Can I still file Chapter 13 Bankruptcy after the law change?
Yes. The new law changed the bankruptcy rules which now include certain pre-filing requirements, but the new law did not eliminate your right to file for Chapter 13 Bankruptcy protection and reorganize your personal debt.
Who can file a Chapter 13 Bankruptcy?
Any person, or self employed individual, or an individual operating an unincorporated business, residing, domiciled, or having property or a place of business in the United States may file Chapter 13. A Chapter 13 bankruptcy is available to individuals with less than about $390,000 in unsecured debt and about $1,100,00 in secured debt pursuant to 11 U.S.C. § 109(e). Also, to qualify for Chapter 13, an individual must have enough disposable income to fund a Chapter 13 Bankruptcy plan.
Do I have to take a credit counseling course before I file Chapter 13 Bankruptcy?
The new bankruptcy law requires all debtors to fulfill two debt education requirements: a credit counseling course prior to filing and a financial management course before obtaining a discharge. The Chapter 13 Trustee in your Virginia Bankruptcy Court District will offer the required courses to Chapter 13 debtors. All bankruptcy education courses are available in person, by phone, or over the internet and are approved for the particular Virginia Bankruptcy Court District in which you are filing. You can obtain information about the costs and availability of debtor education at one or more of the agencies approved by the Chapter 13 Trustee and/or the Virginia Bankruptcy Court District in which you reside.
What is Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is a Court supervised debt reorganization process. Chapter 13 bankruptcy allows a debtor to enter into payment arrangements called a Chapter 13 plan, under the supervision of the Bankruptcy Court. A “Chapter 13” bankruptcy offers you the protection available under Chapter 13 of the United States Bankruptcy Code allowing you to repay your debts over time based on your disposable income. You generally do not relinquish any of your property and in a Chapter 13 bankruptcy, and utilize your disposable income to pay all or part of your creditors over a time period ranging from a minimum of three to a maximum of five years, depending on your specific situation and ability.
How does Chapter 13 Bankruptcy work?
When you file for Chapter 13 protection, you ask the Court to allow you to pay your debts over time. You submit a proposed payment plan based on you particular situation which primarily depends on your disposable income. If your plan satisfies the requirements imposed by the Bankruptcy Code, the Court will approve your plan. For the term of your repayment plan a minimum of 3 and a maximum of 5 years, you send money (generally withdrawn automatically from your paycheck) to the Chapter 13 Bankruptcy Trustee. The Chapter 13 Trustee, in accordance with your plan, pays themselves (a percentage of your payment as compensation for administering your plan) and then your creditors. Upon completing your repayment plan, the Court will discharge the balance of your remaining (dischargeable) debts.
Who is eligible for Chapter 13 Bankruptcy?
Generally, you are eligible for Chapter 13 protection if:
- You are an individual. – A Chapter 13 bankruptcy petition cannot be filed in the name of a business (even a sole proprietorship). Businesses that want to pay their debts over time must file under Chapter 11. Individuals who operate businesses can include business debts for which they are personally liable in their Chapter 13 plans.
- You are not a stockbroker or commodity broker, – Stockbrokers and commodity brokers are not eligible for Chapter 13 relief.
- Your debts are below a certain amount. – Presently, debt limits to be eligible for Chapter 13 relief are if your secured debts total less than about $1,100,000 and your unsecured debts total less than about $390,000. If your debts exceed these limits and you still want to repay them, you must use Chapter 11.
How often can I file Chapter 13 bankruptcy?
A debtor can receive a bankruptcy discharge once every four years. Under certain circumstances, a Chapter 13 can be followed by another Chapter 13 two years from a prior case filing.
What will Chapter 13 Bankruptcy do for me?
The greatest benefit a Chapter 13 Bankruptcy is often the ability to keep all of your property and repay all or part of the debts you are behind on. You get some breathing room and potentially a fresh financial start if you complete your Chapter 13 Bankruptcy Plan and receive a discharge. Chapter 13 offers individuals a number of advantages over liquidation under Chapter 7. Most significantly, Chapter 13 provides individuals an opportunity to save their homes from foreclosure. And, filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. The automatic stay can relieve the financial burdens of stress and restore peace of mind by stopping creditor collections and harassment. Once the Chapter 13 Bankruptcy Petition is filed, the collections calls and bills stop. Any lawsuit, collection action, repossession or garnishment pending against you is stopped. With the exception of child support collections Chapter 13 allows you to stop your creditors and reorganize your personal finances.
Is it wrong to file bankruptcy?
