Frequently Asked Questions About Chapter 13(Note: the following questions and answers provide generalized comment
on Bankruptcy law and procedure in Colorado and may not apply in all fact
situations. They are not a substitute for consultation with an experienced
attorney.)
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1.
Who can file a Chapter 13 plan?
2.
Can my
creditors stop me from filing a Chapter 13 plan?
3.
After having my car repossessed, a house foreclosure or
other legal problems, can I still file Chapter 13 and stop these actions?
4.
How does Chapter 13 basically
work?
5.
For what kinds
of situations is Chapter 13 best suited?
6.
Must you be employed
to use a Chapter 13 plan?
7.
What about new debt
after the Chapter 13 is filed?
8.
Are my co-signers
on consumer debts also protected?
9.
How long does a Chapter 13 plan
last?
10. Can I consolidate all my bills?
11. If I filed bankruptcy in the past, can
I still file a Chapter 13 plan
now?
12.
How does Chapter 13
affect taxes that I owe?
13.
How does
Chapter 13 affect my general unsecured creditors?
14.
Do
I need a cosigner to file Chapter 13?
15.
What if I run into additional financial difficulty during the Plan?
16.
What happens at the end
of my Chapter 13 Plan?
Only individuals or a married couples (not corporations or
partnerships) can file a Chapter 13, if their secured debts don't exceed
approximately $923,000.00
and their unsecured debts don't exceed approximately $307,000. Those
with larger debts must use Chapter 11 if they want to avoid Chapter 7.
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No, creditors cannot stop you from exercising your right to
file under Chapter 13. The key issue is whether your Chapter 13 plan meets
the requirements of the law and experienced legal counsel is invaluable to help
you in this regard.
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Yes, Chapter 13 stops almost all types of court actions until you have a chance
to decide what you want to do with the item.
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A Chapter 13 plan permits persons with a regular source of
income to pay part or all of their debts under the protection and control of the
bankruptcy court. Commencing 30 days after filing your petition and plan
of repayment with the court, you generally will pay the court a fixed sum of
money per month on your old debts, and pay your current monthly expenses
directly to your creditors. The bankruptcy law requires that the
payments you make through the plan to unsecured creditors have a value of at
least what the creditors would have received if you had chosen to file a Chapter
7 case. It also requires that you make a "best effort" which generally means pay
all of your disposable income (Income minus living expenses) to the Court for
three years to five years. The length of the plan is determined by a
calculation required by the law. As you can see, preparation and justification of your budget
is very important in making a plan that will be accepted.
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Generally, Chapter 13 can be preferable where:
In a typical case with these problems, the plan would
provide that one would make all future payments on the secured loans to
the creditors on time and pay a fixed amount to the court
each month which the court would use to pay the trustee, attorney, taxes and
secured loan arrearages, with any excess to go to the unsecured creditors.
In addition, if one owed more on a secured debt than the property is worth
(except real estate), then the plan can provide for payment of only the value of the property
to the creditor to satisfy the lien, and treat the rest of the debt as an
unsecured debt.
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No, but you must have a steady source of income, such as self employment or a
sole proprietorship, a pension, unemployment insurance, disability
insurance, Social Security, trust income, spousal maintenance or child support.
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7.
What about new debt after the Chapter 13 is filed?
Chapter 13 mainly deals with your old bills. Your usual living expenses
for rent or mortgage, food, clothing, insurance and utilities will come out of
your remaining income after your Chapter 13 plan is paid. You will need
special permission of the Court to incur substantial new debt beyond what is on your budget,
such as a new car loan or mortgage loan during the Plan.
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Yes. If someone cosigned for you on a loan or purchase, he will be
insulated from the creditor as long as your Chapter 13 plan stays in effect and
pays 100% percent of the cosigned debt, including interest and late
charges. Keep in mind that you can choose to pay 100% percent of a co-signed debt, yet only pay a small portion of your other debts.
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The usual time frame is 36 months to 60 months, depending on certain
calculations.
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Yes, except your post-petition mortgage, car loan and other secured
payments. Unless special circumstances exist, your post-petition secured
loan payments will be paid on your own, outside the Chapter 13 plan.
Any secured loan payments that you missed prior to filing your plan
(pre-petition payments) will be included in the plan.
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You can file a Chapter 13 to reorganize and pay debt any time, but cannot obtain
a discharge of debt in a Chapter 13 if you received a discharge in a Chapter 7
that was filed in the four (4) years prior, or a discharge in a Chapter 13 case
that was filed in the two (2)
years prior.
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This is one of the benefits of Chapter 13. Usually, your taxes will be
one of the first creditors paid by the plan, and interest and penalties will not
accrue during the plan. Some older taxes may be treated similar to general
unsecured debts, and even though not paid in full, will be discharged at the end
of the plan.
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So long as your plan is in effect, and you pay your ongoing
expenses, all creditors are prevented from pursuing you or your property in
legal actions. Also, no new interest or penalties accrue on the unsecured
debts unless your plan is dismissed for your failure to comply with its terms.
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No.
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If the difficulty is temporary, we can usually work out a
"catch-up" deal with the Chapter 13 Trustee or your mortgage
company. If you are unable to catch up, but can still make plan payments,
with good cause we can move the Court to modify your plan to change the length
of the plan or the amount of the payments. The key is to keep in touch
with your attorney as soon as difficulty in making plan payments occurs, rather
than let the plan fall into default.
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If you have made all of your plan payments, the plan
ends and any remaining dischargeable debts are discharged.
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PLEASE FEEL FREE TO CONTACT US FOR
FURTHER EXPLANATION OR INFORMATION REGARDING THE SPECIFICS OF YOUR
SITUATION.
