A Chapter 13 bankruptcy, also referred to as ‘reorganization’, does not discharge your debts as a Chapter 7 Bankruptcy does. Instead, it provides you with an opportunity to settle amounts past due through monthly payments made over time in addition to your regular monthly payments.
Chapter 13 is normally utilized by people who have suffered a catastrophic financial event such as a sudden job loss or major family illness. It is used by both individuals and businesses and does not negatively impact credit to the degree that a Chapter 7 filing does, because it demonstrates to creditors that you are willing to pay your debts despite the problems.
What Must a Debtor (filer) Do?
Prior to filing the Chapter 13 action, you must complete a U.S. Trustee approved credit counseling briefing. Once completed, a certificate of completion must be filed with your petition. Your case really begins when your attorney files the petition in federal bankruptcy court. When a Chapter 13 action is filed, it places a ‘stay’ in effect under 11 U.S.C §§ 362 that prohibits your creditors from harassing you or attempting further collection activities. A notice of your filing will be sent to the entire list of creditors you provided within fifteen (15) days of filing.
The Chapter 13 Timeline
As previously stated, your case begins on the date your attorney files your petition with the federal courts. Approximately 15 days later, the court issues a notice of commencement of the case to all your creditors. This notifies them that the ‘stay’ is in effect and sets the date for a 341 meeting of creditors before a court-appointed trustee. It also informs your creditors of the final date for filing any complaints or objections with the court (usually 30 days). Your planned re-payment schedule must be filed within fifteen (15) days of filing unless your attorney included it with the original petition. Approximately 20-40 days later, the 341 meeting of creditors is held. In most cases, few if any will actually attend unless the amount due is extremely large. You can expect to be discharged within 60-90 days after the 341 meeting date.
What Must You Do to Qualify for a Chapter 13?
In order to qualify for filing a Chapter 13 bankruptcy, the following must be shown:
• You must have a regular income that will permit you to make the pre-determined payments to the trustee in bankruptcy who will distribute funds to your creditors.
• You have to show that you have an adequate amount of disposable income so that you can make regular payments to the trustee AFTER covering your current living expenses.
• You must also show that your disposable income falls within the pre-set limits for both secured and un-secured debts. These limits are updated occasionally and your attorney will be up to date on what they are. In May 2007, these limits were $1-million for secured debts and $337,000 for unsecured debts.
Some important Cautions…
For either Chapter 13 or Chapter 7 bankruptcies, you should be aware that any assets transferred to family members, friends or some business associates will be considered as ‘preferential’ and disallowed by the court. The court may also dismiss your petition altogether if it believes that transfers of ownership or sales of assets were done to defraud your creditors.
You also cannot file a bankruptcy petition if you had a previous petition dismissed within the past 6 months of this filing.
You should try to avoid Bankruptcy at all costs!
I would recommend trying to consolidate your debts before turning to Bankruptcy.
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Situation/Data;
I ran out of time (only 1 day left) to execute a shortsale on my house and the auction date was fast approaching. So I filed for chapter 13 bankruptcy a day before the auction date in order to buy time to execute the sale. The forms are not complete (No submission of certificate of counselling completion) and I do not intend to continue with the process.
Question:
What do I need to do in order to ensure that the filing doesn’t tarnish my credit outlook. Should I just wait for 15 days to elapse which will dismiss the case, or is there a way I can rescind the filing?The sale is done and I only owe $2300 in credit card debt.
I really hope you don't go around giving legal advice because some of your information is false. For one, In a Chapter 13 you don't get a discharge 60-90 days after your 341 meeting. That only takes place in a 7. Debtors in a Chapter 13 don't get a discharge until they successfully completed their plan, which is 3-5 years.
Second, if you had a previous petition dismissed, there is NO waiting period to file again. I strongly urge you to do some extensive research.
I filed in June. My hearing was last week. My payments have already started. Is it too later to add more debt? I cant afford to pay my cell phone bill. They will charge me 400.00 to cancel service. (2 lines) . Is it too late to add this? I havent cancelled yet, but would need to shortly.