In our last blog post we learned that Chapter 13 bankruptcy is known as ““Adjustment of Debts of an Individual With Regular Income.” Let’s explore a bit more what exactly that means and how it can help you regain control of your financial situation.
A Brief History of Chapter 13 Bankruptcy
In a previous article entitled, “How Bankruptcy Law Has Changed” we gave a more in depth recounting of the bankruptcy story.
Some of the facets of Chapter XIII Bankruptcy go back in the American experiment to the drafting of the Constitution (One could make a strong argument that American bankruptcy originated in English Common Law in the 16th Century).
Chapter 13 Bankruptcy, however, became a specific category of debt relief with the passage of The Chandler Act of 1938.
Since then, it has been one of the most common avenues for Americans to obtain debt relief.
DISCLAIMER: The following blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.
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How Does Chapter 13 Bankruptcy Work?
After deciding to file Chapter XIII, a debtor must file a petition with the bankruptcy court of the area in which he or she has a domicile (legal address) or residence.
After filing the initial petition a debtor must also file schedules of: liabilities and assets, current income and expenditures, executory contracts and unexpired leases, and a statement of financial affairs.
Debtors then have to provide the court with proof that they have received financial counseling from a court certified counselor along with a few other miscellaneous documents listed here.
Then, the debtor must give the Chapter 13 case trustee with his or her tax returns or transcripts, this must also include returns filed during the case.
The debtor will then have to pay a charge of $235 for a case filing fee and a $75 miscellaneous administrative fee. This, fortunately, can be paid through installments.
Next, the debtor must compile:
- 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. (Source: Chapter 13 – Bankruptcy Basics)
Then, the trustee will call a meeting with the debtor and all creditors. The debtor will be placed under oath, then be subjected to a series of questions from the trustee and creditors. During this meeting the actual disbursement plan is completed.
Following the trustee and creditor meeting, the court will hold the bankruptcy hearing.
After a confirmation of the plan by the bankruptcy court judge, the Chapter 13 plan will be implemented and it is up to the debtor to see that it is carried out to full success.
*Note that married couples can file jointly or separately.
Who Can File for Chapter 13 Bankruptcy?
Chapter XIII is fairly inclusive as to who can apply for it.
Here are the basic qualifications:
- Debtor must have proof of regular income.
- Unsecured debts can be no greater than $394,725.
- Secured debts can be no greater than $1,184,200.
Benefits of Chapter 13 Bankruptcy
- Because of the development of a legally binding debt payment plan with Chapter 13 bankruptcy, debtors are allowed to keep certain assets out of reach from creditors.
- It allows a debtor to pay past-due payments like taxes, child-support, and alimony while protecting co-signers and allowing you to reduce debts like student-loan debt.
If you are considering filing for Chapter 13 bankruptcy, contact David S. Clark today!
DISCLAIMER: The above blog post is just advice, and you will be better served to call David S. Clark with your bankruptcy questions. This blog contains helpful tips and advice, but is not professional legal advice, and shouldn’t treated as such.