A Chapter 13 bankruptcy is a structured repayment plan designed to help you pay off your debts without losing your possessions. If you have a steady income stream, a Chapter 13 bankruptcy allows you to propose a plan through which you repay most, if not all, of your creditors over the course of three to five years.
During these three to five years, your payments are made to a trustee who will distribute your payments to your credits. You will have no direct contact with your creditors and they are not permitted to start or continue collection efforts against you while you are under the protection of a Chapter 13 plan.
If you're facing foreclosure, Chapter 13 can help you keep your home. Like a Chapter 7, filing for bankruptcy under Chapter 13 "automatically stays" harassing collector calls, most wage garnishments, and all of other collection actions. Under a Chapter 13, this "stay" also applies to foreclosure proceedings. While not necessarily permanent, this stay is meant to give you time to bring past-due payments up-to-date. However, in order to keep your house, you must also continue to pay all mortgage payments in full and on time throughout the duration of your Chapter 13 plan.
In addition, Chapter 13 contains a special provision that "automatically stays" actions against a co-debtor as well, if the debt is considered "consumer" in nature, meaning a debt primarily incurred for a household or individual purpose. Chapter 13 may also help you lower payments on other secured debts. Your bankruptcy petition must be accompanied by numerous financial documents and statements. Attorney Lander McLoyd will assist you by ensuring that all necessary documents are gathered before submitting your petition.
Under the U.S. Bankruptcy an individual must receive credit counseling within 180 days before the filing of his or her petition to be eligible to be considered a debtor. Attorney Lander McLoyd will provide you the contact information for a credit counseling agency approved by the Bankruptcy Court.
In most cases, you must file a repayment plan with the court within 15 days of filing your Chapter 13 bankruptcy petition. The plan should outline how much will be paid to creditors over the life of the plan (this may be less than the full amount owed), and should outline a payment schedule with fixed amounts to be paid to the court-appointed trustee at specific times (typically a biweekly or monthly schedule).
There are rules governing which debts must be paid off first, and what you must do in order to keep any property associated with a secured debt (i.e., a house or an automobile). A qualified bankruptcy attorney can assist you in drafting your plan to ensure all these rules are met. If, after 30 days of filing your bankruptcy petition, you do not have a confirmed plan, you still must begin making payments to the court-appointed trustee.
Within 20 to 50 days after you file your petition, the court-appointed trustee will hold a meeting of creditors. You must attend this meeting. If you have filed a joint bankruptcy petition with your spouse, you both must appear. During this meeting, your creditors will ask you questions regarding your financial situation.
After the meeting of creditors has been held, the court will hold (within 45 days after the meeting) a confirmation hearing on the payment plan. The court-appointed trustee, and any creditors who wish to, will attend. Creditors may object to the submitted plan during this hearing for a variety of reasons. An experienced bankruptcy attorney can help you structure your plan in such a manner as to avoid as many objections as possible. During this hearing, the court will determine whether you have the ability to adhere to the submitted repayment plan, and whether the plan meets all necessary standards for approval.
Once you have a confirmed repayment plan, you (and your creditors) are bound to the plan by law. You are required to make all payments to your trustee in full and on time as outlined in the plan. In addition, you must consult your trustee before incurring any new debts.
Under Chapter 13, a discharge of debt occurs only after successful completion of a court-approved, structured payment plan. Therefore, it can be many years before your debts are successfully discharged, and you are no longer liable for them. In some cases, if you are unable to complete your approved Chapter 13 payment plan, you can request a "hardship discharge" from the court. To be eligible for such a discharge, you must have been unable to complete your payments due to a reason outside of your control.
If you are an individual with a regular income, and your unsecured debts are less than $336,900 with secured debts being no more than $1,010,649, or you need to stop foreclosure, Chapter 13 may be the right choice for you. If you are a sole proprietor, Chapter 13 can grant you the ability to restructure your debts without the need to liquidate, allowing you to stay in business. In addition, if you have debts that cannot be discharged under Chapter 7 (such as certain tax obligations and debts arising out of divorce proceedings), Chapter 13 may be in your best interest.
Ann Arbor bankruptcy attorney Lander McLoyd is knowledgeable in Chapter 13 bankruptcies, and will approach your case with the intent to create the best long-lasting result for you. Due to the structured, long-term repayment plan inherent in Chapter 13, it can be difficult to obtain a discharge of debt. To ensure Chapter 13 is the right choice for you, consult competent legal counsel prior to filing.
For more information on Chapter 13 bankruptcy, contact Ann Arbor bankruptcy attorney Lander McLoyd today.