Chapter 3:

What is a Chapter 13 Bankruptcy filing?
Chapter 13 is the Bankruptcy code under which a person may enter into a re-payment plan for some or all of their debts. This plan is supervised and controlled by the bankruptcy trustee. The trustee deals with the creditors, not you. You must make regular payments during the life of your re-payment plan. The length of the plan is usually five years. The trustee collects your plan payment and then pays the creditors in accordance with the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the unpaid dischargeable debts. The main difference between a Chapter 13 and a Chapter 7 bankruptcy has to do with what property a debtor can keep. In a Chapter 7, all non exempt property must be surrendered.In a Chapter 13, the debtor can retain most or all of the non exempt property. Further, the Chapter 13 discharges a broader range of debts than a Chapter 7.

Why should I file a Chapter 13 and not a Chapter 7 bankruptcy?
1) Because you wish to repay all or most of the debts and you have the income to do so;
2) You have non exempt property that you wish to keep that would be lost in a Chapter 7;
3) You are not eligible for a Chapter 7.
4) You have debts that are dischargeable under a Chapter 13, but not under a Chapter 7;
5) You are behind on your home payments, and need the court to force the bank to accept payments on the arrearage.

What is a Chapter 13 plan?
This is the agreement with the court stating what your obligations are and how much you must pay each month. It is a several page document that we prepare for you as part of the bankruptcy filing.

Must all debts be paid in full in a Chapter 13?
No. Unsecured debts are usually paid only a percentage of what is owed. And they can not add interest while the plan runs. Secured debts must be paid 100%. Typical secured debts are your house and automobile.

How much will my plan payment be?
Usually all of your extra income above your basic necessities is paid into the plan. The determination of what are basic necessities is where you need the experience of a good attorney.

What is my creditor’s do not approve of the plan?
So what? They have little to say in regard to the approval. The court has the final say as to what is approved or not.

I am self employed, can I file a Chapter 13 bankruptcy?
Yes, the eligibility requirements are the same for self employed as everyone else.

If I can not make the plan payments, can I convert to a Chapter 7?
Maybe. This is a very difficult question to answer generally. If there has been an unforseen change in your circumstances it may be possible. If you simply do not like the payment amount, it can not be changed. Of course, you always have the option to drop out of the plan and dismiss the bankruptcy. But then, you will be right back to where you started.

Can I keep my tax refunds in a Chapter 13 Plan?
No, refunds must be paid over to the trustee.

Do I lose any legal rights by filing a Chapter 13?
No. This is not a criminal proceeding. You do not lose any rights to vote, carry firearm, hunting, or to any other business licensing.

Do I have to have my wages garnished by the trustee?
Generally, yes. And this of course, lets your employer know you filed a Chapter 13. The trustee will not allow direct payment from you.

What happens to the creditor’s that do not file claims?
They do not get paid. At the completion of the plan, the debt you owe them is discharged in full. It seems foolish for a creditor to not file a claim, but in almost every case we handle, there are at least a couple that fail to do so.

If my income changes, can the plan payment be changed?
Generally, yes. So long as the change was not voluntary.

Can I add creditor’s where I incurred new debt during the plan?
No. There are a couple of very narrow exceptions, but do not expect to be able to.