West Palm Beach Chapter 13 Attorney
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a reasonable alternative to Chapter 7. Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect, Chapter 13 has grown in popularity. It was designed for the working individual who procures monthly income. As a result, Chapter 13 is commonly referred to as a “wage earner’s plan.” While Chapter 7 discharges debts altogether, this plan gives individuals the opportunity to pay down debts over time. Debtors create a payment that will pay off all debts within five years. During the repayment period, creditors may not start or continue their collection efforts. However, if the debtor fails to make his or her payments on time as outlined in the payment plan, the court may dismiss the case or convert it into a Chapter 7 liquidation claim.
There are several advantages to filing Chapter 13 over Chapter 7. First and foremost, individuals may keep the mortgage on their homes. After a Chapter 13 bankruptcy is petitioned, all foreclosure proceedings stop. This form of bankruptcy also allows individuals to restructure debts and extend the payment periods over the life of the plan. However, this cannot be applied to the mortgage on a primary residence.
Chapter 13 bankruptcy does not only protect the debtor. It protects third-party co-debtors (or co-signers) who are also liable. In order to make for a simple streamlined process, money is paid to the trustee who then distributes the funds to each credit. This system allows individuals to consolidate all outstanding debt. In essence, the debtor has no contact with creditors while under Chapter 13′s protection.
Under bankruptcy law, any individual is eligible for Chapter 13 so long as total unsecured debt amount to less than $307,675 and secured debt is less than $922,975. These numbers change periodically, depending on the economy and consumer price index. It is always a good idea to check with a bankruptcy attorney in your area to get the most up-to-date information and to find out whether or not you are eligible for Chapter 13 bankruptcy. Also, an individual must receive credit counseling 180 days before filing for bankruptcy.
Individuals who are not eligible have had a bankruptcy petition dismissed within the past 180 days due to either an unsatisfactory absence to appear before the court, a willful disobedience of court order, or a voluntary dismissal.
How it Works
The first step is to file a petition with a court in the local area. All petitions should include a schedule of assets and liabilities; current income and expenditures; executor contracts and unexpired leases; and financial affairs. The debtor must also show proof of having received credit counseling. Forms of proof may include: a copy of any debt repayment plan developed during credit counseling; evidence of payment in the last 60 days from any employers; a copy of the most recent tax returns; a statement of monthly net income (including anticipated increases in income or expenses after filing); and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Applicants may file jointly as a married couple or as individuals.
Charges start with a $235 case filing fee as well as a $39 processing fee. These fees can be made in up to four payments, given court approval. The last installment must be made no more than 120 days after the initial filing date. In extenuating circumstances, the payment date can be extended. If the fees are not paid, the case will be dismissed.
An impartial trustee is appointed to administer the case once the forms have been filled out. This person evaluates the case objectively, disburses agent to the creditors, and informs the creditors that a bankruptcy petition has been filed.
Within fifty days of the petition filing, a mandatory meeting is set up between the creditors, the trustee and the debtor(s). During the meeting, the debtor, under oath, testifies to the nature of his or her financial situation. The bankruptcy judge does not attend in order to keep impartiality in the ruling. Be sure to consult with your attorney and also the trustee prior to the meeting to expedite the process.
Chapter 13′s Protections and Repayment Plan
An automatic stay goes into effect once the petition has been filed. Collection agencies may not continue attempts to contact you for payment once this has taken place. This stay is a temporary action. The repayment plan must also be filed with within 15 days after the petition is filed. Again, the courts are capable of granting an extension. The plan is submitted for court approval.
There are three types of claims that must be addressed in the plan: priority claims, secured claims, and unsecured claims. Priority claims have a special status. These include things like taxes and the costs of the bankruptcy proceeding. In the secured claims situation, the creditor has the right to take back certain property, known as collateral, if the debtor does not pay. For unsecured claims, the creditor has no right to seize property in order to pay back the debt. Of the three, only priority claims must be paid in full.
Payments must begin within 30 days of filing for Chapter 13 bankruptcy, even if the plan has yet to be court approved. However, plans may be modified before or after confirmation. The most common payment method is through payroll deductions. This ensures that payment is made in a timely fashion.
As with Chapter 7 bankruptcy, credit will need to be restored immediately following the proceedings. Part of the reason for the mandatory financial management class is to make sure that applicants avoid filing for debt in the future and maintain a healthy financial lifestyle.
The information provided on this webpage is not meant to be a substitute for legal counsel. It is meant to provide information only.
If you have any questions for our South Florida bankruptcy lawyers, don’t hesitate calling us at 561-353-2800 or complete the form on the left.
Portions reprinted from the office of the US Department of Justice.