Chapter 13

A filing under chapter 13 reorganization is a repayment plan to creditors under the supervision of the bankruptcy court (and more specifically the chapter 13 trustee) for debtors with regular income. The debtor must formulate a plan of repayment, which lasts for three to five years (the “plan”). The debtor submits a portion of his/her future earnings to the chapter 13 trustee, who then in turn, distributes these funds to the creditors pursuant to the plan. The plan must be entered into in good faith and must be confirmed by the court.

There are three main reasons or benefits to filing chapter 13 reorganization. The first and most common reason for filing chapter 13 is to save a house from an impending foreclosure. Chapter 13 reorganization allows you to repay mortgage arrearages over the duration of the plan as long as you pay the future mortgage payments on time. Second, as mentioned above, in some cases you can modify the rights of a secured creditor in a chapter 13 by paying the value of the collateral (other than real estate) plus interest which is tied to the prime rate. This must be done through the plan and is particularly beneficial when you owe substantially more on a secured debt than the value of the collateral that secures that debt (i.e. when you are “upside down” on the debt). Debtors with substantial amounts of non-exempt property can repay the value of the non-exempt property through the plan over its duration. This amount paid for non-exempt property in a chapter 13 is somewhat less than must be paid for the same non-exempt property in a chapter 7, and in a chapter 7 it must be paid in a much shorter period of time, usually no more than 6 months. And finally, debtors whose entire household income exceeds their total reasonable and necessary living expenses for that household cannot file a chapter 7. If these debtor(s) want bankruptcy relief, they must file a chapter 13 or chapter 11 bankruptcy.

Immediately upon filing a chapter 13, the ‘automatic stay’ stops creditors’ collections activities, including lawsuits, garnishments, foreclosures, phone calls, letters, etc. We will file your chapter 13 plan in consultation with you and in compliance with the bankruptcy code. Your plan payments begin 30 days after the plan is filed.

You will only be required to appear one time in front of the chapter 13 trustee’s attorney at the § 341 meeting of creditors, unless there are some serious problems with your case. This will be a 5 to 10 minute hearing where you will be required to testify under oath. I’m there with you and we will have prepared for this hearing and I will be sitting next to you so we can discuss any answers before you give them.

Creditors can file objections to your plan and we spend the 2 to 4 week period after the § 341 meeting of creditors resolving those objections. There will be a confirmation hearing where any outstanding disputes are resolved. You are not required to attend this hearing.

When the plan is confirmed, your remaining obligation is to make the plan payments in a timely manner, and any other payments that are required by your plan such as mortgage or car payemnts, etc. When you have completed your plan payments, the discharge will come shortly thereafter and the case is over.

After either a chapter 7 or a chapter 13 bankruptcy is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. Also, certain transfers of property that were made before the bankruptcy was filed may be reversed, such as repaying a substantial amount to a particular creditor right before filing or repaying all or part of debts to a family member within a year before filing the bankruptcy. Additionally, transfers of property (especially to a family member) within 4 years of filing bankruptcy can be reversed if the debtor did not receive fair value for the property transferred (for example, you cannot sell a $10,000 car to your brother for $1,000 2.5 years before filing the bankruptcy).

Erik B. Atzbach has the experience and knowledge to offer clients superior bankruptcy representation. He knows how to apply the recently changed bankruptcy laws to your case in the most advantageous way possible.