Chapter 13 Bankruptcy Facts:
Stops foreclosure and provides the homeowner an opportunity to bring current the arrears over time
Stops vehicle and mobile home repossessions and may provide an opportunity to restructure the obligation
- Provides for relief from student loan collection actions for the duration of the plan which can be up to 5 years
- Provides protection from creditors seeking to collect past due domestic support obligations
- Provides protection from taxing authorities attempting to collection past due taxes
- May allow for the stripping off of fully unsecured junior mortgages on residential real property
- May allow for the impairment and discharge of non- support marital obligations
- May allow for the impairment and discharge of unsecured debts
- Allows for the retention of all assets as a matter of law, although many plans require the liquidation of assets as a matter of choice or necessity
At Sasser Law Firm:
- All fees and cost related to the filing are rolled into the chapter 13 payment plan. No funds are required to file a case and obtain the protection chapter 13 provides
- Emergency chapter 13 cases are welcomed
- Refiled chapter 13 cases are welcomed where a debtor has been in a prior case
- Chapter 13 cases where a debtor owns a business or is self- employed are welcomed
- Chapter 13 cases where the debtor has tax problems are welcomed
- Chapter 13 cases where the debtor has domestic obligations are welcomed
- Consultations are free and without obligation and intended to be helpful regardless of whether or not we are hired and regardless of whether or not a bankruptcy is to be pursued and regardless of which chapter of bankruptcy the debtor might choose to pursue
- At the consultation stage and prior to the filing of the case our goal is to project as closely as possible what the final chapter 13 repayment amount will be based on the facts we are provided
- After the case is filed our goal is to make the chapter 13 plan payment as short and as low as possible
- We represent our clients throughout the case. Our representation does not end at confirmation.
How Filing Chapter 13 Bankruptcy Works:
- The Debt Limit amount will be set per Section 109(e) of the bankruptcy code. This is the dollar amount limit on how much debt an individual can have and file a chapter 13 reorganization case. $1,184,200 for secured debt and $394,725 for unsecured debt.
- A case is filed whereby the debtor is immediately afforded significant legal protection from creditors
- An individualized plan is submitted detailing the proposed payment plan and how the various debts will be treated
- In the Eastern District of North Carolina, the 1st payment is due the 1st day of the month following the filing of the case
- About 30 days after the case is filed, the debtor must attend a 2.5 hour financial management course followed by a 341 meeting of creditors
- Following the 341 meeting of creditors the case moves forward with the goal being confirmation. Confirmation can be contested by a party in interest for various reasons.
- If the plan is confirmed the debtor must perform under the plan
- If the debtor does not perform under the plan then the case will be dismissed
Amount and Duration of Chapter 13 Plan:
- Chapter 13 plans typically last between 3- 5 years
- If real property is being retained then the ongoing mortgage is paid through the chapter 13 plan in the Eastern District of North Carolina plus any pre- bankruptcy arrears must be paid through the plan
- Vehicles can be surrendered or paid directly or paid through the chapter 13 plan. If a vehicle is paid through the plan then there are some opportunities for restructuring the obligation
- Priority claims (certain taxes, domestic support, attorney fees, etc) claims must be paid in full without interest over the life of the chapter 13 plan
- Real property taxes on retained property can be paid directly or through the chapter 13 plan @ 9%
- Tax obligations secured with a tax lien must be paid in full @ 3%
- Creditors must be paid at least as much in chapter 13 as they would have received in chapter 7. This is referred to as the liquidation test.
- The debtor must devote their disposable income to the chapter 13 plan for the duration of the plan. Disposable income is generally calculated by tabulating the debtor’s household income for the prior 6 months and then deducting various allowances and expenditures permitted by law
- Although many cases do result in the discounting of debt owed to general unsecured creditors (e.g. credit cards, medical bills, etc.), the liquidation test and/or disposable income test may function to not provide any discount on debt and the sole benefit of the chapter 13 filing may be the protection it provides
NOTE: This is an overview of Chapter 13 bankruptcy and does not constitute legal advice. If you are considering Chapter 13 bankruptcy you should consult with an experienced bankruptcy attorney licensed to practice in your jurisdiction.