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Chapter 13
Chapter 13 Relief
Chapter 13 is a bankruptcy for an individual, including one who is engaged in a business, who has a regular source of income and who desires to repay all or even a small percentage of her debts pursuant to a plan, which she has the exclusive right to propose. A case under Chapter 13 is very different from Chapter 7 liquidation, inasmuch as someone filing under Chapter 13 remains in possession of her property and continues to make payments to her creditors at what is generally a reduced rate. To file for bankruptcy under Chapter 13, you must meet certain eligibility requirements.Specific Dollar Limitations under Chapter 13
Chapter 13 bankruptcy relief is available to an individual: who has regular income, whose unsecured debts total less than $307,675, and whose secured debts total less than $922,975.The Chapter 13 Plan
Only the bankruptcy debtor may file a Chapter 13 plan. The plans that we prepare as attorneys admitted to practice before the California Supreme Court and Bankruptcy Court always include all mandatory provisions required by bankruptcy laws to meet confirmation requirements.
To insure that our plans meet chapter 13 confirmation requirements, the San Diego lawyers of the Pacific Bankruptcy Center meticulously analyze all legal tests that a bankruptcy plan must meet.
Our plans are tailored to the bankruptcy debtors best interests while objectively documenting those things that the client needs to establish to meet legal standards, before the court, and providing for the turnover of non-necessary disposable income to the Chapter 13 bankruptcy Trustee for the debt reorganization plan.
Preferential Treatment to Certain Creditors
The confirmation of a
Chapter 13
bankruptcy plan generally requires that all unsecured
creditors receive the same percentage called for in debtors
plan. However there are exceptions to this rule where it is
necessary to the clients effective debt rehabilitation. For
example, a client in business might need to maintain credit
with a lender in order to continue to operate the business.
Our California Attorney's office takes all necessary steps
to approve full repayment to that creditor where it benefits
the chapter 13 bankruptcy plan.
Stopping Foreclosure under Chapter 13
Chapter 13 bankruptcy is very different
from Chapter 7 bankruptcy in that it allows for long term affirmative
orders that reinstate your rights in
defaulted mortgage
obligations. The bankruptcy lawyers of the Pacific
Bankruptcy Center will move quickly in the
courts to
reinstate your mortgage, provide for adequate protection to
the creditor, take care of real
property issues involving
lien avoidance, and
bifurcate multiple mortgages
where appropriate.
Chapter 13 "cram down" of automobile
and truck loans.
Bankruptcy generally allows for the client to pay on their automobile
or other
secured debt, only as much as
the car (collateral) is worth, not the full amount owed on it. The new
legislation enacted in 2005 creates some significant changes
to this rule. An attorney representing a Chapter 13
bankruptcy client in California now needs to be on top
of these changes and developing exceptions to these
changes. Our attorneys have been at the forefront of this
developing area of bankruptcy law. Most attorneys who
practice must learn and be trained in the nuances of
these laws that the attorneys of the Pacific Bankruptcy
Center in San Diego California and others at the forefront have helped
develop.
Eliminating Second Mortgages under Chapter 13
Generally, a chapter 13 bankruptcy debtor will continue to pay on long term mortgages on her
home, outside of the plan as normal, with only unpaid
arrearages inside of the chapter 13 bankruptcy plan. There are certain
circumstances where a second mortgage can be eliminated if
it attaches to only "nominal equity" in a clients homestead.
An attorney representing a Chapter 13 Bankruptcy client in
California must be fully familiar with this rule of law.
Duration of Plan
The payments under a Chapter 13
bankruptcy plan may not extend beyond three years unless, for cause, the
court approves a longer payback period, up to a maximum of
five years. At the conclusion of the plan a
chapter 13 bankruptcy discharge is granted, although a hardship
discharge may be granted earlier.
Modification of Plan
A chapter 13 bankruptcy plan may be
modified post confirmation based on a change of circumstance
Assumption or rejection of contracts and leases.
The plan may provide that executory
contracts and leases be either assumed or rejected.
Plan Confirmation
After proper notice, the bankruptcy court conducts a hearing to determine whether a proposed plan satisfies the elements necessary for confirmation. The plan must comply with the provisions of Chapter 13, as well as all the other applicable provisions of the Bankruptcy Code.
Chapter 13 plans proposing little or no debt repayment
The size of the bankruptcy debtor's payment to the unsecured creditors is not, in and of itself, determinative of whether the plan was proposed in good faith, since the bankruptcy Code provides a best efforts requirement for application of the debtor's expected disposable income over a period of three years.
Commencement of Payments
The bankruptcy debtor's payments under a proposed plan must begin within thirty days after the plan is filed, unless the court rules otherwise. Any payment made before confirmation of a plan must be held by the trustee until the confirmation hearing. If the bankruptcy plan is confirmed, then the trustee makes distribution as provided for by the plan, However, if confirmation is denied, the money must be returned to the debtor, less any unpaid administrative expenses that have been allowed.
Distribution: Ordinarily, the payments under a confirmed plan are sent to bankruptcy creditors by the trustee unless the plan or the confirmation order provides otherwise, such as where a bankruptcy debtor engaged in business is allowed to perform this function.
Effects of Confirmation
A confirmed plan binds the debtor and every creditor, regardless of whether a creditor has accepted or rejected the bankruptcy plan or has objected to confirmation of the plan, or whether his claim is provided for by the plan.
Unless the Chapter 13 bankruptcy plan or the confirmation order provides otherwise, confirmation causes all property of the estate to vest in the debtor "free and clear of any claim or interest of any creditor provided for by the plan."
Chapter 13 Trustee
The Chapter 13 bankruptcy trustee makes payments to your creditors based on the percentage of your debts which decide you can afford to repay. You make a single monthly payment to the Chapter 13 bankruptcy trustee based on a plan prepared by your attorney that fits your specific needs. In California, your bankruptcy plan must be geared towards debt rehabilitation and generally does not allow the maintenance of luxury payments.
Chapter 13 Discharge
The debtor will be granted a bankruptcy discharge under Chapter 13 after she has made all
payments under the plan unless, subsequent to the order for
relief, she has executed a court-approved written waiver of
the bankruptcy discharge.
Co-debtor Stay
The automatic stay enjoins actions against
co-debtors in a Chapter 13
bankruptcy case.
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