About Chapter 13

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[wptabtitle]What is Chapter 13 and how does it work?[/wptabtitle]
[wptabcontent]Chapter 13 Plan is a proceeding under the Federal Bankruptcy laws where a person turns his debts, together with a plan for repaying them, over to the Bankruptcy Court. The party filing the plan (the debtor) will make regular installment payments to a person called the Chapter 13 Trustee. The Trustee collects the installment payments and pays required creditors in the manner prescribed in the Plan. While the Plan is in effect, the court prevents collection efforts from all creditors.[/wptabcontent][wptabtitle]How does Chapter 13 differ from Chapter 7 bankruptcy?[/wptabtitle]
[wptabcontent]Chapter 13 is favored in comparison to Chapter 7 bankruptcy in four situations:

• When you have the desire and the income to pay your debts, but need extra time or the court’s protection;
• When you have valuable non-exempt assets, which may be seized by the chapter 7 bankruptcy trustee
• If you owe certain tax debts, and
• If you have filed a Chapter 7 bankruptcy in the last eight years

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[wptabtitle]When is a Chapter 13 Plan Preferable to Chapter 7 bankruptcy?[/wptabtitle]
[wptabcontent]Chapter 13 is favored in comparison to Chapter 7 bankruptcy in four situations:

• When you have the desire and the income to pay your debts, but need extra time or the court’s protection;
• When you have valuable non-exempt assets, which may be seized by the chapter 7 bankruptcy trustee
• If you owe certain tax debts, and
• If you have filed a Chapter 7 bankruptcy in the last eight years

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[wptabtitle]Will I lose any property if I file a Chapter 13?[/wptabtitle]
[wptabcontent]No. Under a Chapter 13 plan, your debts are satisfied by the installment payments to the Chapter 13 Trustee. At your option, you may elect to surrender collateral to the secured party. If you surrender property through the Chapter 13, you will cancel the debt equal to the value of the property surrendered.[/wptabcontent]

[wptabtitle]Will my Creditors be allowed to collect finance charges while I am in a Chapter 13?[/wptabtitle]
[wptabcontent]Yes and No. Your general (unsecured) creditors will not be allowed to collect interest, penalties, or finance charges which accrue during the life of your plan. General Unsecured Creditors may only collect the amount owed to them on the day your Chapter 13 is filed. Secured Creditors on the other hand, will be allowed to collect interest up to the value of the collateral pledged against the claim.[/wptabcontent]

[wptabtitle]How does filing under Chapter 13 affect lawsuits and attachments that have already been flied against me?[/wptabtitle]
[wptabcontent]The filing of Chapter 13 automatically stays (stops) all lawsuits, garnishments, attachments and other attempts by your creditors to take your property. A few days after your case is filed, the Bankruptcy Court will mail a notice to all of your creditors ordering them to stop all action against you. If you cannot wait this long for relief, you or your attorney may notify any creditor of the automatic stay.[/wptabcontent]

[wptabtitle]Will my creditors be allowed to attach my wages or my property during the plan?[/wptabtitle]
[wptabcontent]No. As long as your Chapter 13 Plan is in effect, the Bankruptcy Court will not allow any of your creditors to bring suit against you or attach your property. This includes a prohibition against garnishment of wages.[/wptabcontent]

[wptabtitle]Are debts for taxes covered under a Chapter 13?[/wptabtitle]
[wptabcontent]Yes. Debts for unpaid federal income taxes are usually covered under a Chapter 13 Plan. So long as a lien has not been filed, the Bankruptcy Court will stop the accrual of interest and penalty on your delinquent balance. The court also has the power to set aside a tax lien filed by local taxing authorities. A Chapter 13 provides significant opportunities to discharge tax obligations.[/wptabcontent]

[wptabtitle]Must I obtain my creditors’ approval?[/wptabtitle]
[wptabcontent]No. Only the Bankruptcy Court must approve your plan.[/wptabcontent]

[wptabtitle]Must I obtain the approval of my Secured Creditors?[/wptabtitle]
[wptabcontent]No. If you propose to pay a secured creditor the value of his security plus interest on that value, the Secured Creditor must accept the plan. Secured creditors must be paid in a manner equal to the value of the collateral. If a vehicle was purchased within 910 days of the filing of the bankruptcy then the balance of the note must be paid. Also, if valuable personal property has been purchased within one year of the filing, the balance of the note must be paid.[/wptabcontent]

