Chapter 13 Bankruptcy - Petition To Keep Family Home, Vehicles, Household Goods
Once loan modification or note workout fails, and the homeowner wants to keep the family home, another alternative is to file a Chapter 13 bankruptcy petition to avoid foreclosure.
Indeed, foreclosure is reportedly soaring; and the filing of a Chapter 13 bankruptcy petition results in automatic stay of: (1) any action against the debtor or the debtor's property to collect sums owed to creditors, (2) any enforcement of judgment against the debtor, and (3) repossession or foreclosure on any property of the debtor.
This statutory injunction implemented by the Bankruptcy Code, 11 USC §362(a), is indeed one of the most powerful tools available to a debtor.
It holds creditors at bay while the debtor reorganizes in a Chapter 13 petition.
More importantly, the family home can be saved from foreclosure without a substantial cash payment, which cannot be done in a Chapter 7 petition.
Moreover, automobiles and household appliances and goods can be saved from repossession; and interest rate and even the balance on some consumer debts can be reduced in a Chapter 13 petition.
Thus, the great advantage of a Chapter 13 petition is discharge from debts without losing nonexempt property, provided the debtor pays creditors not less than the value of nonexempt assets the debtor is retaining, according to a confirmed repayment plan not to exceed five (5) years.
Threshold Requirements Of A Chapter 13 Petition: A.
_ Amount of Debts: As a form of consumer reorganization, a Chapter 13 petition is available only to individuals with less than $336,900.
00 of noncontingent, liquidated, unsecured debts, and less than $1,010,650.
00 of noncontingent, liquidated, secured debts, pursuant to 11 USC §109(e), as adjusted every three (3) years according to the Consumer Price Index.
B.
Regular Income: The debtor has to have regular (gross) income, at the start of the case and over the next 3 to 5 years, depending on the period of the plan, all the disposable portion of which should be dedicated to repay creditors according to the repayment plan.
Disposable income is current monthly income less: (1) amount necessary for the maintenance or support of the debtor or a dependent of the debtor, (2) charitable contributions not exceeding 15 percent of the gross annual income, and (3) amount necessary for operation of the business, if the debtor is engaged in it, under 11 USC §1325(b)(2).
C.
Prior Bankruptcy Petition: If the debtor had filed a Chapter 7 petition and obtained a discharge during the 4-year period preceding the filing of a later Chapter 13 case, or obtained a discharge in a previous Chapter 13 during the 2-year period preceding the filing of a later Chapter 13 case, the debtor will not be eligible for another discharge in a later Chapter 13 case.
This prohibition in 11 USC §1328(f), added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), seeks to put an end to the so-called, "Chapter 20," that is, filing a Chapter 13 after a Chapter 7 to obtain discharge for debts that had survived the Chapter 7 discharge.
If a prior Chapter 13 petition was dismissed with prejudice to refile another case for 180 days, no case can be refiled within the 180-day period.
D.
Credit Counseling Briefing: Lastly, the Chapter 13 debtor must have received a credit counseling briefing from an approved agency during the 180 days preceding the filing of the petition, under 11 USC §109(h)(1).
Exigent circumstances may merit an extension for 30 days and another 15 days, if granted by the Bankruptcy Court for cause, under 11 USC §109(h)(3).
Credit counseling is available from approved credit counseling agencies from the U.
S.
Trustee Program's website, for the debtor over the internet, in person, or by telephone.
The filing fee plus miscellaneous administrative fee for a Chapter 13 petition is $235.
00 plus $39.
00 equals $274.
00.
Chapter 13 Repayment Plan Within 15 Days After Filing Of Petition: A Chapter 13 debtor is required to file a repayment plan for the commitment period, pursuant to 11 USC §1321.
The commitment period is determined under the "means test" applicable under Chapter 7 petition.
If the debtor's current monthly income multiplied by 12 is less than the applicable state median income for the debtor's household, the plan may not exceed three (3) years, unless a longer period not to exceed 5 years is approved for cause by the Bankruptcy Judge, under 11 USC §1322(d)(2).
A.
Payment In Full Of Secured Claims: A Chapter 13 debtor must pay in full secured claims (home mortgage loans, car loans, and financings of household goods with purchase money security interests) plus interest, and the pre-petition arrears thereon can.
be cured with payment of interest at an appropriate rate through the plan.
