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Chapter 13: What It Is


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Chapter 13: What It Is

The Benefits of a Chapter 13 Bankruptcy

A Chapter 13 bankruptcy filing is the best choice for people who have income and want to protect their homes and other assets. A Chapter 13 bankruptcy may also be the right choice for a small business owner, rather than a Chapter 11 business bankruptcy. For some however, a Chapter 7 bankruptcy is best. O'Bryan Law Offices can help you determine the path to take.

In a Chapter 13 bankruptcy, you agree to a debt repayment plan that usually involves a partial reduction in your non-secured debts, reduced interest rates on your secured debts, and extended payments terms. This can provide you with the financial breathing room you need to make a financial recovery. You can keep your house and your retirement assets, and in most cases your vehicles and other personal property.

As soon as O'Bryan Law Offices files a Chapter 13 bankruptcy petition, all creditor harassment will stop, repossession actions will stop, and the threat of foreclosure will stop. You will have the opportunity to rebuild your financial life, and eventually your credit rating.

O'Bryan Law Offices wants to help you through your financial troubles to a new and brighter future. For a free initial consultation with O'Bryan Law Offices, call us at 502-400-4020 or contact us online.

We have four convenient offices to serve you and evening and weekend appointments are available.

Chapter 13 is a reorganization plan to assist individuals and families as well as small business owners in restructuring their debt in order to pay their creditors back in full or in part. If debt collection pressure or the prospect of a home mortgage foreclosure has you thinking about bankruptcy as a possible solution, contact one of our experienced attorneys at O'Bryan Law Offices in Louisville, Frankfort or New Albany. We have helped thousands of people restructure their debt through the filing of a Chapter 13 bankruptcy.

We can help you find the right solution to your debt problems

Since the Bankruptcy Code amendments came into effect in 2005, many people who might otherwise have filed for Chapter 7 protection have instead filed for relief under Chapter 13. To qualify for Chapter 7 relief today, your gross household income must be no greater than the median in your home state. Anyone over the median will need to file for relief under Chapter 13.

What’s the difference between Chapter 7 and Chapter 13?

There are many differences, but the most obvious one has to do with debt repayment. In a basic Chapter 7 case, the debtor files a petition and schedules of assets and debts, attends a meeting with the trustee, turns over non-exempt assets if any, waits to see if anyone objects to discharge, and walks away from most unsecured debt immediately.

Chapter 13 debtors have to repay a portion of their unsecured debts in monthly installments over a period of three to five years. This isn’t as bad as it sounds. Most Chapter 13 plans in Kentucky and Indiana pay about 10 cents on the dollar to unsecured creditors.

The most significant benefit of Chapter 13 consumer bankruptcy is the debtor’s ability to hold on to nonexempt assets that would be subject to liquidation in a Chapter 7 case. At the completion of the repayment plan, the debtor gets a discharge on the unpaid portion of the claims.

Chapter 13 debtors can cure mortgage defaults while paying off the plan

Our experience and focus on bankruptcy law allows us to design Chapter 13 plans with your specific needs and circumstances in mind. We can use the plan to cure defaults on mortgages, car payments, and other secured claims. The plan can also extend the payment periods for nondischargeable debts like recent taxes or student loans. We analyze your cash flow and the value of your nonexempt assets to find practical ways to protect your home and possessions, all while meeting the minimal needs of your creditors on consumer debt.

Every case is different, and we work closely with all of our clients to make sure that you are getting the most out of your bankruptcy case. To learn more about our approach to client service in Chapter 13 bankruptcy, contact one of our lawyers at O'Bryan Law Offices.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Is Chapter 13 Bankruptcy Right for Me?

Despite what you may have heard, debt relief through bankruptcy is still possible. The rules have changed somewhat, but with the help of O'Bryan Law Offices you can make a new financial start.

Call us at 502-400-4020 to arrange for a free, no-obligation consultation. An attorney at our firm can evaluate your situation, review your options, and recommend the financial strategy that is right for you.

Chapter 13 Bankruptcy Timeline

8 or 6 Years Before Your Chapter 13 Bankruptcy

You are eligible for a Chapter 7 discharge after 8 years have passed from the date you filed a prior Chapter 7 case and received a discharge; or after 6 years have passed if you filed a Chapter 13 case and received a discharge.

4 or 2 Years Before Your Chapter 13 Bankruptcy

You are eligible for a Chapter 13 discharge after 4 years have passed from the date you filed a prior Chapter 7 case and received a discharge or after 2 years have passed from the date you filed a Chapter 13 case and received a discharge.

If you have tried to delay or defraud your creditors by transferring, hiding, or destroying your property within a five-year period prior to your bankruptcy, the court may deny you a Chapter 7 discharge and even allow your creditors to recover the property that you transferred.

1 Year Before Your Chapter 13 Bankruptcy

If you pay back one of your creditors who is also a relative or close business associate (“insider”) at any time within the 1-year period prior to the filing of your bankruptcy case, any amount over $600 may be recovered by a Chapter 7 trustee but usually not the 13 trustee. However, if you later convert your case to a Chapter 7 then the Chapter 7 trustee could possibly recover the amount paid to a family member and the amount may then be distributed to your other creditors.

If you had a prior bankruptcy case dismissed within one year of the time you file a Chapter 13 case, the Automatic Stay entered in the Chapter 13 case will be terminated within 30 days unless you can demonstrate that the Chapter 13 case was filed in good faith.

180 Days Before Your Bankruptcy

If within 180 days before your bankruptcy you had a prior bankruptcy case that was dismissed because you failed to obey court orders or you voluntarily requested a dismissal, then you may not file your bankruptcy case until this 180-day period expires.

