 |
 |
 |
 |
 |
Call 773.709.9539
For a Free Consultation
For a Free Consultation
Chapter 13 (Repayment) Bankruptcy Information
Contact the Law Office
of Ben W. Koyl, P.C. for
a Free Consultation
at 773.709.9539 or
ben@chicagobklaw.com
for a Free Consultation
"We Will Help You."
of Ben W. Koyl, P.C. for
a Free Consultation
at 773.709.9539 or
ben@chicagobklaw.com
for a Free Consultation
"We Will Help You."
Contact the Law Office
of Ben W. Koyl, P.C. for
a Free Consultation
at 773.709.9539 or
ben@chicagobklaw.com
for a Free Consultation
"We Will Help You." TM
of Ben W. Koyl, P.C. for
a Free Consultation
at 773.709.9539 or
ben@chicagobklaw.com
for a Free Consultation
"We Will Help You." TM
Office Locations:
Chicago Loop
Chicago South Side
Joliet
Chicago Loop
Chicago South Side
Joliet
Below is a summary of Chapter 13 Bankruptcy, but is not intended to be
comprehensive. Furthermore, this summary does not constitute legal advice.
comprehensive. Furthermore, this summary does not constitute legal advice.
Background
"A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular
income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a
repayment plan to make installments to creditors over three to five years. If the debtor's current
monthly income is less than the applicable state median, the plan will be for three years unless
the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater
than the applicable state median, the plan generally must be for five years. In no case may a plan
provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the
law forbids creditors from starting or continuing collection efforts."
"This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing
chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making
the plan work, and the special chapter 13 discharge."
income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a
repayment plan to make installments to creditors over three to five years. If the debtor's current
monthly income is less than the applicable state median, the plan will be for three years unless
the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater
than the applicable state median, the plan generally must be for five years. In no case may a plan
provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the
law forbids creditors from starting or continuing collection efforts."
"This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing
chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making
the plan work, and the special chapter 13 discharge."
"Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps
most significantly, chapter 13 offers individuals an opportunity to save their homes from
foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may
cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage
payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is
that it allows individuals to reschedule secured debts (other than a mortgage for their primary
residence) and extend them over the life of the chapter 13 plan. Doing this may lower the
payments. Chapter 13 also has a special provision that protects third parties who are liable with
the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts
like a consolidation loan under which the individual makes the plan payments to a chapter 13
trustee who then distributes payments to creditors. Individuals will have no direct contact with
creditors while under chapter 13 protection."
most significantly, chapter 13 offers individuals an opportunity to save their homes from
foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may
cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage
payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is
that it allows individuals to reschedule secured debts (other than a mortgage for their primary
residence) and extend them over the life of the chapter 13 plan. Doing this may lower the
payments. Chapter 13 also has a special provision that protects third parties who are liable with
the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts
like a consolidation loan under which the individual makes the plan payments to a chapter 13
trustee who then distributes payments to creditors. Individuals will have no direct contact with
creditors while under chapter 13 protection."
Advantages of Chapter 13
Chapter 13 Eligibility
"Any individual, even if self-employed or operating an unincorporated business, is eligible for
chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and
secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted
periodically to reflect changes in the consumer price index. A corporation or partnership may not
be a chapter 13 debtor. Id."
"An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days,
a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the
court or comply with orders of the court or was voluntarily dismissed after creditors sought relief
from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g),
362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the
Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling
from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§
109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy
administrator) has determined that there are insufficient approved agencies to provide the
required counseling. If a debt management plan is developed during required credit counseling,
it must be filed with the court."
chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and
secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted
periodically to reflect changes in the consumer price index. A corporation or partnership may not
be a chapter 13 debtor. Id."
"An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days,
a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the
court or comply with orders of the court or was voluntarily dismissed after creditors sought relief
from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g),
362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the
Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling
from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§
109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy
administrator) has determined that there are insufficient approved agencies to provide the
required counseling. If a debt management plan is developed during required credit counseling,
it must be filed with the court."
How Chapter 13 Works
"A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the
debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file
with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and
expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of
financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit
counseling and a copy of any debt repayment plan developed through credit counseling; evidence
of payment from employers, if any, received 60 days before filing; a statement of monthly net
income and any anticipated increase in income or expenses after filing; and a record of any
interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521.
