Chapter 13 is often referred to as a 'reorganization bankruptcy ' or a 'pay back plan bankruptcy'. Debtors that choose to file this type of bankruptcy submit to the Bankruptcy Court a written 'plan' that will propose to pay in full all missed payments to mortgage or car loan companies, income tax debt, real property taxes, and/or family support obligations arising prior to the bankruptcy filing date.
Missed payments on secured loans such as mortgage or car loans must be paid in full whereas unsecured debts such as credit card debt could be paid a minimal amount (as little as 1 percent). Unpaid attorneys' fees in connection with your bankruptcy representation can also be included in this plan. The amount of the plan payment can be calculated only after a thorough evaluation of the debtor's assets, liabilities, and income stream.
Interested in Chapter 13? Find out more during a free consultation with a Baltimore bankruptcy lawyer.
People who typically file this type of case are facing:
Filing for Chapter 13 bankruptcy stops creditors from being able to foreclose, repossess, garnish, or tax levies so long as the Chapter 13 case is filed before the foreclosure or repossession date, and at any time to stop a garnishment or tax levy. Chapter 13 is then used to propose a repayment of these obligations to these creditors.
In the State of Maryland, there is no legal means by which to regain possession of a properly foreclosed upon home after the foreclosure sale date has passed. Any Chapter 13 Case being filed to save a home must be filed before any foreclosure sale date occurs.
As in Chapter 7, the debtor still must comply with all of the pre-filing requirements such as providing the last six months of income statements (i.e., pay stubs, pension statements, social security income statements, etc.), the most recently filed tax return (in some instances the last 3 years of returns are required), and also attend a counseling session with a certified debt counselor. The debtor must receive a counseling certificate from the debt counselor. This certificate is then filed with the Bankruptcy Court. If not, the Court will automatically dismiss the debtor's case.
In a Chapter 13 case, a Trustee is appointed to review whether the payments proposed by the debtor's Chapter 13 plan are sufficient. The Trustee will either recommend 'confirmation' of the plan by the Court, or will object to confirmation due to: the insufficiency of the proposed plan payment, the failure of the debtor to remain current on post-bankruptcy payments, failure to provide certain documents to the trustee, or another reason.
Meeting of Creditors
In a Chapter 13 case, the purpose of the Meeting of Creditors is essentially the same as in Chapter 7 except that the Trustee will confirm that the debtor understands the need to remain current on 'plan payments' and monthly payments to secured creditors, such as mortgage and car loans. The Trustee may seek additional information on the valuation of the debtor's real estate and the debtor's wages. The Trustee will also confirm that the debtor is aware of the date and time for the 'Confirmation Hearing' to be held at the Bankruptcy Court. The Trustee may also provide written information to the debtor which explains in simple terms how the Chapter 13 process works and what the debtor must do to ensure a successful case.
In Chapter 13, unlike Chapter 7, there is an additional step that will require the debtor's attendance at a 'Confirmation Hearing' where the court will either approve or disapprove of the debtor's proposed Chapter 13 Plan. In most instances, if the plan is prepared properly, it will be approved at the hearing without having to appear before a judge. After the Plan is approved, the debtor must be sure to make all Plan payments each month for the duration of the Plan, said Plan cannot exceed 60 months.
Upon Confirmation of a Chapter 13 Plan, the debtor who abides by the terms of the Plan and who remains current on secured loans, will not have to appear in court again. Remaining current on these payments is critical to the success of the Chapter 13 case. Otherwise, the Court, at the request of an aggrieved creditor, may dismiss the case or allow the creditor to take repossession action despite the 'automatic stay' which normally prohibits such action.
To see how specifically Chapter 13 impacts you, talk to one of our Baltimore bankruptcy attorneys at Belsky, Weinberg & Horowitz, LLC. We can evaluate your debt and discuss whether Chapter 13 is right for you. If it is, we are ready to walk you through our Chapter 13 checklist to ensure you are prepared to file successfully.
Contact our office at (410) 234-0100 to begin.