Also, within 180 days of your bankruptcy filing, you must receive an individual or group briefing from an approved nonprofit budget and credit-counseling agency.

90 Days Before Your Bankruptcy

You must be a resident of the state in which you intend to file your bankruptcy case for at least 90 days before the filing. If you have not lived in the state in which you intend to file your case for at least 90 days, you may only file your case in the state where you have resided, or which has been the location of your principal assets, for a majority of the prior 180 days.

Also, if you pay back any of your creditors over $600, even one who is not a relative or close business associate (“insider”), at any time within the 90-day period prior to the filing of your bankruptcy case, the payment may be considered a “preference” payment and the court may recover the amount over $600 and distribute it to your other creditors. This usually does not apply to payments on secured loans like mortgages and car notes. In addition, usually it only would happen in a Chapter 7 case not a Chapter 13 case.

If you incurred new debt of $500 or more for “luxury goods or services” within the 90-day period before your bankruptcy, or if you obtain a cash advance in the amount of $750 or more within 70-day period before your bankruptcy, the debt is presumed to be nondischargeable. Again, so long as you file a Chapter 13 case, this charge on your card should not be a problem and the debt could be paid back in the Chapter 13 plan.

You meet with our law firm for the initial consultation, retain our office and receive the bankruptcy packet of information for your completion. You complete your first step of credit counseling.

You return to our office for your Be-Back appointment where you meet with your paralegal to drop off your completed questionnaire and documents and attorney fee balance.

You return a third time to our office to meet with your attorney and paralegal to review and sign your petition and ask any follow up questions. At this meeting, you will fully understand your Chapter 13 plan, what your payment will be and what dividend creditors will be receiving in your case.

Your Case is Filed!

Your case is formally commenced when we file your bankruptcy petition with the appropriate bankruptcy court. As soon as we file your petition, the court will enter an Automatic Stay order prohibiting your creditors from taking or continuing any collection or legal action against you. This means no more harassing letters or phone calls while your case is in progress.

Next, the court will send a notice of your case to all of the creditors listed in your petition.

Additionally, the bankruptcy court will assign a bankruptcy trustee to oversee your case. The trustee is a federal employee appointed by the court to monitor your case and make sure you are eligible for bankruptcy. The trustee will review your petition, make sure that it is complete, and then schedule a meeting of your creditors.

15 Days After Your Case is Filed

You have a deadline of 15 days after you file your petition to file certain financial “schedules” with the court. These are documents declaring your assets, liabilities, expenses, income, and a statement of your affairs. In most cases, however, we will file these forms for you with your petition.

Approximately 15 Days After Your Case is Filed

Within approximately 15 days after you file your case, the court will mail the Notice of Commencement of Case to you and to all of the creditors listed in your petition. This notice will inform you of the date set by the court for the meeting of your creditors, and the deadlines for your creditors to object to your plan and file their claims against you.

Approximately 30 Days After Your Case is Filed

The court will hold the Meeting of Your Creditors about four to six weeks after your bankruptcy case is filed. At this time, the trustee will learn more about the plan we have proposed before the court to pay back the creditors. At least seven days before this meeting, you are required to provide to the trustee and any creditor requesting it, a copy of your most recently filed tax return. We will do this for you as well as send the trustee other documents requested to be sent.

The court-appointed trustee will preside over this meeting. At the meeting, which you are required to attend, you will be asked to testify under oath as to the accuracy of the statements in your petition. However, most of your creditors will not appear at the meeting, and you will not be before a judge. The meeting is very informal, and in most cases will last no more than 10 minutes. If you do not attend the meeting, your case will be dismissed.

After the 341 Meeting, your case will more than likely be confirmed. Depending on the jurisdiction, the confirmation hearing could be on the same day as the 341 Meeting or within two to three months after that meeting.

The bankruptcy trustee and your creditors have to object to all of your exemption claims within 30 days after the conclusion of the meeting of your creditors.

60 Days After the Meeting of Your Creditors

Your creditors have 60 days after the date first set for the Meeting of Your Creditors to object to the discharge of any of the debts listed in your petition and schedules.
The creditors rarely object in a Chapter 13 but they can and they have, so be prepared for this possibility.

Your creditors can object to your request to discharge a debt if the debt was obtained or incurred as a result of any of the following types of misconduct: fraud; embezzlement or larceny; and any willful or malicious injuries you have caused others; or a divorce or separation (this does not include debts for child support and spousal maintenance, which are nondischargeable by law).

Additionally, your creditors can object to the discharge of all your debts if you have engaged in any of the following conduct: concealment or destruction of property or financial records; false statements; withholding information; failing to explain losses; failure to respond to material questions; or a discharge in a prior case.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 imposes one last hurdle before you’re eligible for your discharge – the financial education requirement. This requires you to complete an instructional course concerning personal financial management. Your attorney can refer you to an approved financial management class.

90 Days After the Meeting of Your Creditors

Your creditors (except for government entities) must file their proofs of claim (these are documents your creditors submit to the court specifying how much you owe them) within 90 days after the first date set for your creditor meeting if they wish to share in the payments you send to the trustee.

3 to 5 Years after the Filing of the Case

After you successfully complete your plan by making all of the required payments, you will receive a discharge, which will officially wipe out any portion of the debt that was unpaid so long as it was a dischargeable type of debt. After the case is closed out, you should order copies of your credit reports from all three credit-reporting agencies to make sure that all of the debts you intended to pay back or discharge are zeroed out on your credit report with a notation that the debt was included in your bankruptcy. Pay the extra fee to receive your credit score.

Contact us if your credit report is not accurate and we can help you dispute any inaccuracies in order to immediately improve your credit score.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.