The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for
the most recent tax year as well as tax returns filed during the case (including tax returns for prior
years that had not been filed when the case began). Id. A husband and wife may file a joint
petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal
stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They
are not available from the court.)"
"The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee.
Normally the fees must be paid to the clerk of the court upon filing. With the court's permission,
however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b);
Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to
four, and the debtor must make the final installment no later than 120 days after filing the petition.
Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as
long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor
may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee
and one administrative fee are charged. Debtors should be aware that failure to pay these fees
may result in dismissal of the case. 11 U.S.C. § 1307(c)(2)."
"In order to complete the Official Bankruptcy Forms that make up the petition, statement of
financial affairs, and schedules, the debtor must compile the following information:
A list of all creditors and the amounts and nature of their claims;
The source, amount, and frequency of the debtor's income;
A list of all of the debtor's property; and
A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes,
transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are
filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation
where only one spouse files, the income and expenses of the non-filing spouse is required so
that the court, the trustee and creditors can evaluate the household's financial position."
"When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the
case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2)
appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13
trustee both evaluates the case and serves as a disbursing agent, collecting payments from the
debtor and making distributions to creditors. 11 U.S.C. § 1302(b)."
"Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against
the debtor or the debtor's property. 11 U.S.C. § 362. Filing the petition does not, however, stay
certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a
short time in some situations. The stay arises by operation of law and requires no judicial action.
As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage
garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives
notice of the bankruptcy case to all creditors whose names and addresses are provided by the
debtor."
"Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the
bankruptcy court authorizes otherwise, a creditor may not seek to collect a "consumer debt" from
any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those
incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. §
101(8)."
"Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic
stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The
individual may then bring the past-due payments current over a reasonable period of time.
Nevertheless, the debtor may still lose the home if the mortgage company completes the
foreclosure sale under state law before the debtor files the petition. 11 U.S.C. § 1322(c). The
debtor may also lose the home if he or she fails to make the regular mortgage payments that
come due after the chapter 13 filing."
"Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will
hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting
at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting
may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this
meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask
questions. The debtor must attend the meeting and answer questions regarding his or her
financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a
joint petition, they both must attend the creditors' meeting and answer questions. In order to
preserve their independent judgment, bankruptcy judges are prohibited from attending the
creditors' meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either
during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making
sure that the petition and plan are complete and accurate, and by consulting with the trustee prior
to the meeting."
"In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured
creditors must file their claims with the court within 90 days after the first date set for the meeting
of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date
the case is filed file a proof of claim.11 U.S.C. § 502(b)(9)."
"After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to
attend will come to court for a hearing on the debtor's chapter 13 repayment plan."
debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file
with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and
expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of
financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit
counseling and a copy of any debt repayment plan developed through credit counseling; evidence
of payment from employers, if any, received 60 days before filing; a statement of monthly net
income and any anticipated increase in income or expenses after filing; and a record of any
interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521.
The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for
the most recent tax year as well as tax returns filed during the case (including tax returns for prior
years that had not been filed when the case began). Id. A husband and wife may file a joint
petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal
stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They
are not available from the court.)"
"The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee.
Normally the fees must be paid to the clerk of the court upon filing. With the court's permission,
however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b);
Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to
four, and the debtor must make the final installment no later than 120 days after filing the petition.
Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as
long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor
may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee
and one administrative fee are charged. Debtors should be aware that failure to pay these fees
may result in dismissal of the case. 11 U.S.C. § 1307(c)(2)."
"In order to complete the Official Bankruptcy Forms that make up the petition, statement of
financial affairs, and schedules, the debtor must compile the following information:
A list of all creditors and the amounts and nature of their claims;
The source, amount, and frequency of the debtor's income;
A list of all of the debtor's property; and
A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes,
transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are
filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation
where only one spouse files, the income and expenses of the non-filing spouse is required so
that the court, the trustee and creditors can evaluate the household's financial position."
"When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the
case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2)
appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13
trustee both evaluates the case and serves as a disbursing agent, collecting payments from the
debtor and making distributions to creditors. 11 U.S.C. § 1302(b)."
"Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against
the debtor or the debtor's property. 11 U.S.C. § 362. Filing the petition does not, however, stay
certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a
short time in some situations. The stay arises by operation of law and requires no judicial action.
