Chapter 13
There are several reasons that a debtor may want to file Chapter 13 bankruptcy. Most common is that the debtor has become delinquent on mortgage payments and is facing foreclosure in state court. Chapter 13 can stop foreclosure so that arrears may be paid over time. Other popular reasons for filing Chapter 13 are repayment of tax and student loan debt and rescheduling secured debts (other than a mortgage) so that the secured debts are paid over a longer period of time.
The new bankruptcy law (BAPCPA, October, 2005) requires Chapter 13 filers to have completed a debt counseling class prior to filing bankruptcy. Your attorney has a list of approved counselors. You should have available for counseling copies of your pay-stubs for the preceeding 60 days and copies of your federal and state income tax returns for the most recent tax filing year. You will need to present to your attorney a certificate from the counselor that you have successfully completed counseling.
You and your attorney will meet and discuss your assets and liabilities, income and expenses, as well as your creditors. Your attorney will prepare a credit report from the three major credit reporting agencies. Review the credit report and add any creditors not listed as you must list everyone to whom you owe money. Your attorney will prepare a petition for Chapter 13 as well as a plan of reorganization. The plan tells the Court how you intend to repay your debts by how much per month you are willing to pay to the Court.
The Court appoints an impartial administrator to serve as Chapter 13 Trustee. The Trustee evaluates the case and serves as disbursing agent. No more than 60 days after filing the petition and plan, you and your attorney will meet with the Trustee to review your filed documents and the intentions noted in your plan. If acceptable, the Trustee will forward the case to Court with a recommendation that the plan be confirmed.
Payments under the plan must begin within 30 days of filing the plan. It is encouraged that the debtor enter into a voluntary wage withholding order permitting the Trustee to gather the monthly plan payment directly from the debtor's employer. Voluntary wage withholding greatly increases the rate of success under Chapter 13!