[wptabtitle]Will the Court approve my Chapter 13 Plan?[/wptabtitle]
[wptabcontent]The Bankruptcy Court will approve your plan if 1) it is proposed in Good Faith, 2) the required fees are paid, 3) each of your secured creditors is paid the lesser of what you owe or the value of the collateral (except in the case of a vehicle purchased within 910 days or other valuable personal property purchased within one year), or the collateral has been surrendered to satisfy the claim, and 4) you make the required payments to the Chapter 13 Trustee timely.[/wptabcontent]

[wptabtitle]How will a Chapter 13 case affect my Credit Rating?[/wptabtitle]
[wptabcontent]In most cases, clients who seek this type of assistance have already damaged their credit. The effect a Chapter 13 will have on your credit will depend on your present history and your situation. A Chapter 13 may stay on your credit history for the period of 7 years from the date of filing.[/wptabcontent]

[wptabtitle]What if I change my mind after my Chapter 13 Plan is in effect and no longer desire to pay my debts?[/wptabtitle]
[wptabcontent]You have the absolute right to dismiss your Chapter 13. You may be able to convert your case to a case under Chapter 7 if you meet the guidelines of a Chapter 7. This decision may be made at any time. Be sure you understand the consequences of your decision. You will be required to pay the additional attorney’s fees earned in performing either of these tasks.[/wptabcontent]

[wptabtitle]Is a Chapter 13 Plan better than a privately operated debt consolidation service?[/wptabtitle]
[wptabcontent]Yes, in many cases, for the following reasons:

• The court will force your unsecured creditors to accept the payment plan. This is even the case, when you propose to pay your unsecured creditors a small percentage of their actual claims. A private service does not have this power.
• The court has the power to prevent your creditors from bringing suit against you and from trying to attach your property. A private service does not have this power.
• Under a Chapter 13 Plan, the court will discharge you from all unpaid debts upon the completion of your plan. A private service does not have this power.

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[wptabtitle]Will I have to appear in Court if I file a Chapter 13?[/wptabtitle]
[wptabcontent]Generally speaking, NO you will not be required to appear in court. You will be required to attend the a Personal Financial Management Course. This will usually be given by the Chapter 13 Trustee on the same day you attend the Meeting of Creditors. The Meeting of Creditors will usually take place within 30 to 45 days after your petition is filed. The meeting is informal and our office will prepare you for this occasion. The “Meeting of Creditors” usually does not last longer than 15 to 20 minutes. If problems arise during the course of your plan, you may have to make other court appearances. The hearings, however, are mostly informal and you will always have the opportunity to explain your views or problems to the judge.[/wptabcontent]

[wptabtitle]Who can file under Chapter 13?[/wptabtitle]
[wptabcontent]Any resident of the Untied States, other than a stockbroker or a commodity broker, who has regular income and who has unsecured debts of less than $307,675 and secured debts of less than $922,975. His or her spouse may also file jointly.[/wptabcontent]

[wptabtitle]Should both husband and wife file under Chapter 13?[/wptabtitle]
[wptabcontent]Under the current law this can be a very tricky question. You need to discuss this matter with your attorney. If this is the first bankruptcy either you or your spouse has filed then it is usually better if both spouses filed jointly.[/wptabcontent]

[wptabtitle]Can a husband and wife file under Chapter 13?[/wptabtitle]
[wptabcontent]Yes. Unless one of the spouses is a stockbroker or a commodity broker, a husband and wife can file a joint petition under Chapter 13 if both reside in, do business in, or own property in the United States.[/wptabcontent]

[wptabtitle]How often may I file under Chapter 13?[/wptabtitle]
[wptabcontent]You may file as often as you need, so long as you are filing in “good faith”. However, the availability of a Discharge in bankruptcy may be limited for repeat filers.[/wptabcontent]

[wptabtitle]Can I file under Chapter 13 if I have already filed Chapter 7 bankruptcy and the case is still open?[/wptabtitle]
[wptabcontent]Yes. However, you may not be able to discharge debt if you have received a discharge in a Chapter 7 bankruptcy within four years prior to filing the Chapter 13.[/wptabcontent]

[wptabtitle]Where will my Chapter 13 case be filed?[/wptabtitle]
[wptabcontent]In the United States District Court in the district where you reside or where you work. The Bankruptcy Court is a part of the United States District Court. Ebert Law Offices, P.C. limits its practice to the Fort Worth Division of the Northern District of Texas.[/wptabcontent]