As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage
garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives
notice of the bankruptcy case to all creditors whose names and addresses are provided by the
debtor."
"Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the
bankruptcy court authorizes otherwise, a creditor may not seek to collect a "consumer debt" from
any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those
incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. §
101(8)."
"Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic
stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The
individual may then bring the past-due payments current over a reasonable period of time.
Nevertheless, the debtor may still lose the home if the mortgage company completes the
foreclosure sale under state law before the debtor files the petition. 11 U.S.C. § 1322(c). The
debtor may also lose the home if he or she fails to make the regular mortgage payments that
come due after the chapter 13 filing."
"Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will
hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting
at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting
may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this
meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask
questions. The debtor must attend the meeting and answer questions regarding his or her
financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a
joint petition, they both must attend the creditors' meeting and answer questions. In order to
preserve their independent judgment, bankruptcy judges are prohibited from attending the
creditors' meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either
during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making
sure that the petition and plan are complete and accurate, and by consulting with the trustee prior
to the meeting."
"In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured
creditors must file their claims with the court within 90 days after the first date set for the meeting
of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date
the case is filed file a proof of claim.11 U.S.C. § 502(b)(9)."
"After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to
attend will come to court for a hearing on the debtor's chapter 13 repayment plan."
The Chapter 13 Plan and Confirmation
"Unless the court grants an extension, the debtor must file a repayment plan with the petition or
within 15 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court
approval and must provide for payments of fixed amounts to the trustee on a regular basis,
typically biweekly or monthly. The trustee then distributes the funds to creditors according to the
terms of the plan, which may offer creditors less than full payment on their claims."
"There are three types of claims: priority, secured, and unsecured. Priority claims are those
granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy
proceeding. (3) Secured claims are those for which the creditor has the right take back certain
property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured
claims, unsecured claims are generally those for which the creditor has no special rights to
collect against particular property owned by the debtor."
"The plan must pay priority claims in full unless a particular priority creditor agrees to different
treatment of the claim or, in the case of a domestic support obligation, unless the debtor
contributes all "disposable income" - discussed below - to a five-year plan.11 U.S.C. § 1322(a)."
"If the debtor wants to keep the collateral securing a particular claim, the plan must provide that
the holder of the secured claim receive at least the value of the collateral. If the obligation
underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was
incurred within certain time frames before the bankruptcy filing, the plan must provide for full
payment of the debt, not just the value of the collateral (which may be less due to depreciation).
Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the
original loan repayment schedule (which may be longer than the plan) so long as any arrearage
is made up during the plan. The debtor should consult an attorney to determine the proper
treatment of secured claims in the plan."
"The plan need not pay unsecured claims in full as long it provides that the debtor will pay all
projected "disposable income" over an "applicable commitment period," and as long as
unsecured creditors receive at least as much under the plan as they would receive if the debtor's
assets were liquidated under chapter 7. 11 U.S.C. § 1325. In chapter 13, "disposable income" is
income (other than child support payments received by the debtor) less amounts reasonably
necessary for the maintenance or support of the debtor or dependents and less charitable
contributions up to 15% of the debtor's gross income. If the debtor operates a business, the
definition of disposable income excludes those amounts which are necessary for ordinary
operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B). The "applicable commitment period"
depends on the debtor's current monthly income. The applicable commitment period must be
three years if current monthly income is less than the state median for a family of the same size -
and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. §
1325(d). The plan may be less than the applicable commitment period (three or five years) only if
unsecured debt is paid in full over a shorter period."
"Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the
court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). If any
secured loan payments or lease payments come due before the debtor's plan is confirmed
(typically home and automobile payments), the debtor must make adequate protection payments
directly to the secured lender or lessor - deducting the amount paid from the amount that would
otherwise be paid to the trustee. Id."
"No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a
confirmation hearing and decide whether the plan is feasible and meets the standards for
confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 25
days' notice of the hearing and may object to confirmation. Fed. R. Bankr. P. 2002(b). While a
variety of objections may be made, the most frequent ones are that payments offered under the
plan are less than creditors would receive if the debtor's assets were liquidated or that the
debtor's plan does not commit all of the debtor's projected disposable income for the three or five
year applicable commitment period."
