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.
You may benefit from Chapter 13 Bankruptcy if:
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.
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.