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Bankruptcy Chapter 13 Questions

Aparna Iyer Jan 9, 2019
Generally, a person intending to file for bankruptcy is plagued by a number of questions regarding the procedure and the consequences. The response to the given questions on bankruptcy chapter 13 may provide some clarification.
The question and answer series, presented further, is meant to illustrate the process and the ramifications of filing Chapter 13 bankruptcy.

How to Get Started?

Debtors need to file a petition with bankruptcy court in the area where they live or are domiciled. The petition is like a stay order to prevent creditors from trying to contact the debtor to recover dues. After filing petition, the debtor has to submit a document called Matrix. Finally, a plan of the debt settlement under chapter 13 is submitted to court.

Who is Eligible to File for Bankruptcy?

A self-employed individual or a sole proprietor who has sought credit counseling within 180 days prior to filing bankruptcy is eligible to file under Chapter 13, provided the sum total of unsecured debts are less than $394,725 and secured debts are less than $1,184,200.

What is the Cost of Filing for Bankruptcy?

The petitioner is expected to pay $235 filing fee to the bankruptcy court, as well as a $75 miscellaneous administrative fee.

Is Prior Bankruptcy Petition Dismissal Significant?

Anyone whose bankruptcy petition was dismissed during preceding 180 days voluntarily or involuntarily cannot file a new petition. Involuntary dismissal may be due to debtor's willful failure to appear before the court or comply with court orders. Voluntary dismissal may be due to the creditors having sought relief from bankruptcy court to recover their dues.

What are the Necessary Documents Required?

The debtor must have the mentioned details in hand:
  • list of assets and liabilities
  • details of current income and expenditure
  • details of unexpired lease and other obligations
  • certificate of counseling
  • copy of the detailed debt repayment plan developed by the credit counseling agencies
  • evidence of steady monthly income
  • a copy of the tax return for the most recent tax year
  • list of creditors and their dues and details regarding the debtor's income
  • personal property and monthly living expenses.

Is One Required to be Present Before a Judge?

Generally, people are assigned a trustee who handles the particulars of their case. A person is expected to appear before a judge only if the creditors contest the case, and the trustee is unable to work out all the issues.

How is the Repayment Plan Worked Out?

A trustee who is appointed by the court questions the debtor in the presence of creditors about his/her financial affairs in a meeting, referred to as 341. This meeting is held within 3 months of filing for bankruptcy. The debtor is questioned under oath, and hence, needs to be honest about his/her financial situation.
He is expected to come up with a repayment plan which has been worked out in the credit counseling sessions. The bankruptcy court has to decide on the feasibility of the plan within 45 days of this meeting. The debtor needs to start making payments to the creditors within 30 days of filing, irrespective of whether the court has approved the repayment plan.

Does the Debtor Repay All Debts?

The debtor is expected to settle all the priority claims and secured debts within a period of 3 to 5 years. As far as unsecured debts are concerned, creditors expect to recover the maximum of 50% of their unsecured debts or the amount that they would have recovered in case of liquidation under chapter 7.
The debtor retains ownership of personal property, provided the dues are settled in accordance with the details worked out in the repayment plan. One should consult a bankruptcy lawyer for any further details and clarifications regarding bankruptcy Chapter 13.