Chapter 13 Bankruptcy
A Chapter 13 bankruptcy is an action where a debtor who earns a regular income asks the court to allow him to pay all or part of his debts under a repayment plan. It is also called the Wage Earner’s Plan. The repayment plan is usually for a period of three to five years. Some people represent themselves in Chapter 13 bankruptcy petitions but the experience and competence of a New York Bankruptcy Attorney is necessary especially in presenting evidence when there are objections from creditors.
Eligibility for a Chapter 13 bankruptcy
A debtor may file a Chapter 13 petition if he is employed, self-employed or operating a business. His income will be analyzed against New York’s median income and if his salary is less than the median income, he will be qualified to apply for a repayment plan with a period of three years. If his income is greater than New York’s median income, he is qualified for a repayment plan of five years.
A debtor cannot apply for a Chapter 13 bankruptcy if he has filed another bankruptcy petition 180 days before and that prior petition was dismissed for failure of the petitioner to appear, failure to comply with the orders of the bankruptcy court or refusal of the petitioner to surrender properties over which his creditors hold liens.
The debtor must also complete a credit counseling course where he may create a debt management plan. This credit management plan must be submitted to the bankruptcy court.
Procedure in filing a Chapter 13 bankruptcy petition
The Chapter 13 petition must be filed with the bankruptcy court along with the payment of filing and miscellaneous administrative fees. The debtor may ask permission from the court to pay it within a maximum of four installments.
The petition must be accompanied with a list of his assets and liabilities; a list of current income and expenditures; a list of executory contracts and unexpired leases; a statement of financial affairs; a certificate of credit counseling; evidence of payment from employers for 60 days before the filing of the petition; a statement of monthly net income; statement of anticipated increase in income or expenses; copies of the debtor’s tax returns; a list of all creditors, the amounts and the nature of their claims; and a detailed list of the debtor’s monthly living expenses.
Within two weeks from the filing of the petition, the debtor must submit a repayment plan for the approval of the court. In accordance with the plan, the debtor must make regular payments to the trustee will be distributed to the creditors after confirmation of the plan. Even before the plan is confirmed or approved by the court, the debtor has to make payments as he had proposed in the plan.
A trustee will be appointed and the trustee will meet with the creditors been three to seven weeks after filing of the petition. The proceedings will be under oath and the debtors must be present to answer any questions the creditors may ask of him. Unsecured creditors (those who do not have lien over specific properties of the debtor) must file a claim with the trustee so that their claim will be included in the distribution of payments made under the plan.
The bankruptcy court will hold a confirmatory hearing and receive evidence on whether the repayment plan is workable and whether it meets the standards of confirmation. The creditors will be given an opportunity to object to the confirmation. Once the payment plan is confirmed, the trustee must distribute to the creditors the payments already made by the debtor under the plan.
If all goes well and the debtor succeeds in fulfilling his duties under the repayment plan, the Court will grant him a discharge. The debtor will still be responsible to pay those debts which are not dischargeable such as those debts for alimony, child support, criminal restitution, and educational loans.
If things do not go well and during the period of the repayment plan the debtor is unable to complete payments under the confirmed payment plan, the debtor may ask the bankruptcy court to grant him a ‘hardship discharge’. This is available only if the failure of the debtor to pay was due to circumstances beyond his control and without his fault; and if the plan cannot be modified because the debtor has been injured or ill and is unable to work. He will need the advice and representation of a New York Bankruptcy attorney to present evidence in this case.
We at the Maxwell Law Firm, PLLC assist client debt settlement, foreclosure defense, tax collection defense, filing for chapter 7 and chapter 13 bankruptcy and mortgage home loan modifications. Contact us and speak to our competent and experienced New York Bankruptcy Attorney so that you can get the debt relief you are seeking. Please give us a call at 718-701-0095 to discuss your options.