Absolutely not. Filing for Chapter 13 bankruptcy is taking a positive step to regain control of your financial situation, reorganize your personal finances and hopefully obtain a fresh financial start through a Chapter 13 Discharge. In Chapter 13 Bankruptcy you repay all or part of your debts. Whatever financial problems you may have Chapter 13 Bankruptcy is a time tested responsible approach to repay all or part of your debts. Sometimes life brings on unexpected events which could never have been planned for. The bankruptcy laws were designed to help people address their financial difficulties in an honest, forthright, and straightforward manner. Bankruptcy relief in the United States has been around since the 1800’s and millions have utilized it to responsibly address financial difficulty including the 16th President of the United States Abraham Lincoln who filed for bankruptcy twice as well as other notable individuals who have filed for bankruptcy. You have a constitutional right to reorganize you personal debt utilizing Chapter 13 Bankruptcy. Remember Chapter 13 under the Bankruptcy Code is a voluntary reorganization for individuals who can pay a greater dividend to their creditors if given time to reorganize their debts.
Do both me and my spouse both have to file Chapter 13 bankruptcy?
No. In many cases when both the husband and wife have a lot of debt it makes sense and obviously saves money for them to both file. It is not however a requirement under the law.
If I’m married but filing as an individual, do I have to give information about my spouse?
Usually the only thing required for the petition is their income information.
Will my Chapter 13 Bankruptcy affect my spouse’s credit?
Generally no. When one spouse files for bankruptcy, as long as none of the debts scheduled by you are joint debts with your spouse are not being paid current, your spouse’s credit is generally not affected.
Can I File Chapter 13 Bankruptcy if I am in the middle of a Divorce?
Yes you can. However there are things to take into consideration as filing Bankruptcy can delay the finalization of your divorce. State Court Judges aren’t supposed to make a final ruling in a divorce case while your bankruptcy case is pending in Federal Court. Although this has happened before it is unusually rare. If you do not want to further delay the final hearing in your divorce wait until the final decree. If you must file during a divorce then a Motion to Lift Stay is the usual course but contact us to determine your particular circumstances. Also in a bankruptcy filing you have to list your future ex-spouse’s information (both property and income) in your bankruptcy schedules, even though he or she is not filing bankruptcy with you. Your financial situation becomes much clearer as to how much you owe, what you own, and what property you will be keeping after your divorce is finalized.
Will I lose my job if I file Chapter 13 bankruptcy?
No. It is a violation of Federal Labor laws for an employer to discriminate against an existing employee because they filed for bankruptcy.
Do I still have to make my car and house payment in Chapter 13 bankruptcy?
In a Chapter 13 Bankruptcy, you will generally want to stay current with any secured debt for property you would like to keep such as your house or car. As such you must continue to make your regular house or car payments after filing. If you have chosen to keep your house or car and do not make regular payments or fall behind on payments then the secured creditors can lift the automatic stay and repossess or foreclose on the property. As long as the property is insured and you remain current on payments the law allows you to keep the property as per the Chapter 13 plan. Any arrearage you may have on your home or vehicle at the outset or at the time of the Chapter 13 filing can be included in the Chapter 13 Bankruptcy plan.
If I file Chapter 13 Bankruptcy can I still use my credit cards?
You should stop using your credit cards and not incur any additional debt once you know you are going to file for Chapter 13 Bankruptcy. Immediately after filing you cannot use the credit cards or incur any debt without permission of the Chapter 13 Trustee. As for the cards if you have elected to keep a particular credit card and that particular credit card company has also agreed in writing to allow you to do so then you may be able to use that particular card.
Chapter 13 Bankruptcy seems like Consumer Credit Counseling. How is it different?
First of all, creditors have to honor a Chapter 13 Bankruptcy, however Credit Counseling is voluntary for creditors and not all creditors are amenable to it. Your creditors DO NOT have to accept whatever deal Credit Counseling proposes. Also, most unsecured consumer debts are paid interest free in Chapter 13 Bankruptcy cases where as Credit Counseling may lower interest or defer it if at all. Finally, Chapter 13 Bankruptcy specifically addresses problems with mortgages and vehicles that Credit Counseling does not usually deal with and will not touch.
Can I include my back child support in my Chapter 13 bankruptcy?
Child support arrears may be included in a Chapter 13 bankruptcy but there are some changes in relation to the new bankruptcy law. A Chapter 13 Bankruptcy does not prevent actions of enforcement against non-exempt property nor does not affect future child or spousal support obligations. Contact an attorney to determine your particular child support situation as it relates to Chapter 13 bankruptcy.
Can I repay debts owed to relatives before filing Chapter 13 Bankruptcy so that I do not have to list them on my bankruptcy petition?
No. Payments made to relatives within 12 months (one year) before filing bankruptcy are considered “preferences”. The trustee may have the right to pursue the relative to recover the preference, and divide the money equally among all creditors.
I have a vehicle that I own outright. Can I sign it over to a relative and then file bankruptcy so that the bankruptcy trustee does not take it?
No. The transfer would be fraudulent, and the trustee would likely take the car.
