Chapter 13 Bankruptcy

Need Help with Filing Chapter 13 Bankruptcy? Consult Sam Calvert, Attorney at Law

Chapter 13 is often called a "wage earner" plan, although it is available to any individual who has regular income from any source, not just wages. So, for example, social security payments or self-employment income will count.  Chapter 13 is most often used to save property from foreclosure. So, if your mortgage company has started a foreclosure, we can usually come up with a plan to make the regular mortgage payments which come due after you file and make “catch up” payments during the plan. That is why it is very important to file bankruptcy before the sheriff’s sale, not afterwards.  If your vehicle is collateral for a loan which is much more than the value of the vehicle, we can re-write the loan to pay the value of the vehicle at its NADA retail value in installments through the plan. 

A chapter 13 plan lasts at least three years and not more than five years. During this time creditors cannot start nor continue collection efforts. However, you must keep current with house payments that come due after the case was filed, or the mortgage company will get “relief from the stay”, which will permit them to start a foreclosure. The moral is: keep up your house payments!

A chapter 13 case begins with the filing of a petition with the bankruptcy court. A husband and wife may file a joint petition or they may file individual petitions. If only one spouse owes money, the other does not have to file. To prepare the bankruptcy papers to file with the court, we need copies of all bills or a list of all creditors and the amounts and nature of their claims; the amount and source of the your income; a list of all of the property you own, and a detailed list of your monthly living expenses, such as mortgage or rent payments, utilities, food, clothing, medical expenses, transportation, insurance payments, car payments, etc. You should bring your last two years tax returns and a recent paycheck to the meeting.  You should also bring your real estate descriptions from your abstract or deed.

The court filing fee is $274.00 as of April 10, 2006, which must be paid before we can file the case. (There is an installment plan if it is an emergency). The attorneys fees are, generally, included in payments under the plan. In other words, your up front cost is $274.00, and the attorneys fees for the case are paid by the trustee from the payments you make to the trustee. Your unsecured debts must be less than $300,000 and your secured debts must be less than $850,000. Only “natural persons” can file a chapter 13, so corporations and partnerships cannot do so.

A "meeting of creditors" is held about 30 days after the paperwork is filed. Depending on the county in which you live, the meeting will be in St. Cloud, Detroit Lakes, Redwood Falls, Duluth, Minneapolis, or St. Paul. The debtor (or debtors) must attend the meeting. The trustee will swear you in and ask questions regarding your financial situation and the proposed terms of the plan. The trustee will doubtless also ask if you get a tax refund, and if you do, and if it is significant in size, he or she may ask that it be contributed to creditors. If there is a problem with the plan, it is usually resolved during or shortly after the meeting with the trustee. Problems generally arise because your income has increased or your expenses have decreased, or because some creditor feels you have undervalued its property.  A second date is set, called a “confirmation hearing”, but almost always things are worked out ahead of time and it is not necessary to go to the confirmation hearing.

When you finish making all payments under the chapter 13 plan you receive a “discharge”. This discharge releases you from all debts provided for by the plan or disallowed, with limited exceptions. Therefore creditors’ claims are wiped out, and they cannot collect them after your discharge, even if you did not pay them in full during the bankruptcy.

There is a great deal more to bankruptcy than this, of course; that's why we offer a free first visit.