Bankruptcy Chapter 13 Questions

The following question and answer series is meant to illustrate the process and the ramifications of filing Chapter 13 bankruptcy.

Answers to Bankruptcy Chapter 13 Questions

How to Get Started?
Debtors need to file a petition with the bankruptcy court serving in the area where they are resident or domiciled. This petition is like a stay order that prevents the creditors from trying to contact the debtor to recover the dues. After filing the petition, the debtor needs to submit a document called Matrix. Finally a plan, outlining the settlement of debts under chapter 13, is submitted to the court.

Who is Eligible to File Bankruptcy?
A self-employed individual or a sole proprietor who has sought credit counseling within 180 days prior to filing bankruptcy is eligible to file under Chapter 13 provided the sum total of unsecured and secured debts do not exceed $336,900 and $1,010,650 respectively.

What is the Cost of Filing Bankruptcy?
The petitioner is expected to pay $235 as case filing fee and $39 as miscellaneous fee.

Prior Bankruptcy Petition Dismissal Significant?
An individual whose bankruptcy petition was dismissed during the preceding 180 days either voluntarily or involuntarily cannot file a new petition. Involuntary dismissal may be the result of the debtor's willful failure to appear before the court or comply with court orders. Voluntary dismissal may be on account of the creditors having sought relief from the bankruptcy court to recover their dues.

What are the Necessary Documents Required for Filing Bankruptcy?
The debtor needs to have the following details in hand before filing bankruptcy: List of assets and liabilities; details of current income and expenditure, details of unexpired lease and other obligations; certificate of counseling; copy of the detailed debt repayment plan developed by the credit counseling agencies; evidence of steady monthly income, a copy of the tax return for the most recent tax year; list of creditors and their dues and details regarding the debtor's income, personal property and monthly living expenses.

Is One Required to be Present Before a Judge?
Generally, people filing under Chapter 13 bankruptcy are assigned a trustee who handles the particulars of their case. A person is expected to appear before a judge only if the creditors contest the case and the trustee is unable to work out all the issues.

How is the Repayment Plan Worked Out?
A trustee, who is appointed by the court, questions the debtor in the presence of creditors about his/her financial affairs in a meeting; referred to, as 341. This meeting is held within 3 months of filing bankruptcy. The debtor is questioned under oath and hence needs to be honest about his/her financial situation. The debtor is expected to come up with a repayment plan which has been worked out in the credit counseling sessions. The bankruptcy court has to decide on the feasibility of the plan within 45 days of this meeting. The debtor needs to start making payments to the creditors within 30 days of filing bankruptcy irrespective of whether the court has approved the repayment plan.

Does the Debtor Repay All Debts?
The debtor is expected to settle all the priority claims and secured debts within a period of 3 to 5 years of filing bankruptcy. As far as unsecured debts are concerned, the creditors expect to recover the maximum of 50 percent of their unsecured debts or the amount that they would have recovered in case of liquidation under chapter 7.

The debtor retains ownership of personal property provided the dues are settled in accordance with the details worked out in the repayment plan. The above list of bankruptcy chapter 13 questions is not comprehensive. One should consult a bankruptcy lawyer for any further details and clarifications regarding bankruptcy Chapter 13 FAQs.