A Chapter 13 bankruptcy can be a good option for wage earners looking to protect their family's assets and catch up on past-due debts. But what happens after filing Chapter 13 bankruptcy can be something of a mystery. Here's what to expect after your bankruptcy attorney takes your petition to the courthouse.
In this blog post, I will review the process of filing a Chapter 13 Bankruptcy and what to expect after filing is finished. I will discuss how installment payments work and how often you will need to go back to court.
The success of a debtor's Chapter 13 bankruptcy starts before the petition is filed. The process from filing to discharge in a Chapter 13 bankruptcy will take three to five years. Your attorney will help you gather the necessary proof of income, debts, and assets, and prepare a payment plan that you can afford to keep over that extended period.
Depending on your circumstances (and how thorough your records are) preparing to file your Chapter 13 bankruptcy petition could take as little as 24 hours or as long as weeks, or even months. It depends on whether you have your records together before you meet with your lawyer. The pre-filing period can also be extended if you and your attorney decide it is best to use a debt management plan or other non-bankruptcy strategy to pay down your debt before your file.
A Chapter 13 Bankruptcy does not officially start until the petition is filed. In most cases, that filing will include lists, called schedules, that account for all your:
You will also be expected to file a certificate of credit counseling. Your bankruptcy petition will have several attachments that give the court evidence of your financial circumstances. In most cases you will need to provide pay stubs or other evidence of income, tax returns, and a detailed statement of monthly expenses.
There is a $310 filing fee for each Chapter 13 bankruptcy. Spouses filing jointly only pay these fees once. In most cases these fees are paid when the petition is filed. However, the court can allow you to break the fees into up to 4 installments paid within the first 120 to 180 days after the case is filed.
Your proposed payment plan must generally be filed within 14 days of the filing of the petition. Many bankruptcy attorneys will file them both at the same time. This isn't necessarily the final version, but it should be a plan you and your lawyer think you will be able to follow that satisfies the Bankruptcy Code's requirements.
As soon as your petition is filed, it creates an automatic "stay" on all ongoing or new collections efforts. The Trustee will mail written notice of the bankruptcy proceedings to all your listed creditors. If they have filed suit, started foreclosure proceedings, or are garnishing your wages, those collections efforts are put on hold while the Chapter 13 Bankruptcy progresses.
Most creditors cannot file new lawsuits during the time your bankruptcy case is pending. In many cases, they are not even allowed to call you to try to collect the debt. For many debtors, this peace of mind is the best part of the bankruptcy process.
Within 30 days after filing Chapter 13 Bankruptcy, you will need to start making payments to the U.S. Bankruptcy Trustee. These payments will be held until your plan can be confirmed. Then they will be distributed to your creditors according to the terms of the plan.
You are also legally required to make "protection payments" on secured loans (such as mortgages or car loans) and any outstanding leases until your plan can be confirmed. Keep track of how much you pay on these loans. You can subtract them from the amount owed to the Trustee.
Between 21 and 50 days (never more than 60 days) after your Chapter 13 Bankruptcy petition is filed, you and your attorney will be required to attend a meeting of creditors with the bankruptcy trustee assigned to your case. Each of your creditors receives notice of this meeting. They may choose to appear, but usually do not.
At the meeting of creditors, the trustee will put you under oath and ask you questions about your financial affairs and the proposed payment plan. Any creditors who attend are also allowed to ask you questions. If you and your spouse are filing together, you will both be required to attend the same hearing.
The meeting of creditors makes sure your proposed Chapter 13 payment plan is complete and accurate, and all your debts have been accounted for. If there are any problems with your plan, they will be resolved during or shortly after that meeting.
Within 45 days after you attend the meeting of creditors, you and your attorney will head back to court for a confirmation hearing before a U.S. Bankruptcy Judge. Your creditors will receive notice of that hearing and may object to the confirmation of the plan. This is rare, but when it happens it is often because:
If the judge believes your plan is feasible and meets the requirements of the Bankruptcy Code, he or she will confirm your plan. This locks in terms of the payment plan until a modification is granted. If the plan is not feasible, the judge may require you to file a modified plan, convert the case to a Chapter 7 Bankruptcy, or dismiss the case and order the Trustee to return the money paid (other than court fees).
Once your payment plan is confirmed it is up to you to make it work. This means paying the monthly or biweekly payments to the trustee directly or through income withholding. Then the trustee will distribute the money to your creditors according to the terms in the plan, gradually paying off secured creditors and portions of each unsecured credit account.
The commitment period for a Chapter 13 Bankruptcy is 3 to 5 years. During that time, you will need to:
If circumstances arise that will keep you from making your payments, it is up to you to request a modification. If you do, the court will schedule a hearing and allow your creditors to object to the modification.
When the commitment period is over and all the payments have been made, you and your bankruptcy attorney can request a Chapter 13 Discharge. You will have to file certifications that all the court's requirements have been met, and that you haven't received another discharge within the set time limits (2 years for Chapter 13 or 4 years for Chapter 7, 11, and 12). After a hearing, if the court is satisfied that you have done everything you were ordered to do, the judge will issue a Chapter 13 Discharge.
This discharge releases you from all debts covered by the plan except:
Discharged creditors cannot file lawsuits or make any other collections efforts on the debts provided for in the plan.
Sometimes, unfortunate life circumstances keep you from completing the payment plan, even if it was modified. In these cases, your bankruptcy attorney can help you file for a "hardship discharge" before the commitment period is over. To qualify, you will have to show:
If the court grants your Hardship Discharge, it will satisfy any debts that would have been discharged under a Chapter 7 Bankruptcy. However, there are a few types of debts that will carry on even after a Hardship Discharge.
Deciding to file a Chapter 13 Bankruptcy is a commitment to a new way of life. You and your household will be on a tight budget during the commitment period. But if you successfully complete the process it will release you from the burden of unpaid debt and creditor calls, and let you move on with your life.
The best way to make sure you are able to see the process through to the end is to hire an experienced Chapter 13 bankruptcy attorney at the start. At John A. Steinberger & Associates, P.C., we are a full-service bankruptcy law firm in Southeast MI. We help debtors and families in Southfield, throughout Metro Detroit, and in the surrounding communities see their Chapter 13 bankruptcy through from start to finish. If you think a Chapter 13 bankruptcy might be the best financial decision for you, call us toll-free at (866) 690-2140 or contact us online to schedule a free initial consultation.