More About Chapter 13

Chapter 13 bankruptcy is often referred to as the “individual debt adjustment” chapter. It is the chapter selected in approximately one-third of all the bankruptcies filed around the country each year. As in a Chapter 7 bankruptcy, the debtor is seeking a discharge, which is the document mailed to the debtor and all creditors by the Clerk of the Bankruptcy Court toward the end of the case advising that the debtor is no longer legally responsible for repaying discharged debts. In a Chapter 13 bankruptcy proceeding, the debtor is essentially saying to his or her creditors that his or her household generates a certain sum, such as $5,000 per month, that it spends a certain sum, say $4,600 per month, on its normal going forward obligations such as rent or mortgage, car payments, utilities, food and groceries, insurance, medical, transportation, etc., and, accordingly, has net funds of say $400 left over at the end of each month to offer to repay to the pre-bankruptcy creditors, all of whom are put on the proverbial back burner when the bankruptcy petition is first filed.

If you have any questions about bankruptcy, call us at 610-251-2500.

Chapter 13 Bankruptcy Criteria And Tests Used By The Bankruptcy Court.

The Chapter 13 bankruptcy plan states that for a fixed period of time–a minimum of thirty-six months and up to a maximum of sixty months–the debtor will forward the net cash surplus, $400 in the example used above, to the Chapter 13 bankruptcy trustee assigned to the case, and the bankruptcy trustee will distribute the funds on a monthly basis to creditors pursuant to the terms of the proposed “plan,” which is an approximately ten page “fill in the blanks” style document which divides creditors into certain groups or classes. For example, if the debtor is behind on his or her mortgage payments, the mortgage company will be in a certain class. Other secured creditors, such as car lenders or lessors, may be in their own class. If the debtor owes recent taxes to a governmental tax agency, the tax agency will be in a certain class. All general unsecured nonpriority creditors will be together in another class. If after the specified plan period, whether it is thirty-six months, sixty months, or some period of time in between, the debtor has made all of his or her plan payments, he or she will receive his or her discharge at the conclusion of the case.
Once in Chapter 13, the debtor must remain current on his or her going forward obligations, such as mortgage payments, vehicle payments, and current taxes. Failure to remain current on post-petition obligations constitutes grounds to either permit secured lenders to foreclose or repossess their collateral, or to dismiss the case from bankruptcy altogether.

If you have any questions about bankruptcy, call us at 610-251-2500.

Free Consultation

We meet with clients for a free consultation. We determine what chapter you qualify for and make recommendations for bankruptcy and non-bankruptcy options. We work to prepare the petition, the statements, and the schedules before filing them with the bankruptcy court, and we represent you before the trustee and before the court to work through the discharge of your debt. If you’re at risk of losing your mortgage in West Chester, you need to contact us today.

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