Seelinger Law

Chapter 13 Bankruptcy

What Is Chapter 13 Bankruptcy?

Our federal bankruptcy laws are contained in the United States Bankruptcy Code. Chapter 7 is titled “Liquidation,” Chapter 11 is “Reorganization,” and Chapter 13 is “Individual Debt Adjustment.”

We often read or hear in the news about big companies filing for Chapter 11 bankruptcy without going out of business. Chapter 13 is similar in some ways to a Chapter 11 Plan of Reorganization, but there are many differences. While Chapter 11 Reorganization is normally used by businesses, only an individual may file for Chapter 13 relief. Chapter 13 is a much more streamlined process of “reorganizing,” or “adjusting” debts,” and as a result it is much less costly than a Chapter 11 Reorganization.

A Chapter 13 plan can be used to cure a default on the debtor’s mortgage over three to five years. Lenders can be unreasonable and difficult to work with if you have fallen behind on payments. They often refuse to accept partial payments, and instead of allowing borrowers to gradually bring their payments current, they often demand immediate payment of the entire past due amount.

The good news is that the law has a remedy for this, Chapter 13. Lenders must immediately stop foreclosure efforts, halting any steps toward selling your home. A Chapter 13 plan does not risk a sale of the debtor’s assets, although a debtor may voluntarily choose to sell assets, with prior Court approval, to help fund the plan. You have options which may enable you to avoid losing your home.

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How Chapter 13 Bankruptcy Can Benefit You

You may benefit from Chapter 13 Bankruptcy if:

  • You're behind on your mortgage. You will bring the payments current over time, no longer facing foreclosure.
  • You owe back taxes. Those will be paid off over time, preventing tax sales or IRS collection.
  • You are drowning in debt each month, living paycheck to paycheck, with no emergency fund in case something happens to the car or house (i.e. robbing Peter to pay Paul). You will have some padding to pay for those new snow tires or new water heater without having to sacrifice necessities.
  • You are about to have your car repossessed. You will stop repossession and get caught up on your payments, probably paying off your car loan in full in the Chapter 13 plan.
  • Student loan companies are garnishing so much from your paycheck that you cannot afford to live a normal life. You will stop the garnishment and be allowed to pay only the amount that you can afford to pay back each month.
  • You filed a Chapter 7 bankruptcy less than 8 years ago, but new problems arose since then preventing you from paying what you owe each month, you can file Chapter 13 and stop lawsuits, foreclosures, tax sales, IRS collection, car repossession, student loan garnishments and more, because you don’t have to wait 8 years before filing a Chapter 13. (You are not permitted to obtain a second Chapter 7 discharge until 8 full years have elapsed from the time you filed a previous Chapter 7 case.)

If you are facing mortgage foreclosure, tax liens or tax collection, student loan garnishments, or have equity in your home or other assets which exceeds what you are allowed to protect as “exempt,” Chapter 13 can help you.

At Seelinger Law, we can help you file for Chapter 13 Bankruptcy. Your free consultation includes an in-person meeting with a licensed attorney, not just a telephone interview.

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Understanding the Process & Players

Length of time to File
A Chapter 13 can take from three to five years depending on your income. Although Chapter 13 does take a period of years, most clients who are catching up on mortgage payments appreciate having five years, allowing them the time that they need.

The Chapter 13 Bankruptcy Trustee
When you file a Chapter 13 case, a Chapter 13 Trustee is appointed to your case. The trustee does not represent the creditors but is responsible for overseeing the bankruptcy estate. The trustee does not work for the Bankruptcy Court but instead is an independent attorney who has been appointed by the Department of Justice to serve as trustee in cases filed under Chapter 13 of the Bankruptcy Code.

A Trustee is simply a lawyer whose job is to review your case for any errors or omissions and to evaluate whether you have listed all of your property on your paperwork. The Trustee’s job is to make sure that the creditors are being treated fairly since they will be the ones that are losing money in the bankruptcy process.

In the Chapter 13 meeting, the trustee reviews your income and expenses to determine whether the payment plan you have proposed is appropriate based on your finances Unlike a Chapter 7 Trustee, the Chapter 13 Trustee does not take possession of your property, even if its value is too high to be exempted.

Instead, the Chapter 13 Trustee administers your payment plan, receiving funds that you dedicate to the plan, and disbursing it to the creditors provided for in your plan. Like a Chapter 7 Trustee, the Chapter 13 Trustee is required to ensure that you are the person on the petition, review your case for accuracy, and ask about your recent financial affairs.

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Chapter 13 Frequently Asked Questions

  • How will I know when to make payments for my Chapter 13?
  • Once I Am in a Chapter 13, Are There Things That I Cannot Do?
  • What is a Means Test?
  • May I Continue to be Self-Employed or Become Self-Employed?
  • How do my Creditors get Paid?
  • Am I Going to Get Bills from my Bankruptcy Lawyer During the Five Year Chapter 13 Plan Term?
  • Can I end my plan early if my rich aunt offers to give me enough money to pay the remainder of my plan base?
  • I filed my Chapter 13 Case jointly with my spouse. Her car lease wasn’t listed in the same places in the paperwork as my car loan. Why is that?
  • Can I Sell My Home or Car if I’m in a Chapter 13 Bankruptcy?
  • What About the Taxes I Already Owed when I Filed my Chapter 13 Case?
  • Can I Still Sue if I Am Wronged?
  • Did You Know that Both the Court and the Trustee Want Your Chapter 13 Plan to Work?

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