Chapter 13 helps people with jobs who are behind in payments save their homes, cars and other property while bringing order to their finances over a 3-5 year period.

What is a Chapter 13 plan?

A proposal stating what and how the debtor will pay creditors over the course of a 3-5 year period.

What is a Chapter 13 trustee?

The Court hires the trustee to make payments to creditors according to the debtor’s plan, and administer the debtor’s Chapter 13 case until it is closed.

What debts may be paid under a Chapter 13 plan?

Any and all.

Must all debts be paid in full under a Chapter 13 plan?

No. Debts to governments or for family support usually must be be paid in full under a Chapter 13 plan, only an amount that the debtor can reasonably afford must be paid on most other debts, which are discharged at the plan’s completion.

How much of my income must be paid into the plan?

Usually all “disposable monthly income”—income not necessary for support of the spouse or dependents of the debtor and the debtor’s spouse— must be paid into the plan.

When must the debtor begin making payments to the Chapter 13 trustee and how must they be made?

Within 30 days of filing the plan, and 10 days prior to the Meeting of Creditors.

How long does a Chapter 13 plan last?

Three years usually, but sometimes for five.

Is it necessary for all creditors to approve a Chapter 13 plan?

No.

How are co-signed or guaranteed debts handled under Chapter 13?

Co-signers are protected if the co-owned debt is being paid in full in the plan.

May a husband and wife file jointly?

Yes, especially if they have significant co-debt.

Will a person lose any property if he or she files under Chapter 13?

Usually not, unless the Court finds that the debtor’s income is too low to pay a proper percentage to unsecured creditors, and the debtor has valuable property that might remedy that.

Does the Chapter 13 have an “Automatic Stay?”

Yes.

Does my work with a debt consolidation agency prevent me from filing a Chapter 13?

The law doesn’t give debt consolidation agencies any special standing.

How will Chapter 13 affect my credit rating?

It will hurt it. But if you need Chapter 13’s protections, chances are that your credit is already bruised and getting more credit is the least of your concerns.

They publish Chapter 13 filings in the newspapers, don’t they?

They used to, apparently, because people ask about this all the time. Filing Bankruptcy is part of the public record, and anyone with login credentials or the moxy to visit the Court can learn who has filed; however, our office has never actually seen a newspaper clipping with filers listed. We’re sure they happen, or have happened, but it’s not something we’ve had to deal with.

Will my boss know?

Yes, in most cases your payment will be deducted from your paycheck. In some situations, we can arrange to have the amount deducted from your checking account—but MLO, the trustee and the Courts would all recommend against it.

We have to go to court, don’t we?

About six weeks after filing, you’ll attend a hearing called the “meeting of creditors,” or “the 341.” You’re under oath. Creditors can question you, but they rarely, if ever, show up. The majority of bankruptcies require no further hearings. You may have to attend something called a “confirmation hearing,” but not always. So, at least once, maybe twice, but not likely more.

What if my boss or some government agency give me grief about my Chapter 13?

It is illegal for either private or governmental employers to discriminate because a person has filed Chapter 13. It is also illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses, permits, or student loans.

What if the debtor incurs new debts or needs credit during a Chapter 13 case?

We encourage debtors to stop getting into debt. The Court won’t allow you to go out incurring credit willy-nilly anyhow during the Chapter 13 plan period; but let’s say you need a car to get back and forth to work so you can complete your plan. We’ll arrange it with the trustee, get everyone on board, and get Court approval when necessary.

What should the debtor do if he or she moves while the case is pending?

The debtor should immediately notify the Bankruptcy court and the Chapter 13 trustee in writing of the new address. Most communications in a Chapter 13 case are by mail, and if the debtor fails to receive an order of the court or a notice from the Chapter 13 trustee because of an incorrect address, the case may be dismissed. Many courts have change-of-address forms that may be used if the debtor moves.

What if the debtor later decides to discontinue the Chapter 13 case?

The debtor has the right to either dismiss a Chapter 13 case at any time for any reason.

What happens if a debtor is unable to complete the Chapter 13 payments?

The case will be dismissed and everything goes back to the way it was before the automatic stay.