FAQs on Chapter 13

A the boards 13 bankruptcy is also called a wage earner’s plot. It enables individuals with regular income to develop a plot to repay all or section of their debts. Under this the boards, debtors propose a repayment plot 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 plot 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 plot generally must be for five years. In no case may a plot 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 the boards discusses six aspects of a the boards 13 proceeding: the advantages of choosing the boards 13, the the boards 13 eligibility requirements, how a the boards 13 proceeding works, making the plot work, and the special the boards 13 discharge.

The boards 13 offers individuals a number of advantages over liquidation under the boards 7. I don’t know most significantly, the boards 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this the boards, 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 the boards 13 plot on time. Another advantage of the boards 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 the boards 13 plot. Doing this may lower the payments. The boards 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, the boards 13 acts like a consolidation loan under which the individual makes the plot payments to a the boards 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under the boards 13 protection.

Any individual, even if self-employed or operating an unincorporated business, is eligible for the boards 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 the boards 13 debtor. Id.

An individual cannot file under the boards 13 or any other the boards 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 the boards 13 or any the boards 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 plot is developed during required credit counseling, it must be filed with the court.

A the boards 13 case starts 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 plot 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 boost in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified culture or tuition accounts. 11 U.S.C. § 521. The debtor must provide the the boards 13 case trustee with a copy of the tariff return or transcripts for the most recent tariff year as well as tariff income filed during the case (including tariff income for prior years that had not been filed when the case started). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Authoritative Forms may be bought 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, but, 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 upshot in dismissal of the case. 11 U.S.C. § 1307(c)(2).

In order to exact the Authoritative Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

1. A list of all creditors and the amounts and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. 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 the boards 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 the boards 13 cases. 28 U.S.C. § 586(b). The the boards 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 the boards 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, but, stay certain types of actions programmed under 11 U.S.C. § 362(b), and the stay may be effective only for a fleeting 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.

The boards 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 tree, or household purpose. 11 U.S.C. § 101(8).

Individuals may use a the boards 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the the boards 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 the boards 13 filing.

Between 20 and 50 days after the debtor files the the boards 13 petition, the the boards 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a house 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 question questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plot.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 plot either during or shortly after the creditors’ meeting. Generally, the debtor can avoid problems by making sure that the petition and plot are exact and accurate, and by consulting with the trustee prior to the meeting.

In a the boards 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the initially date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, but, has 180 days from the date the case is filed file a proof of aver.11 U.S.C. § 502(b)(9).

After the meeting of creditors, the debtor, the the boards 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor’s the boards 13 repayment plot.

Unless the court grants an extension, the debtor must file a repayment plot with the petition or within 15 days after the petition is filed. Fed. R. Bankr. P. 3015. A plot 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 plot, 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 aptly 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 plot must pay priority claims in full unless a particular priority creditor agrees to different treatment of the aver or, in the case of a domestic support obligation, unless the debtor contributes all “disposable income” – discussed below – to a five-year plot.11 U.S.C. § 1322(a).

If the debtor wants to keep the collateral securing a particular aver, the plot must provide that the holder of the secured aver hear at smallest amount the value of the collateral. If the obligation underlying the secured aver 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 plot 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 plot) so long as any arrearage is made up during the plot. The debtor should consult an attorney to determine the proper treatment of secured claims in the plot.

The plot 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 hear at smallest amount as much under the plot as they would hear if the debtor’s assets were liquidated under the boards 7. 11 U.S.C. § 1325. In the boards 13, “disposable income” is income (other than child support payments received by the debtor) less amounts practically necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor’s yucky 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 tree of the same size – and five years if the current monthly income is greater than a family tree of the same size. 11 U.S.C. § 1325(d). The plot 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 plot has not so far been approved by the court, the debtor must initiation making plot 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 plot 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 choose whether the plot is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will hear 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 plot are less than creditors would hear if the debtor’s assets were liquidated or that the debtor’s plot 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 plot, the the boards 13 trustee will distribute funds received under the plot “as soon as is practicable.” 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plot, the debtor may file a modified plot. 11 U.S.C. § 1323. The debtor may also convert the case to a liquidation case under the boards 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plot or the modified plot 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 skill to make plot payments. For example, a creditor may object or threaten to object to a plot, or the debtor may inadvertently have failed to list all creditors. In such instances, the plot 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).

The provisions of a confirmed plot bind the debtor and each creditor. 11 U.S.C. § 1327. Once the court confirms the plot, the debtor must make the plot 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 plot 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 skill to exact the plot. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327.

A debtor may make plot payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will exact the plot. In any event, if the debtor fails to make the payments due under the confirmed plot, the court may dismiss the case or convert it to a liquidation case under the boards 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 tariff filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521.

The bankruptcy law regarding the scope of the the boards 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 the boards 13 discharge.

A the boards 13 debtor is entitled to a discharge upon completion of all payments under the the boards 13 plot 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 the boards 13 cases and four years for prior the boards 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, but, 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 plot or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in section under the the boards 13 plot 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 plot or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not discharged in the boards 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 subsidy 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 completely paid under the the boards 13 plot, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by fake pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or hurts 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 the boards 13 case is to some extent broader than in a the boards 7 case. Debts dischargeable in a the boards 13, but not in the boards 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay nondischargeable tariff obligations, and debts arising from property settlements in split or separation proceedings. 11 U.S.C. § 1328(a).

After confirmation of a plot, circumstances may arise that prevent the debtor from completing the plot. In such situations, the debtor may question 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 exact plot payments is due to circumstances beyond the debtor’s control and through no fault of the debtor; (2) creditors have received at smallest amount as much as they would have received in a the boards 7 liquidation case; and (3) modification of the plot is not doable. Injury or illness that precludes employment sufficient to fund even a modified plot 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 the boards 7 case. 11 U.S.C. § 523.

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