Requirements for Declaration of Chapter 13

Bankruptcy under Chapter 13 allows a person to financially reorganize.  Chapter 13 reorganization aims to help income-producing individuals rehabilitate their finances, so long as they abide by a court-approved plan.  This is different from Chapter 7, which is a straight-up bankruptcy and gives complete and immediate relief from debt.

Chapter 13 in General

Chapter 13 is also known as the wage earner’s plan.  Debtors with regular income are permitted to develop a plan to repay their debts.  When filing bankruptcy under this chapter, individuals propose a repayment plan where they will make installment payments to their creditors over a 3 to 5 year period.

Declaring Chapter 13

A person is eligible for Chapter 13 if the person’s unsecured debts are less than $360,475 and the secured debts are not more than $1,081, 400.  Chapter 13 begins with filing a petition with the bankruptcy court located in the area where the debtor is domiciled or resides.  The debtor must file the following with the court (unless ordered otherwise):

1. schedules of assets and liabilities;
2. schedule of current income and expenditures;
3. schedule of executory contracts and unexpired leases; and
4. a statement of financial affairs. 

Additionally, the debtor needs to file:

1. certificate of credit counseling and copies of any debt repayment plan developed during counseling;
2. some evidence of income payment from employers received 60 days before filing the petition;
3. statement of monthly net income and anticipated increases in income or expenses after filing the petition; and
4. record of any interest in (qualified) education or tuition.

The debtor needs to provide the trustee with a copy of the most recent tax return filed during the case (includes returns from prior years not filed when case began).  The court is required to charge a $235 filing fee and a $39 administrative fee.  These are paid to court clerk when filing.  The court can permit installment payments for these fees.

When the debtor files the petition, an impartial trustee is appointed to administer the case.  The trustee evaluates the case and collects payments from the debtor and gives them to the creditors.  The debtor’s filed petition creates an “automatic stay” and stops most collection attempts and actions against the debtor and his property.  After the petition is filed, the trustee holds a meeting of creditors and the participants (debtor and creditors) usually resolve the issues with the plan.  Finally, after the meeting of creditors, there is a court hearing regarding the debtor’s chapter 13 repayment plan.

Importance of Speaking with a Lawyer

If you would like more information regarding chapter 13 requirements or have any questions concerning the bankruptcy process, contact a qualified bankruptcy attorney in your area.