"If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan
"as soon as is practicable." 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the
debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a
liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan
or the modified plan and instead dismisses the case, the court may authorize the trustee to keep
some funds for costs, but the trustee must return all remaining funds to the debtor (other than
funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2)."
"Occasionally, a change in circumstances may compromise the debtor's ability to make plan
payments. For example, a creditor may object or threaten to object to a plan, or the debtor may
inadvertently have failed to list all creditors. In such instances, the plan may be modified either
before or after confirmation. 11 U.S.C. §§ 1323, 1329. Modification after confirmation is not limited
to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. 11
U.S.C. § 1329(a)."
within 15 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court
approval and must provide for payments of fixed amounts to the trustee on a regular basis,
typically biweekly or monthly. The trustee then distributes the funds to creditors according to the
terms of the plan, which may offer creditors less than full payment on their claims."
"There are three types of claims: priority, secured, and unsecured. Priority claims are those
granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy
proceeding. (3) Secured claims are those for which the creditor has the right take back certain
property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured
claims, unsecured claims are generally those for which the creditor has no special rights to
collect against particular property owned by the debtor."
"The plan must pay priority claims in full unless a particular priority creditor agrees to different
treatment of the claim or, in the case of a domestic support obligation, unless the debtor
contributes all "disposable income" - discussed below - to a five-year plan.11 U.S.C. § 1322(a)."
"If the debtor wants to keep the collateral securing a particular claim, the plan must provide that
the holder of the secured claim receive at least the value of the collateral. If the obligation
underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was
incurred within certain time frames before the bankruptcy filing, the plan must provide for full
payment of the debt, not just the value of the collateral (which may be less due to depreciation).
Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the
original loan repayment schedule (which may be longer than the plan) so long as any arrearage
is made up during the plan. The debtor should consult an attorney to determine the proper
treatment of secured claims in the plan."
"The plan need not pay unsecured claims in full as long it provides that the debtor will pay all
projected "disposable income" over an "applicable commitment period," and as long as
unsecured creditors receive at least as much under the plan as they would receive if the debtor's
assets were liquidated under chapter 7. 11 U.S.C. § 1325. In chapter 13, "disposable income" is
income (other than child support payments received by the debtor) less amounts reasonably
necessary for the maintenance or support of the debtor or dependents and less charitable
contributions up to 15% of the debtor's gross income. If the debtor operates a business, the
definition of disposable income excludes those amounts which are necessary for ordinary
operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B). The "applicable commitment period"
depends on the debtor's current monthly income. The applicable commitment period must be
three years if current monthly income is less than the state median for a family of the same size -
and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. §
1325(d). The plan may be less than the applicable commitment period (three or five years) only if
unsecured debt is paid in full over a shorter period."
"Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the
court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). If any
secured loan payments or lease payments come due before the debtor's plan is confirmed
(typically home and automobile payments), the debtor must make adequate protection payments
directly to the secured lender or lessor - deducting the amount paid from the amount that would
otherwise be paid to the trustee. Id."
"No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a
confirmation hearing and decide whether the plan is feasible and meets the standards for
confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 25
days' notice of the hearing and may object to confirmation. Fed. R. Bankr. P. 2002(b). While a
variety of objections may be made, the most frequent ones are that payments offered under the
plan are less than creditors would receive if the debtor's assets were liquidated or that the
debtor's plan does not commit all of the debtor's projected disposable income for the three or five
year applicable commitment period."
"If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan
"as soon as is practicable." 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the
debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a
liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan
or the modified plan and instead dismisses the case, the court may authorize the trustee to keep
some funds for costs, but the trustee must return all remaining funds to the debtor (other than
funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2)."
"Occasionally, a change in circumstances may compromise the debtor's ability to make plan
payments. For example, a creditor may object or threaten to object to a plan, or the debtor may
inadvertently have failed to list all creditors. In such instances, the plan may be modified either
before or after confirmation. 11 U.S.C. §§ 1323, 1329. Modification after confirmation is not limited
to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. 11
U.S.C. § 1329(a)."
Making the Plan Work
"The provisions of a confirmed plan bind the debtor and each creditor. 11 U.S.C. § 1327. Once
the court confirms the plan, the debtor must make the plan succeed. The debtor must make
regular payments to the trustee either directly or through payroll deduction, which will require
adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of
the plan entitles the debtor to retain property as long as payments are made, the debtor may not
incur new debt without consulting the trustee, because additional debt may compromise the
debtor's ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327."
