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Chapter 13 Bankruptcy

I 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 28 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 have your attorney email your social security card and driver’s license to him before the hearing, which takes place at the trustee’s office. 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 (All 3 judges have different expectations and they are subject to change, as the judges see fit).

In SC you must make your first chapter 13 bankruptcy plan payment 30 days after you file your case. Usually, 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.

I say pretty much, because you can get a chapter 13 plan confirmed in about 3 months, but in all chapter 7 and chapter 13 bankruptcies, the creditors have to prove that you owe them money by filing a proof of claim with the bankruptcy court wherein they show the documents which prove that the debtor is liable for a debt and the amount owed. The deadline for non- governmental creditors to file claims in all states is 4 months, and it is 6 months for the government. If a claim comes in at an amount higher than the debtor thought after his chapter 13 bankruptcy plan was confirmed the chapter 13 bankruptcy trustee may have to tell the debtor to raise his chapter 13 payment plan payment.

Similarly, bankruptcy trustees have to get bankruptcy court approval to pay money to creditors. Bankruptcy trustees wait until the deadline to file claims has passed and see who has filed a proof of claim. Bankruptcy trustees inspect them for accuracy, completion and timeliness. The bankruptcy trustee then objects if something is wrong and won’t want to pay it. Once the bankruptcy judge says whom the bankruptcy trustee can pay, the bankruptcy trustee starts paying all the money that the debtor has been paying him each pay period to the proper creditors. He then gives the creditors their money each month after that, according to the terms or schedule set forth in the confirmed chapter 13 payment plan.

In SC the chapter 13 bankruptcy trustee sends a report to the debtors at least annually showing who has been paid and how much, and what is left. When all payments have been made, the chapter 13 trustee will do a final accounting, audit the file and the bankruptcy judge will issue a bankruptcy court order discharging the debtor’s debts which are unpaid (and can be discharged), the interest the payment plan said the debtor did not have to pay, etc. which says to creditors, in layman’s terms, that the debtor has paid everything according to his approved chapter 13 bankruptcy payment plan and, even if it didn’t pay all the money that he owes his creditors, plus interest, late fees, etc., that is all that the creditor is going to get and the creditor cannot collect any more. Then the bankruptcy court closes the debtor’s file and he is out of bankruptcy. All the chapter 13 trustee’s have all debtors’ information on a website which has a link on this website, where debtors can access their information at any time.

There are a lot of issues that could come up regarding a chapter 13 bankruptcy and some of them are listed here on the site.

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