What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a repayment plan offering individuals overwhelmed by debt a path to dealing with it in a structured manageable way. Repayments plans are generally 36-60 months in term and the amount paid to creditors depends on ones disposable income. Disposable income is the income that is left over after factoring in all monthly expenditures. In addition, it is commonly used to get “caught up” on house payments and car payments. Lenders cannot foreclose or repossess if your plan in paying them
back in full assuming you stay current from that point on. Another great tool that Chapter 13 bankruptcy allows in certain cases is the removal of judgment liens and even second mortgages if your house is completely under water.
Who Qualifies for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is utilized by individuals who can demonstrate an ability to repay a portion of their debt
through disposable income. A common filer is one whose income exceeds the Chapter 7 threshold or
does not qualify for Chapter 7 for other reasons (i.e. have filed within the last 8 years). In most cases
you need to be employed or have a fixed income to qualify for Chapter 13 relief. In addition, the
individual must be current on their income tax filings and unsecured debt cannot be above $383,000.00
and secured debt over $1,149,000.
What is the Bankruptcy Process and Time Frame?
Once a Chapter 13 bankruptcy is filed your creditors like in a Chapter 7 will get notified promptly by the
Bankruptcy Clerk’s Office. They will also get a Proof of Claim form to fill out to submit to the Court.
This document is to be the basic evidence that you do indeed owe them a debt. The Proof of Claim will
usually attach the contract or other agreement you entered into with the Creditor. You will have the
ability to examine these proof of claims for accuracy and object if you disagree. In addition, if you are
employed, your payroll will get a Withholding Order form the Court requiring them to garnish your
monthly plan payment directly out of your paycheck. It would be broken up by your pay intervals.
Your employer will continue to take out funds from your pay check until directed by the Chapter 13
office to stop.
You will attend a “Meeting of Creditors” in roughly 6 weeks from filing in which the Chapter 13
trustee and/or his staff will examine you under oath about your finances and plan. In general, Creditors
do not attend. This should be a pain free experience as the Chapter 13 staff has always demonstrated
compassion and fairness in my experience. After about 2 months from this hearing, you plan should
be accepted (also know as confirmed) so long as we have proposed a fair plan and have complied with
any requests from the trustee and have settled any objections from creditors or other interested parties.
At this point it’s simply making your payments over the length of your plan.
Your Bankruptcy Attorney’s Role
I will make sure you understand your bankruptcy obligations to the Court and how your plan payment was
calculated before your case is filed. If you simply do not have the income to support a plan payment or
your payment is too high to be a benefit, I will inform you of this before you waste your efforts
pursuing a Chapter 13 option. And I will be there for you at your hearing and assist in giving you the
best opportunity to have your plan approved by the Court. I proudly serve clients in Akron and surrounding Northeast Ohio areas.