Filing Chapter 13 Bankruptcy Rules and Procedures

Info_lover | Jun 17, 2010 |

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U.S. citizens must know how to file bankruptcy under Chapter 13 or find another debt-free solution if ineligible under Chapter 7. The Bankruptcy Abuse Prevention and Consumer Protection Act that was passed in 2005 has tightened up the requirements so that many people with serious debts can no longer qualify due to having an income that exceeds the state median. Many other debtors believe that filing chapter 13 bankruptcy is the right thing to do as they wish to protect non-exempt assets, such as a luxury car or valuable art collection, from sale by the trustee.

Filing Chapter 13 Bankruptcy

Those of you who want to understand how to file chapter 13 bankruptcy must first realize that the process is a lot more involved than filing for chapter 7 bankruptcy. Chapter 13 requires a careful and detailed assessment of income and expenses to come up with an appropriate repayment plan.

Those with non-exempt assets who have an income below the state average will make repayments over a 3 year period.
If income is above the state median, debt repayment will be made over a period of 5years.
The 2005 laws do not permit the repayment term to be longer than five years. The debtor will enjoy full court protection from creditors during this period.

Chapter 13 Bankruptcy Eligibility Requirements

The debtor will have to undergo some counseling sessions from an approved credit counseling agency 6 months prior to filing for chapter 13 bankruptcy.
Unsecured debt amounts must be less than $350,000 and secured debt amounts must not exceed $1,000,000.
The debtor will not be allowed to proceed with filing for bankruptcy if it was voluntarily dismissed after creditors sought relief in order to recover the sale proceeds of any personal assets on which they hold a lien.

How to File Bankruptcy under Chapter 13

The debtor must file a petition in the local bankruptcy court in his/her area/region.
The petitioner will have to submit a schedule of assets and liabilities, details of current income and expenses as well as a statement of financial affairs.
The court will charge the debtor a case filing fee of $230 and an administrative fee of around $50. Non-payment of these charges will result in the case being dismissed.
Once the petition has been filed, an automatic stay will come into force that legally forbids creditors from harassing the debtor for debt repayments.
Filing will also stop home foreclosure. That said, a lender can still foreclose at any time as long as it is done before the petition is officially presented to the court.
Around 30-50 days later, the assigned trustee will hold a meeting involving both the debtor and creditors. The trustee or creditors can ask the debtor, under an oath, any questions that are pertinent to his or her current financial situation.
The debtor must provide the court with an appropriate repayment plan within 15 days of the petition. The court appointed trustee will then distribute payments to creditors based on this repayment plan.
Priority claims (secured debt) must be paid in full. However, this is not the case for unsecured debts which can be waived off completely in some cases.

After making debt repayments for around 3-5 years, the debtor will then be fully discharged from the majority of his/her personal debt. Filing for Chapter 13 bankruptcy can help a debtor keep non-exempt assets and arrange for an affordable debt repayment plan.