"A debtor may make plan payments through payroll deductions. This practice increases the
likelihood that payments will be made on time and that the debtor will complete the plan. In any
event, if the debtor fails to make the payments due under the confirmed plan, the court may
dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11
U.S.C. § 1307(c). The court may also dismiss or convert the debtor's case if the debtor fails to pay
any post-filing domestic support obligations (i.e., child support, alimony), or fails to make
required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521."
the court confirms the plan, the debtor must make the plan succeed. The debtor must make
regular payments to the trustee either directly or through payroll deduction, which will require
adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of
the plan entitles the debtor to retain property as long as payments are made, the debtor may not
incur new debt without consulting the trustee, because additional debt may compromise the
debtor's ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327."
"A debtor may make plan payments through payroll deductions. This practice increases the
likelihood that payments will be made on time and that the debtor will complete the plan. In any
event, if the debtor fails to make the payments due under the confirmed plan, the court may
dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11
U.S.C. § 1307(c). The court may also dismiss or convert the debtor's case if the debtor fails to pay
any post-filing domestic support obligations (i.e., child support, alimony), or fails to make
required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521."
The Chapter 13 Discharge
"The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has
recently undergone major changes. Therefore, debtors should consult competent legal counsel
prior to filing regarding the scope of the chapter 13 discharge."
"A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter
13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations
that came due prior to making such certification have been paid; (2) has not received a discharge
in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four
years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in
financial management (if the U.S. trustee or bankruptcy administrator for the debtor's district has
determined that such courses are available to the debtor). 11 U.S.C. § 1328. The court will not
enter the discharge, however, until it determines, after notice and a hearing, that there is no
reason to believe there is any pending proceeding that might give rise to a limitation on the
debtor's homestead exemption. 11 U.S.C. § 1328(h)."
"The discharge releases the debtor from all debts provided for by the plan or disallowed (under
section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13
plan may no longer initiate or continue any legal or other action against the debtor to collect the
discharged obligations."
"As a general rule, the discharge releases the debtor from all debts provided for by the plan or
disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not
discharged in chapter 13 include certain long term obligations (such as a home mortgage),
debts for alimony or child support, certain taxes, debts for most government funded or
guaranteed educational loans or benefit overpayments, debts arising from death or personal
injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution
or a criminal fine included in a sentence on the debtor's conviction of a crime. To the extent that
they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these
debts after the bankruptcy case has concluded. Debts for money or property obtained by false
pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for
restitution or damages awarded in a civil case for willful or malicious actions by the debtor that
cause personal injury or death to a person will be discharged unless a creditor timely files and
prevails in an action to have such debts declared nondischargeable. 11 U.S.C. §§ 1328, 523(c);
Fed. R. Bankr. P. 4007(c)."
"The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts
dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury
to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations,
and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. §
1328(a)."
recently undergone major changes. Therefore, debtors should consult competent legal counsel
prior to filing regarding the scope of the chapter 13 discharge."
"A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter
13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations
that came due prior to making such certification have been paid; (2) has not received a discharge
in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four
years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in
financial management (if the U.S. trustee or bankruptcy administrator for the debtor's district has
determined that such courses are available to the debtor). 11 U.S.C. § 1328. The court will not
enter the discharge, however, until it determines, after notice and a hearing, that there is no
reason to believe there is any pending proceeding that might give rise to a limitation on the
debtor's homestead exemption. 11 U.S.C. § 1328(h)."
"The discharge releases the debtor from all debts provided for by the plan or disallowed (under
section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13
plan may no longer initiate or continue any legal or other action against the debtor to collect the
discharged obligations."
"As a general rule, the discharge releases the debtor from all debts provided for by the plan or
disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not
discharged in chapter 13 include certain long term obligations (such as a home mortgage),
debts for alimony or child support, certain taxes, debts for most government funded or
guaranteed educational loans or benefit overpayments, debts arising from death or personal
injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution
or a criminal fine included in a sentence on the debtor's conviction of a crime. To the extent that
they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these
debts after the bankruptcy case has concluded. Debts for money or property obtained by false
pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for
restitution or damages awarded in a civil case for willful or malicious actions by the debtor that
cause personal injury or death to a person will be discharged unless a creditor timely files and
prevails in an action to have such debts declared nondischargeable. 11 U.S.C. §§ 1328, 523(c);
Fed. R. Bankr. P. 4007(c)."