As to real estate claims, the Chapter 13 plan usually requires the debtor to make the regular monthly mortgage payments directly to the creditor.
Claims not secured by the debtor's principal residence, such as personal property-secured claims, may be divided into the secured portion (replacement value) which must be paid in full with interest and the unsecured balance which may be paid from 0 to 100 percent without interest under the plan for unsecured claims.
B.
Payment Of General Unsecured Claims: Unsecured nonpriority claims (priority claims are domestic support claims, administrative claims [debtor's attorney's fee and Chapter 13 trustee's fee], and priority tax claims) must be paid under a Chapter 13 plan at least what they would be paid in a Chapter 7 case.
These claims include credit card debts, judgments debts without lien filings, signature loans, and the unsecured portion of certain secured claims.
The amounts to be paid to unsecured creditors may be a certain percentage (such as 100%, 70%, 0%, etc.
) of the claims' amounts, or pro rata from available funds, after payment of the allowed secured and priority claims.
C.
Initial Plan Payment: Initial payments under the Chapter 13 plan must be made not later than thirty (30) days after the filing of the plan or the filing of the petition, whichever is earlier, unless otherwise ordered by the Bankruptcy Court, under 11 USC §1326(a)(1).
The debtor is required to make direct payments to secured creditors until confirmation of the plan, unless the Bankruptcy Court orders otherwise.
Most Chapter 13 trustees will accept cashier's checks or money orders, as disbursement agents for the debtors' estates, making disbursements once a month.
D.
Confirmation Of The Plan: Creditors and the Chapter 13 trustee review the plan and supporting documentation.
They may object to the plan, accompanied by a motion to dismiss, if the requirements of 11 USC §1325(a) are not complied with.
If no objections are presented or the objections are overruled, the plan will be confirmed by the Bankruptcy Court in a confirmation hearing held not earlier than twenty (20) days and not later than forty-five (45) days after the date of the Section 341(a) meeting of creditors conducted by the trustee.
(The Author, Roman P.
Mosqueda, has practiced bankruptcy law for more than fifteen (15) years, representing debtors, creditors, and trustees.
)
Indeed, foreclosure is reportedly soaring; and the filing of a Chapter 13 bankruptcy petition results in automatic stay of: (1) any action against the debtor or the debtor's property to collect sums owed to creditors, (2) any enforcement of judgment against the debtor, and (3) repossession or foreclosure on any property of the debtor.
This statutory injunction implemented by the Bankruptcy Code, 11 USC §362(a), is indeed one of the most powerful tools available to a debtor.
It holds creditors at bay while the debtor reorganizes in a Chapter 13 petition.
More importantly, the family home can be saved from foreclosure without a substantial cash payment, which cannot be done in a Chapter 7 petition.
Moreover, automobiles and household appliances and goods can be saved from repossession; and interest rate and even the balance on some consumer debts can be reduced in a Chapter 13 petition.
Thus, the great advantage of a Chapter 13 petition is discharge from debts without losing nonexempt property, provided the debtor pays creditors not less than the value of nonexempt assets the debtor is retaining, according to a confirmed repayment plan not to exceed five (5) years.
Threshold Requirements Of A Chapter 13 Petition: A.
_ Amount of Debts: As a form of consumer reorganization, a Chapter 13 petition is available only to individuals with less than $336,900.
00 of noncontingent, liquidated, unsecured debts, and less than $1,010,650.
00 of noncontingent, liquidated, secured debts, pursuant to 11 USC §109(e), as adjusted every three (3) years according to the Consumer Price Index.
B.
Regular Income: The debtor has to have regular (gross) income, at the start of the case and over the next 3 to 5 years, depending on the period of the plan, all the disposable portion of which should be dedicated to repay creditors according to the repayment plan.
Disposable income is current monthly income less: (1) amount necessary for the maintenance or support of the debtor or a dependent of the debtor, (2) charitable contributions not exceeding 15 percent of the gross annual income, and (3) amount necessary for operation of the business, if the debtor is engaged in it, under 11 USC §1325(b)(2).
C.
