Under Chapter 13 of the Bankruptcy Law, individuals who cannot discharge their debts but have fallen behind in their mortgage payments, car payments etc. can consolidate their overdue payments and repay their pre-filing arrears in monthly payments for a period of up to 5 years (60 months).

The amount of the monthly payment and the time period varies for each individual based upon a number of factors including:

Non-dischargeable priority debts, which include child support arrears, alimony or maintenance arrears, taxes owed government authorities, criminal fines, restitution, all debts which were reduced to a judgment prior to the bankruptcy filing, secured and priority debts, under Chapter 13 must be entirely repaid. Any unsecured debts may be repaid at a minimum of 10% up to 100% based upon an individual’s available monthly income.

How the Chapter 13 Process Works:

Our office will review your financial situation and advise you as to whether you qualify for a Chapter 13 bankruptcy. If Chapter 13 is your best alternative, we will prepare a plan which will provide a monthly payment covering a period from 36 months to a maximum of 60 months. This one monthly payment will be paid to the Bankruptcy Court and at the end of the time period, assuming all plan payments have been made, you will receive a discharge. The payments will be received by a Bankruptcy Trustee who is authorized by the Court to receive your payments and distribute the plan payment to the creditors.

The Process of Chapter 13 Bankruptcy

Chapter 13 bankruptcy cases officially start when the bankruptcy petition is filed. Most of the time, the court will enact the automatic stay immediately after the case is filed, which prevents creditors from making any collection efforts while the bankruptcy is pending or until the bankruptcy court gives further notice.

The bankruptcy court will then provide notice of the filing to all creditors named in the Chapter 13 petition, and assign a bankruptcy trustee to the case.

The court will send a Notice of Commencement of Case to the petitioner and all creditors named in the petition within approximately 15 days of the petition being filed. In this notice will be key information like deadlines for claims and/or objections from creditors and the details about the creditors’ meeting (date, time, location).

Schedules detailing the petitioner’s assets, debts, expenses and income have to be filed within 15 days of the case’s start. In many cases, these schedules are filed at the same time as the petition, but in emergency situations (as when a bankruptcy filer is trying to prevent repossession or foreclosure) they can be filed separately so that bankruptcy protection is not delayed by the collection of information.

The Chapter 13 repayment plan must also be filed within 15 days.

The Repayment Plan in Chapter 13 Bankruptcy

One of the main contrasts between Chapter 7 bankruptcy and Chapter 13 bankruptcy is that Chapter 13 involves neither liquidation of assets nor quick completion. Intended to allow those who are struggling financially to maintain ownership of their property, Chapter 13 filers develop a plan to catch up on their past due balances while staying current on new payments. A typical Chapter 13 bankruptcy repayment plan includes 36 to 60 months of payments during which debts are paid based on their priority. Secured creditors receive payment first, and remaining disposable income is funneled toward paying unsecured creditors. The hierarchy of payment has been established by U.S. Bankruptcy Code.

If all payments are made on time, any unsecured debt left over at the end of the plan can be discharged.