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Chapter 13 Bankruptcy

July 9th, 2010    •  by Showell Blades    •   Comments Off on Chapter 13 Bankruptcy

istock_000003637738xsmallI file plenty of chapter 13 bankruptcies, but I usually recommend filing chapter 7 bankruptcy to everyone who qualifies. In my opinion you should file a chapter 13 bankruptcy when you make too much money to qualify for chapter 7 bankruptcy but still need bankruptcy protection; when you have assets that a chapter 7 bankruptcy trustee would sell and don’t want that to happen so you cannot file chapter 7 bankruptcy, but you still need bankruptcy protection; and when you are trying to save a house from foreclosure or a car from repossession. Of course, you could file a chapter 13 bankruptcy instead of a chapter 7 bankruptcy if you just want to.

This firm and most attorneys will allow you to pay some of your attorney’s fees under the chapter 13 repayment plan.  If you qualify, this firm will let you pay ALL ATTORNEY’S FEES in the plan. Make sure, however, that you are not filing a chapter 13 bankruptcy just to be able to pay the attorney’s fees over time, when you would be much better off filing a cheaper, faster chapter 7 bankruptcy than going through the hassle of filing a chapter 13 bankruptcy which is doomed from the outset to fail and you end up having it be dismissed by the court or converted by you into the chapter 7 bankruptcy you should have filed in the beginning. It will save you money, time and headaches.

When you file a chapter 13 bankruptcy, you file the same basic paperwork as in a chapter 7 bankruptcy, but you also file a thing called a chapter 13 payment plan. The chapter 13 bankruptcy payment plan is what distinguishes chapter 13 bankruptcy from chapter 7 bankruptcy. In a chapter 7 bankruptcy you discharge your debt and usually only keep paying secured creditors who have liens on things you want to keep, like your car and house. In a chapter 13 bankruptcy, the chapter 13 payment plan is a way for you to restructure, or reorganize, your debt. Basically, you tell the bankruptcy court and your creditors how you wish to repay the creditors over up to 5 years. In some circumstances you can do a three to five year repayment plan instead. Under the Forms section of this Website are the versions of the plans approved for use in the Western District of North Carolina and the District of South Carolina for your review. Do Not use them, as these are subject to change; they are merely for you to get an idea of what a Plan looks like and how radically different a Plan is, given the district in which you file (and of what a bunch of legal mumbo jumbo looks like).

If your payment plan is approved, then you make monthly payments to a chapter 13 bankruptcy trustee for the 5 years and he pays your creditors. Usually, the only debt that is not paid in this plan is your future mortgage payment.  Thus, you make a plan payment to the chapter 13 bankruptcy trustee and a mortgage payment to the bank each month. I repeat……you still have to pay your mortgage payment when you file a chapter 13 bankruptcy. Caveat: In the Western District of North Carolina your chapter 13 plan payment is calculated to be an amount that will PAY your mortgage payment in the bankruptcy plan and the chapter 13 trustee pays it for you while you are in the bankruptcy plan AS LONG AS YOU PAY HIM!

Most chapter 13 bankruptcy payment plans pay the car and furniture-type loans spread over five years, and pay the unsecured creditors (credit cards, doctor bills, etc…) at a percentage of what you owe them, from 1%-100%, depending on what you make in income and on the value of your assets The time line for a chapter 13 bankruptcy is as follows: you file your bankruptcy petition (your case) and chapter 13 payment plan and serve the plan on the creditors. The creditors have 25 days to object to the plan. It can’t be because they are upset about your filing bankruptcy. They have to have a legal reason, and those are few. There also is the meeting of creditors (hearing) about 30 days after you file. Usually, no creditors show up. In North Carolina, your first chapter 13 plan payment is usually due 10 days after you file chapter 13 bankruptcy and in South Carolina, it is due 30 days after you file bankruptcy.

At the hearing, in NC the chapter 13 bankruptcy trustee will expect you to send your latest tax return beforehand and bring your social security card and driver’s license to the hearing. He will ask you some questions about your file for a few minutes while you are under oath and then talk about any changes he thinks need to be made to make the plan work. He usually will make them there and ask the attorney for information, if he needs it. Then you can go and keep making your plan payment, or the new payment, if it changed at the hearing.

If you cannot come up with a chapter 13 bankruptcy payment plan that you and the bankruptcy trustee or any objecting creditor can agree upon then, in NC, the bankruptcy judge will have what is called a confirmation hearing. That is where you and the bankruptcy trustee and any objecting creditors argue your legal and factual positions as to why a bankruptcy plan should or should not be approved (this is called “confirmed”) to a bankruptcy judge who makes the ultimate decision.

In South Carolina, you go to the meeting of creditors approximately 30 days after you file and you and your lawyer and the chapter 13 bankruptcy trustee are usually the only ones there. Before the hearing, you have to send a lot of requested information such as tax returns, pay stubs, proof that you are current in your child support since you filed, and such to the chapter 13 bankruptcy trustee. The list is on a pdf form in this website if you would like to see it. At the hearing, the chapter 13 trustee will ask you questions under oath, give your attorney a booklet for you which tells you how to deal with his office and staff and about chapter 13 bankruptcy. He also will give your attorney a sheet telling him what the chapter 13 trustee wants you to do to change your plan, or what you still have to get to him to review before the confirmation hearing, which you always have in SC. However, if you are able to prepare the plan like the chapter 13 trustee or any objecting creditor wants, and to get all requested information to the chapter 13 bankruptcy trustee in plenty of time for him to review before the confirmation hearing, you and your attorney usually do not have to go, except one of the three judges has just started requiring debtors and their attorneys to apear at every confirmation.

In SC you must make your first chapter 13 bankruptcy plan payment 30 days after you file your case. Often the chapter 13 trustees require that it be taken from your paycheck. You must also make your mortgage payments on time. Once the plan is confirmed, you pretty much know what to expect for the next 5 years.

  • Can I go to Jail for not Paying my Bills?

    No, not unless you committed a crime in the creation of the debt (for example, fraud). Simply borrowing money and not being able to pay it back is not a crime. Many creditors representatives will tell you lies on the telephone and say that they will have you put in jail. Perhaps they are too ignorant to know they are wrong or that it is illegal for them even to say that. See More Bankruptcy Q&A