Prior Bankruptcy Petition: If the debtor had filed a Chapter 7 petition and obtained a discharge during the 4-year period preceding the filing of a later Chapter 13 case, or obtained a discharge in a previous Chapter 13 during the 2-year period preceding the filing of a later Chapter 13 case, the debtor will not be eligible for another discharge in a later Chapter 13 case.
This prohibition in 11 USC §1328(f), added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), seeks to put an end to the so-called, "Chapter 20," that is, filing a Chapter 13 after a Chapter 7 to obtain discharge for debts that had survived the Chapter 7 discharge.
If a prior Chapter 13 petition was dismissed with prejudice to refile another case for 180 days, no case can be refiled within the 180-day period.
D.
Credit Counseling Briefing: Lastly, the Chapter 13 debtor must have received a credit counseling briefing from an approved agency during the 180 days preceding the filing of the petition, under 11 USC §109(h)(1).
Exigent circumstances may merit an extension for 30 days and another 15 days, if granted by the Bankruptcy Court for cause, under 11 USC §109(h)(3).
Credit counseling is available from approved credit counseling agencies from the U.
S.
Trustee Program's website, for the debtor over the internet, in person, or by telephone.
The filing fee plus miscellaneous administrative fee for a Chapter 13 petition is $235.
00 plus $39.
00 equals $274.
00.
Chapter 13 Repayment Plan Within 15 Days After Filing Of Petition: A Chapter 13 debtor is required to file a repayment plan for the commitment period, pursuant to 11 USC §1321.
The commitment period is determined under the "means test" applicable under Chapter 7 petition.
If the debtor's current monthly income multiplied by 12 is less than the applicable state median income for the debtor's household, the plan may not exceed three (3) years, unless a longer period not to exceed 5 years is approved for cause by the Bankruptcy Judge, under 11 USC §1322(d)(2).
A.
Payment In Full Of Secured Claims: A Chapter 13 debtor must pay in full secured claims (home mortgage loans, car loans, and financings of household goods with purchase money security interests) plus interest, and the pre-petition arrears thereon can.
be cured with payment of interest at an appropriate rate through the plan.
As to real estate claims, the Chapter 13 plan usually requires the debtor to make the regular monthly mortgage payments directly to the creditor.
Claims not secured by the debtor's principal residence, such as personal property-secured claims, may be divided into the secured portion (replacement value) which must be paid in full with interest and the unsecured balance which may be paid from 0 to 100 percent without interest under the plan for unsecured claims.
B.
Payment Of General Unsecured Claims: Unsecured nonpriority claims (priority claims are domestic support claims, administrative claims [debtor's attorney's fee and Chapter 13 trustee's fee], and priority tax claims) must be paid under a Chapter 13 plan at least what they would be paid in a Chapter 7 case.
These claims include credit card debts, judgments debts without lien filings, signature loans, and the unsecured portion of certain secured claims.
The amounts to be paid to unsecured creditors may be a certain percentage (such as 100%, 70%, 0%, etc.
) of the claims' amounts, or pro rata from available funds, after payment of the allowed secured and priority claims.
C.
Initial Plan Payment: Initial payments under the Chapter 13 plan must be made not later than thirty (30) days after the filing of the plan or the filing of the petition, whichever is earlier, unless otherwise ordered by the Bankruptcy Court, under 11 USC §1326(a)(1).
The debtor is required to make direct payments to secured creditors until confirmation of the plan, unless the Bankruptcy Court orders otherwise.
Most Chapter 13 trustees will accept cashier's checks or money orders, as disbursement agents for the debtors' estates, making disbursements once a month.
D.
Confirmation Of The Plan: Creditors and the Chapter 13 trustee review the plan and supporting documentation.
They may object to the plan, accompanied by a motion to dismiss, if the requirements of 11 USC §1325(a) are not complied with.
If no objections are presented or the objections are overruled, the plan will be confirmed by the Bankruptcy Court in a confirmation hearing held not earlier than twenty (20) days and not later than forty-five (45) days after the date of the Section 341(a) meeting of creditors conducted by the trustee.
(The Author, Roman P.
Mosqueda, has practiced bankruptcy law for more than fifteen (15) years, representing debtors, creditors, and trustees.
)
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