Can I choose which debts and property to include in my Chapter 13 bankruptcy?
No. When you file Chapter 13 bankruptcy the law requires you to list all your property and all your debts. Many people want to leave out a certain debts because it is their intent to keep paying on them. Others want to leave out certain property for fear that it will be taken and sold for the benefit of creditors. One of the most fundamental tenants of the Bankruptcy Code is to be forthright and list all of your debts and all of your property. All debts owing as of the time of a filing of a Chapter 13 bankruptcy petition must be listed on the schedules; no creditor can be left off. This applies to debts owed to friends and relatives. When a person signs a bankruptcy petition, he or she is certifying under penalty of perjury that all their assets (property) and all their liabilities (debts) are listed on the petition. And, when it comes time for the meeting of creditors, you will be asked under oath if all assets (property) and liabilities (debts) have been listed.
Can Chapter 13 bankruptcy discharge or eliminate all my debts?
No. The following are considered unsecured non-priority non-dischargeable debts under Chapter 13:
- Student loans (absent a rare exception)
- Fines, penalties & restitution imposed by a Court or other governmental entity which include certain federal, state, and local taxes, restitution, fines, penalties (absent a hardship showing)
- Judgments for personal injuries or death resulting from drunk driving convictions (absent a hardship showing)
- Debts not dischargeable in a previous bankruptcy because of fraud
- Debts not listed or omitted from the petition can remain in force after discharge.
Although you will include them in your plan, the balance remaining upon completion of your plan cannot be discharged.
Can I get rid of student loans or tax debts?
It depends. Your attorney needs to have a relatively sophisticated understanding of the bankruptcy law in order to properly address your student loan and tax debts. Under Chapter 13, you can likely consolidate your student loan debt, along with any other outstanding bills, and arrange an interest free repayment plan during the pendency of the case, so that you do not have to suffer the burden of garnishments, harassment and other collection efforts by student loan agencies. It may be possible to reduce the amount paid to student loan agencies during the course of your Chapter 13 so that your consolidation payment is as low as possible.
Tax debts are generally dischargeable only if you file bankruptcy more than three years after you file a truthful and timely tax return. If your return was filed late, the taxes are generally dischargeable only if you file bankruptcy more than two years after filing a truthful tax return.
What’s the difference between a secured debt and an unsecured debt?
A secured debt is one where the creditor takes personal or real property as collateral. A creditor whose debt is secured has a right to take property to satisfy a debt in default. A secured debt (like a mortgage on a house or a car loan) gives the creditor the right to take back the security (car, house, furniture, etc.) if you fail to make your payments.
A debt is unsecured if you have simply promised to pay a creditor a sum of money at a particular time, and you have not put up any real or personal property as collateral. An unsecured debt (like a credit card, medical bill, utility bill, rent, etc.) does not give the creditor the right to repossess any property you have. All the creditor can do is to sue you for the money it is owed.
How long does the Chapter 13 bankruptcy process take?
A Chapter 13 bankruptcy typically takes 36 to 60 months (3 to 5 years) from the time the petition is filed. Chapter 13 lasts for a minimum of 36 months and a maximum of 60 months.
I am listed on a bank account that’s not mine; do I have to list it as an asset?
Generally yes, but you should consult an attorney for specifics.
I co-signed for another person; do I have to include that debt?
All debts you owe or are responsible for must be listed.
What about Contracts and Leases in Chapter 13 bankruptcy?
Under Chapter 13, you can handle your current contracts and unexpired leases in one of three ways:
- Reject the contract or lease. Your obligations under the contract or lease will end.
- Assume (keep) the contract or lease. Your obligations under the contract or lease continue.
- Assign the contract or lease. You transfer your obligations to someone else.
What if I forget to list a creditor?
Even after filing you may add a creditor post-petition within the time parameters to do so and there are usually additional fees associated with doing so. Amendments to Chapter 13 Bankruptcy filings are common.
After I file Chapter 13 Bankruptcy can creditors still harass me?
No. The moment you file for bankruptcy protection, the Bankruptcy Court issues an order which is a stay against your creditor’s actions to collect or attempt to collect debts you may owe. By law they must leave you alone. That means no more phone calls, no more collection letters, no more lawsuits, no repossessions, and no foreclosures. The Court’s Order or “automatic stay” is issued pursuant to 11 United States Code, Section 362. The automatic stay prohibits any and all collections actions. After you file for bankruptcy, a creditor is not even allowed to talk to you. All creditors must stop any and all collection attempts already initiated. The automatic stay is very powerful and if a creditor violates the automatic stay, you have the right to bring action against the creditor before the Court for Contempt of Court, as well as to be compensated accordingly. Once you file for bankruptcy, all creditors are required by law to leave you alone.
What is disposable income?
