Chapter 13 Bankruptcy - The Wage Earner Plan
In a chapter 13 case you file a "plan" showing how you will pay off some of your past due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property - especially your home and car - which might otherwise be lost, if you can make the payments which the bankruptcy law requires to be made to your creditors.
A chapter 13 plan may be right for you if you:
- own your home and are in danger of losing it because of money problems;
- are behind on debt payments, but can catch up if given some time;
- have valuable property which is not exempt, but you can afford to pay creditors from your income over time;
- do not qualify for a Chapter 7 under the Means Test.
How Does Chapter 13 Bankruptcy Work?
Assembling the Documents
Filing a Chapter 13 Case, as with a Chapter 7 Case, requires the assembly of a lot of financial documentation and a lot of teamwork between the lawyer and you, as the client. The first step is for you to assemble all of your financial documentation. I would need you to get the following documents:
- 2 (two) years Federal Tax Returns or transcripts from the IRS.
- 6 (six) months Payroll Stubs for each employed person including a non-filing spouse
- Current mortgage statement (if applicable)
- Registrations for each vehicle and the last statement for each vehicle payment
- Last 2 (two) statements from each utility and cell phone
- Last 4 (four) months statements for each credit card
- 6 (six) months Bank Statements for each Financial Account
- Your last statement for any IRA, 401K or medical savings plan
- Homeowners or Renter’s Insurance Policy Declaration Page
- Driver’s License, State ID, or Passport (Must be current and valid)
- Social Security Card
- Copies of the summons and Complaint from any lawsuit ongoing or filed by or against you or your spouse in the last two years
- Any Divorce or Separation Agreements (if applicable)
- 6 (Six) months evidence of payment of Domestic Support Obligations
That's most of the work that you will have to do. Leave the rest to me!
Our Interview
Once I have these documents we will go through a structured financial interview. During this process we will cover every aspect of your finances and help you develop a budget for moving forward. We will also develop your Chapter 13 Plan. This is a very important step, because the Chapter 13 Plan will dictate how much money you are going to pay to the Chapter 13 Trustee for the next three to five years.The length of the Chapter 13 Plan will often be dictated by your income level - if you earn above the Median Income for your family size you are required to be in a 5 year Chapter 13 Plan.
Credit Counseling
After the interview is complete, I will set you up with a Credit Counseling session. Credit Counseling must be completed within 180 days of a Bankruptcy filing. Don't worry, the Credit Counseling sessions are done online - I will e-mail you a link to the site with information on how to log in. The sessions usually take 2 hours or less, and then you are done!
Filing the Case
Once Credit Counseling is complete, we will sign the documentation. Then the Bankruptcy Petition, Schedules, Statement of Financial Affairs, Means Test calculation and other documents are filed with the Court. The Chapter 13 Plan is also filed with the Court and served on all creditors.
The Creditors Meeting
Upon the filing of the case a Creditors Meeting is scheduled. You will be required to attend a Creditors Meeting, and you will need to bring a cashier's check or money order for the amount of the first plan payment. It's ironic, but you almost never see actual creditors at the Creditors Meeting! Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation. The Meeting is held by a Chapter 13 Trustee, who is usually a private attorney who is experienced in Bankruptcy Law and is on the standing panel of Trustees. The focus of the Creditors Meeting is whether your Chapter 13 Plan meets legal requirements and is “feasible”. I will be with you every step of the way, and in most cases we have provided the Chapter 13 Trustee with enough information in advance of the meeting to establish that your Chapter 13 Plan is legal, feasible and should be confirmed.
The Financial Management Session
After the Creditors Meeting I will set you up with a Financial Management course. The Financial Management Course must be completed in order for you to get a discharge. This course is handled just like the Credit Counseling - I will e-mail you a link to the site with information on how to log in. The sessions usually take about 2 hours.
Reviewing Claims and Responding to Objections
When your case is filed the Court will set a deadline for filing Proofs of Claim. Regardless of whether you include a creditor on your Bankruptcy Schedules the creditor will only receive a payment through your case if they file a Proof of Claim. I will review all of the Proofs of Claim in your case to make sure that your rights are preserved. Also, if there are any objections to your Chapter 13 Plan by either the Chapter 13 Trustee of a creditor I will respond to them.
Confirmation of Your Plan and Beyond
If the Chapter 13 Trustee and the creditors do not object to your Chapter 13 Plan (or if their objections are dealt with or overruled) your Chapter 13 Plan can usually be confirmed without a court hearing. Onceyour Chapter 13 Plan is confirmed it is important that you make all of the required payments on time so that you get the benefit of Chapter 13 relief. It is critical that you get in touch with me if a change in your financial circumstances occurs so that I can respond in a timely manner to protect your interests. A lot can happen in 3 to 5 years, and we need to stay on top of these changes.
Chapter 13 is not right for everyone, and a Chapter 13 case can be a complicated legal matter. I can help you decide if Chapter 13 is right for you and to navigate the requirements of the Bankruptcy Code to have a successful Chapter 13 Plan. Sign up today for a no obligation appointment!