"The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts
dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury
to property (as opposed to a person), debts incurred to pay nondischargeable tax obligations,
and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. §
1328(a)."
The Chapter 13 Hardship Discharge
"After confirmation of a plan, circumstances may arise that prevent the debtor from completing
the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11
U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to
complete plan payments is due to circumstances beyond the debtor's control and through no
fault of the debtor; (2) creditors have received at least as much as they would have received in a
chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that
precludes employment sufficient to fund even a modified plan may serve as the basis for a
hardship discharge. The hardship discharge is more limited than the discharge described
above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C.
§ 523."
NOTES
""The "current monthly income" received by the debtor is a defined term in the Bankruptcy Code
and means the average monthly income received over the six calendar months before
commencement of the bankruptcy case, including regular contributions to household expenses
from nondebtors and including income from the debtor's spouse if the petition is a joint petition,
but not including social security income or certain payments made because the debtor is the
victim of certain crimes. 11 U.S.C. § 101(10A)."
"In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S.
trustees perform in the remaining forty-eight states. The bankruptcy administrator program is
administered by the Administrative Office of the United States Courts, while the U.S. trustee
program is administered by the Department of Justice. For purposes of this publication,
references to U.S. trustees are also applicable to bankruptcy administrators. return to text
Section 507 sets forth 10 categories of unsecured claims which Congress has, for public policy
reasons, given priority of distribution over other unsecured claims. return to text
A fee of $25 is charged for converting a case under chapter 13 to a case under chapter 7."
the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11
U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to
complete plan payments is due to circumstances beyond the debtor's control and through no
fault of the debtor; (2) creditors have received at least as much as they would have received in a
chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that
precludes employment sufficient to fund even a modified plan may serve as the basis for a
hardship discharge. The hardship discharge is more limited than the discharge described
above and does not apply to any debts that are nondischargeable in a chapter 7 case. 11 U.S.C.
§ 523."
NOTES
""The "current monthly income" received by the debtor is a defined term in the Bankruptcy Code
and means the average monthly income received over the six calendar months before
commencement of the bankruptcy case, including regular contributions to household expenses
from nondebtors and including income from the debtor's spouse if the petition is a joint petition,
but not including social security income or certain payments made because the debtor is the
victim of certain crimes. 11 U.S.C. § 101(10A)."
"In North Carolina and Alabama, bankruptcy administrators perform similar functions that U.S.
trustees perform in the remaining forty-eight states. The bankruptcy administrator program is
administered by the Administrative Office of the United States Courts, while the U.S. trustee
program is administered by the Department of Justice. For purposes of this publication,
references to U.S. trustees are also applicable to bankruptcy administrators. return to text
Section 507 sets forth 10 categories of unsecured claims which Congress has, for public policy
reasons, given priority of distribution over other unsecured claims. return to text
A fee of $25 is charged for converting a case under chapter 13 to a case under chapter 7."
Law Office of Ben W. Koyl, P.C.
17 North State Street
Suite 1700
Chicago, IL 60602
ph: 773.709.9539
ben@chicagobklaw.com
17 North State Street
Suite 1700
Chicago, IL 60602
ph: 773.709.9539
ben@chicagobklaw.com
The Law Office of Ben W. Koyl, P.C. is a Debt Relief
Agency helping people file for bankruptcy under the
United States Bankruptcy Code
Copyright 2011 Law Office of Ben W. Koyl, P.C., All
rights reserved.
Agency helping people file for bankruptcy under the
United States Bankruptcy Code
Copyright 2011 Law Office of Ben W. Koyl, P.C., All
rights reserved.
The above quoted portions were taken from the United States Courts website and may
be found at:
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx
be found at:
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx
The Law Office of Ben W. Koyl, P.C.
Button provided by Cooltext.com.
Your South Side Bankruptcy,
Debt Relief and Tax Office
Debt Relief and Tax Office
Free Skype and Phone Consultations Available.
Click the Call Me Button to Start Skype Chat.
Click the Call Me Button to Start Skype Chat.