What Is The Process That I Will Go Through To File My Chapter 13 Case?
Your first step will be to set up a time for a free consultation (at our office, by telephone, or by videoconference online) in which you and your attorney will review your financial situation in detail. We will review with you your income and expenses to determine whether you qualify for Chapter 7 or Chapter 13 (and whether there may be an alternative that would work for you) and then give you our advice as to your bankruptcy options. If Chapter 13 is your best option, we will be able to give you a very good idea of what your plan payment and plan length will be, how your debts will be treated in the Chapter 13, and generally what to expect. We will then give you an action-list of your next steps to take to prepare for filing your case and what documentation we will need in order to file.
Your Chapter 13 case will be filed when all the necessary documents are gathered and you have signed the petition, schedules and statements. Once your case is filed, you are protected from your creditors by the “automatic stay.” About a week after your case is filed, the bankruptcy court will mail you a notice of a hearing that will be held. This hearing is called a “meeting of creditors” but creditors seldom attend. It is an administrative hearing and no Judge will be present. The meeting usually takes place about 1 to 2 months after your case is filed, and is simply a meeting between you, your attorney, and the Chapter 13 Trustee’s attorney. The Trustee’s attorney sits down with you and your attorney to verify your identity, verify that the information in the petition and other documents are true and correct, and make sure that the Chapter 13 plan is set up properly. This meeting usually takes about 5 to 10 minutes.
Typically this is the only hearing or other event you have to attend after your case is filed.
At about the same time as the meeting (30 days after your case is filed), you have to make your first Chapter 13 payment to the Trustee. Your first plan payment will have to be mailed in to the Trustee, but at the meeting you can enroll in automatic payments or get information on making payments electronically online.
About a month after the meeting of creditors, the Bankruptcy Court will have a confirmation hearing which you do NOT need to attend (typically, this hearing doesn’t actually happen). If no one objects to the Chapter 13 plan, it is approved by default, without you or your attorney needing to do anything.
After the Chapter 13 plan is confirmed at the confirmation hearing, your obligation is to carry out the terms of the plan, which are to make your payments to the Trustee on time, send tax returns to the Trustee each year and perhaps send part of your tax refund to the Trustee each year, and comply with any other terms.
WHAT IF I CANNOT MAKE MY MONTHLY PAYMENT AS REQUIRED?
If you fall behind in your Chapter 13 plan payments, your first step should be to call your attorney. We can often modify the Chapter 13 plan to help you catch up, lower the payment, or even convert your case to a Chapter 7 bankruptcy.
WHAT IF MY PAYMENT PLAN DOES NOT PAY OFF ALL OF MY DEBT?
It is very rare that a Chapter 13 plan does pay off all debts. Most often, we help our clients achieve specific goals through their Chapter 13 plan payments – such as paying off taxes, catching up on mortgage or vehicle payments, or protecting cosigners from debts, without paying off all or even most of the unsecured debts. At the end of the Chapter 13, those unsecured creditor’s claims will be discharged like they would have in a Chapter 7 case (unless you received a discharge in a previous Chapter 7 or Chapter 13 recently). Student loans not paid in full will survive the Chapter 13 discharge.
ARE THERE TAX CONSEQUENCES TO DISCHARGING DEBT IN CHAPTER 13 BANKRUPTCY?
Debt discharged in bankruptcy is not taxable income.