[wptabtitle]What fees are charged in a Chapter 13 case other than the attorney fees and how are they paid?[/wptabtitle]
[wptabcontent]The court will charge a filing fee of $274.00 when your case is filed. Additionally the Trustee will charge an administrative fee of approximately 10% of the amount you pay under the plan. For example: if the total amount of debts being paid through the plan is $10,000.00, the fees will total $1,189.00 (i.e., $189.00 filing fee, $1,000.00 administrative fee). Generally these fees and your attorney’s fees and costs will be more than offset by the savings obtained in your Chapter 13 Plan.[/wptabcontent]

[wptabtitle]What if some of the creditors do not accept my Chapter 13 Plan?[/wptabtitle]
[wptabcontent]As long as the court approves your plan, your unsecured creditors will be forced to accept the plan. Most Secured Creditors can also be forced to accept the plan, provided they are paid in accordance with the requirements of the bankruptcy code. You are allowed great flexibility in dealing with secured creditors. Usually a plan can be devised which is acceptable to your secured creditors.[/wptabcontent]

[wptabtitle]How do I handle my Secured Creditors?[/wptabtitle]
[wptabcontent]You have three options for dealing with your Secured Creditors in your Chapter 13 Plan:

• The secured creditor can accept your proposed plan; or
• You can surrender the collateral to the creditor which will cancel your obligations; or
• You can pay the secured creditor the value of his collateral, plus interest through the Plan (see exceptions in questions 10 and 11 above). The amount of any claim in excess of the collateral’s value is bifurcated into a separate unsecured claim.

It is important to realize, while a secured creditor cannot be forced to accept a plan, most Secured Creditors do not have enough collateral to completely cover the debt owed them. Usually secured creditors are willing to accept a plan, which promises to pay them completely. Also, as long as the plan is in effect, the court has the power to prevent an unreasonable creditor from repossessing his collateral. This threat encourages secured creditors to be receptive to reasonable plans. Finally, the court can modify the rights (this usually means extending the time for repayment) of any secured creditor, except those secured only by a mortgage on your home.[/wptabcontent]

[wptabtitle]What if the court will not approve my Chapter 13 Plan?[/wptabtitle]
[wptabcontent]The court will usually approve a Chapter 13 plan unless it appears you will not be able to make the payments prescribed in plan or unless the plan is not being proposed in good faith. If the plan is proposed in good faith, the court will usually let you modify the plan, to correct any other problems, to one the court will approve.[/wptabcontent]

[wptabtitle]When do the installment payments begin and how often must they be made?[/wptabtitle]
[wptabcontent]The first installment payment must be paid to the Trustee within thirty days after your case is filed. Then you must make additional monthly payments as required by your plan. These payments must be made timely. Making the required payments when due will evidence you are filing the plan in good faith and you have the ability to make the proposed payments. Under a recent General Order the Court requires payments to be tendered through wage withholding.[/wptabcontent]

[wptabtitle]What about creditors who fail to file proof of claims?[/wptabtitle]
[wptabcontent]If a creditor fails to file a claim with the Court within 90 days of the First Meeting of Creditors, you may object to its filing a claim. Upon the successful completion of the plan, this creditor’s claim, if unsecured, will be discharged. You may file a claim on behalf of a creditor if you wish to do so.[/wptabcontent]

[wptabtitle]What about debts that have been co-signed by another person?[/wptabtitle]
[wptabcontent]If the debt is a consumer debt, the automatic stay entered when your case was filed will prevent your creditors from seeking to collect their claims from persons who are liable with you. The automatic stay continues until the case is completed, dismissed, converted to a Chapter 7 bankruptcy, or removed by Court Order. However, if you do not satisfy the debt, the creditor can seek payment of the balance from the co-signer after the plan has been completed.

In Texas, the creditor’s ability to collect from a co-debtor is limited if the co-debtor happens to be the debtor’s non-filing spouse. If the co-debtor is a non-filing spouse the creditor may only collect from the co-debtor’s separate property.[/wptabcontent]

[wptabtitle]What about foreclosures and repossessions during the plan?[/wptabtitle]
[wptabcontent]The court has the power to prevent secured creditors, even those secured by real estate, from foreclosing upon or repossessing your property for as long as the plan is in effect provided you have equity in the property and the property is worth at least as much as you owe. This does not mean the court will always prevent a creditor from foreclosing. But, if you are making an honest effort to satisfy a secured creditor and if your payments to that creditor are reasonably current, the creditor will not be permitted to reclaim its collateral. However, if you do not keep your payments current to the trustee (and direct to the creditor if required) the court may lift the stay and allow the creditor to foreclose or repossess its collateral. The creditor must make application to the court in order to lift the stay however.[/wptabcontent]

