To file for Chapter 13 bankruptcy, you must have a regular source of income and have some disposable income. Disposable income is the amount that remains after subtracting allowed bankruptcy expenses from your monthly gross income. As part of your bankruptcy petition, you will be filing a Chapter 13 Plan, which is your proposed debt repayment over the course of the next three to five years. Often the amount of debt to be repaid is significantly less than what is owed.

 

SHOULD YOU FILE FOR CHAPTER 7 OR CHAPTER 13?

 

There are several situations where Chapter 13 is preferable to Chapter 7 bankruptcy:

• A Chapter 13 bankruptcy allows people to make up overdue mortgage payments over time, thus saving their home from foreclosure.
• Chapter 13 bankruptcy can remove a second mortgage from a home.
• Chapter 13 can reduce the amount owed on a multi-family home, an investment house or a vehicle loan.
• A Chapter 13 bankruptcy is removed from your credit report three years faster than a Chapter 7 bankruptcy.

If you have questions about whether you qualify for Chapter 7 or Chapter 13 bankruptcy or the advantages and disadvantages of each type, Texas Chapter 13 bankruptcy attorney Patty Edwards will be happy to review your situation and explain your options. Contact or call 806-621-1585 for a free initial consultation.

 

YOU FILED FOR CHAPTER 13 BANKRUPTCY – NOW WHAT?

 

Immediately after you file bankruptcy, your creditors must stop trying to collect on your existing debt; this includes stopping any home foreclosure proceedings or collection of garnishment on your wages.

The Texas Chapter 13 bankruptcy process can stop foreclosure. Filing a petition with the court automatically stops any and all collection activities by creditors. This means that a lender can’t pursue foreclosure, and if they have already initiated the process, they are required to stop. In addition to the temporary foreclosure prevention offered by an automatic stay, Chapter 13 can lower your debt and reorganize it into a 3-to-5-year repayment plan.

Upon completion of the filing, the Bankruptcy Court will mail your creditors a notice of the bankruptcy filing. Once they have been given notice, they must stop collection efforts immediately or they can be found in contempt of the automatic stay provisions and possibly be liable for court sanctions. In the interim, you can provide the creditors with the bankruptcy case number as well as Texas bankruptcy lawyer Patty Edwards’ information.

In a Chapter 13 bankruptcy filing, the debtor must file a proposed repayment plan with the petition or within 14 days after the petition is filed. The plan is submitted for court approval and must provide for payments of fixed amounts to the trustee on a monthly basis. The plan proposes to pay the disposable income of the debtor throughout the life of the plan.

After you file your repayment plan, a bankruptcy trustee is appointed to administer the case. The trustee and your creditors will review your proposed plan to make sure it complies with all bankruptcy requirements. Your repayment plan must also be approved (confirmed) by the court before being finalized.

Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. 

Most of your debt payments are put on hold while your bankruptcy is pending. However, you should continue to make payments on your vehicle loan or your home mortgage. If you are behind on these items, the arears will be caught up through the plan. You will also continue to pay your day-to-day living expenses, such as rent, groceries, utilities and child support, if any.

About 30 to 40 days after filing the petition, you will be required to attend the “Meeting of Creditors” or “Section 341(a) Examination.” There is no judge for this hearing, it is run by the bankruptcy trustee in charge of your case. Creditors can attend and can ask you questions but rarely do.

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing to decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. Creditors will receive 28 days notice of the hearing and may object to confirmation. Unless a creditor objects, the debtor does not have to attend this hearing.

The provisions of a confirmed plan bind the debtor and each creditor.  Once the court confirms the plan, the debtor must make the plan succeed. Occasionally, a change in circumstances may compromise the debtor’s ability to make plan payments. In such instances, the plan may be modified either before or after confirmation.

Typically, you will be making payments from three to five years. Afterwhich, any remaining debt is discharged and your bankruptcy is completed.