chapter 13 process

​A Chapter 13 reorganization bankruptcy, involves a relatively straightforward process, that typically includes only the following steps: 

• Decide if you are eligible for Chapter 13 Relief;
• Participate in Credit Counseling;
• Complete Required Documents;
• ​Meeting of Creditors;
• Plan Confirmation;
• Following the plan; and finally
• Discharge.

* Nothing on this page is legal advice, neither does it create an attorney-client relationship of any sort.  The material contained here is for informational purposes only.  Contact us for real legal advice and an opportunity to form a relationship with great attorneys.

determining eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $394,725 and secured debts are less than $1,184,200. These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. 

An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

participate in credit counseling

Before a Chapter 13 Bankruptcy can be filed, the debtor MUST participate in a credit counseling program.  See the credit counseling page to get a list of approved credit counseling agencies.

file required documents

In order to successfully file for bankruptcy, many documents must be filed on your behalf.  It is imperative these forms are completed correctly.  Click the link in order to access the Chapter 13 form packet.

meeting of the creditors

When you file for Chapter 13 bankruptcy, you must go to a mandatory hearing called the meeting of creditors before your case can be approved (confirmed) by the court. This is usually a simple hearing to verify the information in your bankruptcy papers. The primary purpose of the Chapter 13 meeting of creditors is to allow the bankruptcy trustee (and any creditors who choose to attend) to verify the information in your bankruptcy papers and ask you questions about your financial affairs. The Chapter 13 trustee also uses this time to determine whether your case is ready to be approved by the court. If the trustee believes that you should be paying more to your unsecured creditors, he or she can object to the confirmation of your Chapter 13 repayment plan.

The Chapter 13 bankruptcy trustee conducts the meeting of creditors. There is no judge at the hearing. However, you may be required to attend a confirmation hearing in front of a judge (especially if the trustee objects to your plan) after your meeting of creditors.  Your creditors can also come to your meeting of creditors and ask you questions. However, in most cases, no creditors attend these hearings. Generally, secured creditors (such as your car lender) are the most likely to appear at your hearing to ask whether you wish to keep or surrender the property securing their loan and verify that it is properly insured.  This means that you will usually be examined only by the Chapter 13 bankruptcy trustee. But the meeting of creditors is open to the public so anyone can observe your hearing. Further, the other Chapter 13 debtors will typically be in the same hearing room when you are being examined.

If the Chapter 13 trustee is satisfied with your repayment plan and other bankruptcy papers, he or she will conclude your hearing. This means that you won’t be required to attend another hearing in front of the trustee. However, you may still have to go to a confirmation hearing in front of the judge.  If the trustee requires further information or objects to your repayment plan, he or she can continue the hearing to another date to resolve any remaining issues. Alternatively, instead of continuing the hearing, the trustee can let you know that he or she will move to dismiss your case at your confirmation hearing in front of the judge. If the trustee wants to dismiss your case, you will need to argue and show the judge why your bankruptcy should be approved.

plan confirmation

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 14 days after the petition is filed.  A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
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There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding.  Secured claims are those for which the creditor has the right take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all "disposable income" - discussed below - to a five-year plan.

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any arrearage is made up during the plan. The debtor should consult an attorney to determine the proper treatment of secured claims in the plan.
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The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7.

following the plan

The provisions of a confirmed plan bind the debtor and each creditor. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor's ability to complete the plan. 
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A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan. In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. The court may also dismiss or convert the debtor's case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony), or fails to make required tax filings during the case.

discharge

A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid; (2) has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor's district has determined that such courses are available to the debtor).  The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor's homestead exemption. 
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The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.