on the repayment of a lump sum now due.
The most common reasons people file Chapter 13 are as follows:
- To bring current delinquent mortgage payments or real estate taxes. In a Chapter 13 Bankruptcy proceeding, a Debtor can pay the delinquent amounts over a period of 36-60 months and protect their property from foreclosure.
- To restructure automobile loans with high payments, lower high interest rates, or decrease payoff balances that exceed the value of the vehicle.
- To pay back income taxes, child support arrears, and other priority debts without incurring any additional interest or penalties.
- To protect assets that might otherwise be subject to an auction or sale within a Chapter 7 Bankruptcy proceeding. By paying back creditors a percentage of the debt due through a Chapter 13 plan, the non-exempt assets are permanently kept beyond the reach of your Creditors.
- To obtain a partial discharge of unsecured debts (such as credit cards) when a person's income is too high to qualify for Chapter 7.
The individual who files for protection utilizing the Chapter 13 Bankruptcy laws will file a proposed payment Plan together with their Bankruptcy Petition. The Plan will provide for payments during a three to five year span to "catch up" on missed secured payments; such as, mortgage or vehicle payments. The exact repayment amount is determined by a variety of factors; including, but not limited to, the value of assets and monthly income. In Chapter 13 cases, the Bankruptcy Filer agrees to repay all or part of the debts under the Plan. Monthly payments can be made up to five years. Generally, the client has to pay, through the Chapter 13 Bankruptcy Plan, an amount equal to his or her total assets, less $12,000, plus Trustee's commissions, and any applicable attorneys' fees. Your Plan may also be "disposable income" or percentage based "general unsecured creditors" driven. Trustees usually require that employers pay the plan amount directly to the Trustee via wage garnishment.
Chapter 13 Bankruptcy Filers are allowed to retain most, if not all, of their property as long as they make the confirmed Chapter 13 Plan payments while continuing to make their regular, current, post-filing payments on mortgages, cars, or other secured loans. To successfully file for Chapter 13 Bankruptcy protection, the individual must have income greater than his or her living expenses. Budget(s) and proof(s) of earnings must be submitted to the Federal Bankruptcy Court and the Chapter 13 Trustee. The budget must be deemed reasonable and fair. The Bankruptcy Judge must approve the Chapter 13 Bankruptcy filer's repayment Plan and will generally do so if the Chapter 13 Bankruptcy Plan complies with the applicable provisions of the Chapter 13 Bankruptcy laws. The Chapter 13 Bankruptcy Filer must make their monthly Plan payments to the Chapter 13 Trustee commencing one month after the Bankruptcy Petition is filed. To illustrate the above, if an individual files for Chapter 13 Bankruptcy protection on January 1st, the first monthly plan payment should be made to the Trustee on or before February 1st. It is crucial that all Plan payments be made timely to prove to the Bankruptcy Judge that the Bankruptcy Filer can and will maintain the payments under the Bankruptcy Plan. The Chapter 13 Bankruptcy Filer has to attend two hearings: one before the Trustee who assesses the plan and one before a Judge who decides whether to confirm the plan. The first hearing occurs about a month after filing the petition and the second about six weeks thereafter. Unfortunately, it is routine that a Plan may not be confirmed at the first scheduled Confirmation Hearing. The Debtor(s) must appear at all scheduled hearings. Once your Chapter 13 Plan is confirmed, your will receive a Semi-Annual Report from the Trustee. This report will list the creditors and the amounts the Trustee will be paying out during the course of your plan.
A crucial element of the Chapter 13 case is to remain current with secured creditors (Mortgage, Car Loan etc.) following the filing of the Chapter 13 case. You will also be required to timely pay a monthly payment to the Chapter 13 Trustee every month. Once the Chapter 13 Plan is confirmed the monthly payment to the Trustee will be paid by way of a payroll withholding order signed by the Judge. Until the payroll withdrawal is noted on your paystub it is the Debtors responsibility to make sure the Trustee is paid monthly. Failure to remain current on the required payments can result in the case being dismissed and/or the Mortgage Company foreclosing on your home. In certain circumstances when a case is dismissed for failure of client to cooperate a case may not be re-filed for 180 days. In most cases a mortgage company will be able to foreclose in that period of time. As you have already deduced from the above, a Chapter 13 Bankruptcy proceeding is drastically different from the usual, short, and straight-forward Chapter 7 Bankruptcy proceeding. The knowledgeable and experienced attorneys at The Drazin Law Center, can assist you through the web and intricacies of the Chapter 13 proceeding; from start to finish. Generally, after the Debtor has made all of the payments required during the 36 to 60 month Plan, and the Trustee has disbursed the received funds to the Creditors, the Chapter 13 Bankruptcy filer will be sent a Discharge and the case will be closed. The Drazin Law Center's attorneys are knowledgeable, diligent, qualified, and resourceful. Our attorneys and staff have solid relationships with the Chapter 13 Bankruptcy Trustees, their attorneys and staff.
While it is mostly true that a basic Chapter 7 case can be handled by a competent general practice attorney, Chapter 13 cases should only be handled by a qualified Bankruptcy attorney like those at the Drazin Law Center.