Last month, we explained how to file for Chapter 7 bankruptcy, which is otherwise known as “liquidation bankruptcy” because its purpose of clearing away many types of unsecured debts. Contrary to Chapter 7 bankruptcies, Chapter 13 bankruptcy cases are designed for individuals who can afford to repay some of their debts, but need assistance restructuring their debts into an affordable repayment plan.
If you’re interested in filing for Chapter 13 bankruptcy, there are several qualifications required in order for you to be able to do that. In this article, we will describe the process it takes for an eligible person to file for Chapter 13 bankruptcy in California. This process is made up of several steps, which include completing debt courses, filing paperwork, attending required meetings, and more.
The Purpose of Chapter 13 Bankruptcy
There are a variety of reasons why an individual would choose to file for Chapter 13 bankruptcy over Chapter 7. Common reasons include:
- You want to cure arrears on a house or car.
- You want to make payments on a tax debt over a 5-year period.
- You don’t want to lose a car or house after falling behind on a monthly payment.
- You want to avoid wage garnishments and outreach from debt collectors.
- You want to repay support or other arrearages.
- You make too much income to pass the Chapter 7 means test.
The Chapter 7 Means Test is meant to test whether an individual has enough income to repay creditors; if you don’t have enough income, then you pass the test. However, if you have available income according to the means test, Chapter 13 could be for you.
Complete Mandatory Credit Counseling Course
One of the requirements of filing for Chapter 13 bankruptcy is that you must complete a credit counseling course from an agency approved by the Department of Justice U.S. Trustee Program. This counseling course must be completed during the 180 days before filing for bankruptcy.
The purpose of the credit counseling course is to help educate you on budgeting, and assist you in evaluating whether you have enough income to repay your creditors.
File Chapter 13 Bankruptcy Paperwork
Individuals work closely with attorneys to prepare and file the pleadings, and paperwork needed. Once you have officially filed your Chapter 13 petition, your bankruptcy case will begin. Sometimes emergencies require the filing of only a handful of documents, but in most cases will entail the filing of a complete set of pleadings and documents.
Of course, we recommend working with a bankruptcy attorney at The Mlnarik Law Group, Inc., if you haven’t been doing so already up to this point. Our attorneys will help guide you, and help avoid common mistakes and pitfalls that go along with compiling the paperwork and preparing to file for bankruptcy protection.
Once you’ve officially filed, the bankruptcy court clerk will assign a judge and trustee to your case. A notice will go out to you, your attorney and all of your creditors to notify them of the opening of your bankruptcy case and the imposition of the automatic stay. Upon sending this letter, your creditors will be automatically prohibited from debt collection activities. The letter will also notify everyone of the deadlines set in your case and the date set for the 341 meeting of creditors you’re required to attend.
Attend 341 Meeting of Creditors
At least 5 days before the 341 hearing, you’ll be required to turn over “521 documents.” These documents will enable your case trustee to
- Check your identity,
- Verify and ask about information in your bankruptcy paperwork,
- Ask questions about your financial affairs,
- Discuss your proposed repayment plan, and
- Explain where to make your monthly repayment plan payments
Start Payment & Opportunity for Objection
Even if courts haven’t “confirmed” or approved your proposed Chapter 13 payment plan, you will be required to begin your monthly payments 30 days after you file. This required payment is established to ensure that your bankruptcy case ends on the scheduled 36–60 months.
Before your Chapter 13 bankruptcy case can be officially confirmed, the bankruptcy trustee and your creditors will have an opportunity to object. The purpose of this is to make sure your plan conforms to the applicable bankruptcy code provisions, and also to give everyone the opportunity to weigh in on their treatment under the plan. Although the grounds are limited on which an objection may be filed, your attorney will need to work to resolve the objections to the satisfaction of the Chapter 13 trustee or objecting creditor, or set the matter for a hearing and ask the court to rule on the objection.
Contested confirmation of a Chapter 13 bankruptcy plan does not happen very often. But when it does, the judge must be able to affirmatively answer the following questions before confirming the plan:
- Is the plan feasible? Does the filer have enough income to pay the monthly payment?
- Did the debtor propose the plan in good faith? Is the filer trying to manipulate the bankruptcy process?
- Does the plan comply with bankruptcy law? Is the filer paying creditors the amounts required by law?
Complete Confirmed Bankruptcy Plan
Once you have completed your confirmed bankruptcy plan monthly payments, then the court will enter a discharge order that wipes out the remaining balance of your qualifying debt. In addition to making the monthly plan payments, you must also be current on child support alimony obligations, and complete a second debtor’s education course concerning financial management.
Keep in mind that Chapter 13 bankruptcy discharge doesn’t relieve all of your debt. Kinds of debt that survive Chapter 13 bankruptcy discharges include:
- Domestic support obligations
- Criminal penalties debt
- Fines or penalties owed to a government agency
- Certain taxes owed, such as income tax
- Intoxicated driving debts
- Debtors not listed on bankruptcy plan
- Student loans
- Fraudulent debts
Don’t File without an Attorney!
If you’re interested in filing for Chapter 13 bankruptcy, it’s vital that you speak with one of the bankruptcy attorneys at The Mlnarik Law Group, Inc. Our team of bankruptcy professionals have the required skills and experience to ensure that your bankruptcy filing process is smooth and gives you the full benefit of the bankruptcy discharge.
If you have filed a prior bankruptcy there are certain waiting period that need to be observed before filing a Chapter 13 bankruptcy. It’s because of this waiting period (and a number of other considerations) that you should take time and plan ahead before filing bankruptcy. Even if you have completed a Chapter 13 bankruptcy payment plan before, it’s important to speak with a Mlnarik Law bankruptcy attorney. We work to stay ahead of all the changes to the bankruptcy code, because we want to ensure our clients have all the information they need before filing.
have all vital information before filing.