This is the amount of money left after deducting your cost of living from all sources of income or all income not necessary for the maintenance or support of the debtor or a dependent of the debtor.
What is a section 341 meeting of creditors?
Section 341 of the Bankruptcy Code requires every debtor to personally attend a meeting of creditors and to submit to an examination under oath. The United States Trustee, their designee, or a Chapter 13 Bankruptcy Trustee, presides at the meeting. Creditors may ask questions of the debtor under oath, or conduct such other business as may be appropriate. Although creditors are not required to attend the meeting this is usually the only opportunity creditors will have to directly examine the debtor while under oath without seeking further permission of the court. In most Chapter 13 consumer bankruptcy cases the creditors rarely if ever appear.
What will happen at the meeting of creditors?
At the meeting of creditors, the Chapter 13 Trustee will ask a series of questions almost identical to those on the schedules and statement of financial affairs. The Chapter 13 trustee is generally attempting to locate non-exempt assets and trying to determine the feasibility of your Chapter 13 Plan. Also they are checking as to whether the income and expenses you have attested to under penalty of perjury are correct. The Chapter 13 Trustee is further determining whether you qualify for Chapter 13 Bankruptcy and have complied with the requirements under the Bankruptcy Code. Most importantly they are looking to your disposable income to be able to fund the plan. In virtually every case, these issues will have long since been addressed with you, your attorney, and the Chapter 13 Trustee’s office prior to the meeting. Creditors are permitted to attend these meetings and ask questions if they wish, but in most Chapter 13 bankruptcy cases the creditors rarely if ever appear.
Will an attorney be present with me at the meeting of creditors?
Do I need to bring anything to the meeting of creditors?
In every bankruptcy case, the debtor is required to provide two pieces of proof of identity at the creditors’ meeting, one of which verifies the social security number. The preferred proof is a driver’s license and social security card. Other acceptable proof includes: (1) government ID, (2) a state picture ID, (3) a U.S. passport, (4) a military ID, (5) a resident alien card, (6) a medical insurance card, (7) a pay stub, (8) a W-2 form, (9) an IRS Form 1099, or (10) a Social Security Administration report.
What can I do if a creditor keeps trying to collect money after I have filed bankruptcy?
If a creditor continues to attempt to collect a debt after the bankruptcy case is filed they are likely in violation of the automatic stay. You should immediately notify the creditor in writing that you have filed bankruptcy, and provide them with both the case number and filing date or a copy of the bankruptcy petition that shows it was filed. If the creditor still continues to try to collect, you may be entitled to take legal action against the creditor to obtain a specific order from the court prohibiting the creditor from taking further collection action and, if the creditor is willfully violating the automatic stay, the court can hold the creditor in contempt of court and punish the creditor by fine or incarceration. Any such legal action brought against the creditor will be complex and will normally require representation by an experienced attorney.
How is a Chapter 13 Case Completed?
Upon the completion of your Chapter 13 repayment plan, any remaining debts that are dischargeable will be discharged. However before you can receive a Chapter 13 discharge, you must provide the Court evidence that you are current on your child support payment and/or alimony if any before the discharge is entered. And, that you have completed the required budget counseling education course with an agency approved by the United States Trustee’s Office. When these requirements a complete the Chapter 13 Bankruptcy is complete.
Will my immigration Status be affected by filing Chapter 13 Bankruptcy?
No. Many people worry unnecessarily that they will somehow jeopardize their immigration status if they file for bankruptcy. This is incorrect. Immigration status is not affected in any way by filing for bankruptcy.
Do I Need an Attorney to file Chapter 13 Bankruptcy?
No but it may be a good idea. Since the one thing that is in common with almost all bankruptcy debtors is a lack of available money, many people consider filing bankruptcy without a lawyer. This option known as “Pro Se” is available to all consumer debtors. The new bankruptcy law is more rigid in its requirements and the process is not as simple as just filling in the blanks. In the past, if a debtor failed to follow through on a documentation requirement or filed incorrect paperwork, there was usually an opportunity to correct the problem. This is not the case anymore. Under the current bankruptcy law, there are various timelines or deadlines for certain actions, and the failure to perform these tasks timely will result in a dismissal of your case. You need an experienced attorney to make sure you meet these timelines. Keep in mind that everyone involved in the Chapter 13 Bankruptcy process is a lawyer or has an attorney representing them. The Judge is a lawyer and the Court has the US Trustee who is a lawyer, the Chapter 13 Trustee is a lawyer or has a lawyer, and most all creditors have lawyers representing their interests. If you are the only one without legal assistance, you are likely at a grave disadvantage. You can be compelled by the other side into making bad decisions, loose property, or even become subject to further legal proceedings if you do not know your legal rights. Remember, it is always more expensive to hire a lawyer to fix problems than it is to assist you from start to finish.