Bankruptcy Law: Filing Chapter 13 Bankruptcy
NOTE: All of the policies and procedures addressed below are based on the standard practices of Westlake Legal Group and are not intended to be construed as anything other than such.
To begin with, it is important to understand that a Chapter 13 case follows the same initial process as a Chapter 7 case. After the initial consult, a “means test” is applied in order to determine eligibility under Chapter 7. Once it is determined that you are not eligible for relief under Chapter 7, we will begin to prepare your application for relief under Chapter 13.
When filing under Chapter 13, we will typically propose to the Chapter 13 Trustee a payment plan that sends him/her your disposable income to be used to pay off your creditors. The payment plan cannot exceed your disposable income and the plan cannot exceed 60 payments (5 years). Unless your plan allows you to pay off all your debts in fewer than 60 payments, you should count on a 60 month plan. At the end of the plan term, the remaining debts (with a few exceptions) are eliminated, just as in a Chapter 7 case. While the plan is in effect, you do not pay interest on most debts. You may also pay a portion of your legal fees through the plan
At the moment Westlake Legal Group files your Petition for relief under Chapter 13, legal and collection actions must stop. This “stay” applies to foreclosures, garnishments, repossessions, and any other lawsuit. The first payment of the plan is due no later than 30 days after filing. This payment is due even if the plan is not ultimately approved. Failure to make this payment will result in an automatic dismissal of your case.
One other important obligation, incurred as a result of being granted the “stay” upon filing, is that you must keep all of your regularly incurring debts current. These include house payments, car payments, and any other secured installment payment.
It is also important to realize that the Trustee will not send you a monthly reminder. It is up to you to make sure your payments are received by the Trustee on time. In addition, the Bankruptcy Code requires that a payroll deduction order be entered so that your employer pays the Plan payment directly to the Chapter 13 Trustee. However, you are responsible to ensure the payment is made. If your employer fails to make the payment for some reason, your case can be dismissed.
It is important not to miss any payments to the Trustee. If you miss a payment, the Trustee cannot pay your creditors as called for by the Plan and the Trustee may be obligated to file papers with the Bankruptcy Court asking that your case be dismissed. If your case is dismissed, your creditors will be notified, and they may resume collection against you. If there is a serious change in your circumstances that affects your ability to make payments under the plan, contact Westlake Legal Group immediately. Do not miss a payment. We will notify the Trustee. We will also review your status, and possibly seek to modify your plan.
Once the Petition and plan are filed, if the Trustee recommends approval of the plan, you will receive a Confirmation Order setting forth the duration of the plan, the amount of payment, and other obligations. If the Trustee does not initially approve the plan, or a creditor successfully objects to the plan, we have to file an amended plan or attend a hearing. It is imperative that you continue to make your plan payment even if there is an objection or a request to submit an amended plan.
After the plan is filed, as in a Chapter 7 case, the Trustee will conduct a hearing to verify the accuracy of your Petition and to determine the status of your assets and income. Creditors have 90 days from that hearing to file a proof of claim in order to receive some payment from the plan (governmental units, like the IRS, have 120 days). Usually within six months of filing, the Trustee’s office will send a report called “Notice of Intent to Pay Claims.” You will have 30 days to object to any amounts claimed in the report, otherwise the debt will be deemed valid and paid in the Chapter 13 case.
If the plan does not call for paying all debts in full, every year you will be required to provide signed copies of your Federal and States tax returns to the Trustee within 10 days of their filing. Westlake Legal Group will also assist you in determining the proper number of tax exemptions to take from your employer, as all tax refunds in excess of $250.00 must be paid to the Trustee as an additional payment for the benefit of your creditors.
Every six months, you will receive a report from the Chapter 13 Trustee’s office listing the payments received and to whom payments have been made during that period. This report should be reviewed to ensure consistency. Approximately 6 to 8 months after filing, the Chapter 13 Trustee will conduct a short, half-hour meeting to review your case.
Information regarding your Chapter 13 filing and the specifics of its administration are available as matters of public record, and the financial details of your case will be disclosed to parties in interest.
When you are finished making all of the payments in the plan, as directed by the Confirmation Order, the closing procedure will begin. If you are paying less than 100% to your unsecured creditors, you must file all the appropriate tax returns in order for the case to be closed. After all required information and payments have been received, the Chapter 13 office will issue an order to stop your payroll deduction. Any overpayments will be refunded after your case has its final audit. If you pay 100% of your debt, you can pay your case off early. After all the requirements of your case have been satisfied, you will receive your discharge papers from the Court in approximately four to six weeks.
For more information about the Chapter 13 process, or to schedule a personal consultation, please feel free to contact Westlake Legal Group and we will be glad to meet with you.