How to File Bankruptcy Under Chapter 13
Filing Chapter 13 Bankruptcy Rules and Procedures
Aug 27, 2009
U.S. citizens need to know how to file bankruptcy under chapter 13 or find an alternative debt-free solution if not eligible under chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act 2005 has tightened-up the law so that many people with serious debts no longer qualify due to having an income above the state median. Many others decide that filing under chapter 13 is the right option because they seek to protect non-exempt assets, such as an expensive car or valuable collection, from sale by the trustee.
Filing Chapter 13 Bankruptcy
Those who need to understand how to file bankruptcy under chapter 13 must realise that the process is more involved than chapter 7. Chapter 13 involves a careful assessment of income and expenditure in order to decide upon an appropriate repayment plan.
- Those with non-exempt assets who have an income below the state average will make repayments over a 3 year period.
- If income is above the state median, repayment will be made over a period of five years.
- The 2005 laws do not permit the term to be greater than five years. The debtor will enjoy full court protection from creditors during this period.
Chapter 13 Bankruptcy Eligibility Requirements
- The debtor must have undergone counseling session from an approved credit counseling agency 180 days before filing.
- Unsecured debts must be less than $336,900 and secured debts must not exceed $1,010,650. These figures are periodically adjusted to take account movement in the Retail Price Index (RPI).
- Filing is not permitted if, during the last 180 days, a debtor has willfully failed to appear before the court or has failed to comply with a court order.
- It is also not possible to proceed if it was voluntarily dismissed after creditors sought relief in order to recover the sale proceeds of any property on which they hold a lien.
How to File Bankruptcy Under Chapter 13
- The court in the area the debtor resides will need to be served with a petition.
- The court will also require a schedule of assets and liabilities, executory contracts and unexpired lease, details of current income and expenditure and a statement of financial affairs.
- A certificate of credit counseling must also be provided. This should include details of a repayment plan, wage slips and tax return.
- The court will charge the debtor a case filing fee of $235 and an administrative fee of $39. Non-payment of these charges may result in the case being dismissed.
- Once the petition is filed, an automatic stay will come into force that stops further activity from creditors and debt collection agencies. The bankruptcy clerk notifies creditors.
- Filing will also stop home foreclosure. However, it is still possible for a lender to foreclose at any time before the petition is officially presented to the court.
- About 20 to 50 days later the trustee will hold a meeting of creditors. Under oath, either the trustee of creditors can ask the debtor any questions. It is a legal requirement that the debtor attends.
- Creditors and debt collection agencies must file their claim for any of the proceeds within 90 days of the first meeting. Government departments have 180 days to lodge any claim.
- The debtor must provide the court with a suitable repayment plan within 15 days of the petition. The court appointed trustee will then provide payment to creditors on the basis of this plan.
- Priority claims (secured debt) must be paid in-full. This isn't the case for unsecured debts as it is only necessary to repay what can realistically be afforded.
Provided repayments are made for the full term, that person will then be discharged from the majority or all of their personal debt. Learning how to file and improving financial management skills are the first steps towards the removal of serious debt. Filing bankruptcy under chapter 13 can help a debtor keep non-exempt assets and arrange an affordable repayment plan.
Sources
USCourts.gov
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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