[wptabtitle]What if I need to purchase something on credit during the plan?[/wptabtitle]
[wptabcontent]This is reasonably common, especially if your plan lasts for a number of years. If it becomes necessary to purchase a different car, a larger house, or some other item that is needed for the well being of you or your family, the procedure is to petition the court for permission before making the purchase. If the judge feels the purchase is reasonably necessary, he will allow you to incur the new credit obligation. This is especially true if the new debt does not impair your ability to make the installment payments prescribed in the plan.[/wptabcontent]

[wptabtitle]What happens if I am temporarily unable to make my installment payments during the plan?[/wptabtitle]
[wptabcontent]If you are temporarily out of work, or are injured or otherwise unable to make the installment payments for a limited period during the life of your plan, the court may suspend the payments until you are able to return to work and resume the payments. If it appears that your inability to make the payments is permanent or will continue for a lengthy period, the judge will either dismiss the case or allow you to convert to a Chapter 7 bankruptcy[/wptabcontent]

[wptabtitle]What will happen if my Chapter 13 fails?[/wptabtitle]
[wptabcontent]If you are unable to complete your Chapter 13, your case will either be dismissed or converted to Chapter 7 bankruptcy. The choice is usually yours.[/wptabcontent]

[wptabtitle]Do I have to completely pay off all of my debts under a Chapter 13 Plan?[/wptabtitle]
[wptabcontent]No. You must provide for payments of the following debts: 1) secured debts to the lesser of the value of the collateral or what you owe (see questions 10 and 11 above), 2) all priority debts, and 3) the payment to unsecured creditors of an amount equal to the value of your non-exempt assets and you pay all your disposable income during the applicable commitment period to the unsecured creditors.[/wptabcontent]

[wptabtitle]If I incur additional debts after the case has been filed, can I include them in my plan?[/wptabtitle]
[wptabcontent]Only two kinds of debts incurred after the Chapter 13 case is filed may be included in your Chapter 13 Plan. These are debts for taxes that become payable after you filed the case and consumer debts necessary for you to carry out the plan. To be included, consumer debts usually must be approved by the Trustee in advance.[/wptabcontent]

[wptabtitle]What is the role of your attorney in a Chapter 13 Plan? [/wptabtitle]
[wptabcontent]Your attorney will normally perform the following functions in a Chapter 13 case:

• Assist you in determining whether a Chapter 13 Plan is possible. If a Chapter 13 Plan is possible, then determining the type of plan which best suits your situation.
• Assist you in preparing a budget.
• Assist you in devising a plan acceptable to the court and to secured creditors.
• Preparation of the proper pleading and forms to filed with the court.
• Contact creditors to solicit their acceptance of your plan.
• File the Chapter 13 Petition and all other papers with the court.
• Attend the “Meeting of Creditors” and any subsequent court hearings.
• Assist you in gaining confirmation of the Chapter 13 Plan.
• Attend the Confirmation Hearing.
• Assist you in overcoming any obstacles (legal or non-legal) that arise during the course of the plan. In most cases legal services provided after confirmation accrue additional fees.

The fees paid to your attorney must be set and approved by the Bankruptcy Court. Most of the fees paid to your attorney will be paid in installments through the plan. Attorney’s fees, vary depending on the simplicity/complexity of each case. However, a minimum fee will generally be quoted to you at the completion of your initial conference. The fee quoted will include only routine services required in a typical Chapter 13. If objections are filed or extra services provided, then you will incur additional attorney’s fees.[/wptabcontent]

[wptabtitle]Will I be entitled to receive my Income Tax refund?[/wptabtitle]
[wptabcontent]This is a difficult question to answer. The best course of action is DON’T HAVE A TAX REFUND WHILE IN CHAPTER 13. Any tax refund due to you during the course of your Chapter 13 will be initially offset by the IRS if you owe any secured or priority taxes. Any additional tax refund will be directed to the Chapter 13 Trustee. Provided you are current on your Chapter 13 plan payments the Chapter 13 Trustee will attempt to pay the amount of the refund to your unsecured creditors. If you are delinquent in plan payments, the Trustee will apply the funds to your plan in an attempt to cure your delinquency. In a rare case the Trustee might, if he/she is in a good mood, send some or all of the refund to the debtor.[/wptabcontent]

[wptabtitle]What about Child Support?[/wptabtitle]
[wptabcontent]You must remain current on your post-petition child support obligation. One condition of a discharge in Chapter 13 is you MUST have paid all post-petition child support prior to the discharge.[/wptabcontent]
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