Chapter 13 is the chapter of the Bankruptcy Code that involves reorganization for individuals. Chapter 13 allows an individual to propose a plan to repay creditors over three to five years. In most cases, Chapter 13 allows you to pay your unsecured creditors (e.g., credit cards, medical debt, personal loans, etc.) only a fraction of what is owed. There are many reasons why Chapter 13 could be the right choice for you. The Jones Law Firm will thoroughly review your options with you before you file. Learn more about what we do for you
or contact us today to schedule a free consultation
Eligibility for Chapter 13 Bankruptcy
Unlike Chapter 7
, most individuals qualify for Chapter 13 bankruptcy. The following are the only requirements to file Chapter 13 bankruptcy:
- You must have a source of income. Chapter 13 requires you to make monthly payments according to a Chapter 13 plan. You need a regular source of income to make these payments.
- Your total debt balances must be below certain amounts (as of April 1, 2019, the limits are $419,275 for unsecured debt and $1,257,850 for secured debt). If your debt exceeds these amounts, you may have the option of filing Chapter 11 bankruptcy.
As long as you meet these requirements, you should qualify to file a Chapter 13 bankruptcy.
Why Choose to File Chapter 13?
People choose to file Chapter 13 bankruptcy for a variety of reasons. Sometimes people choose to file Chapter 13 because they are not eligible to file Chapter 7. Other times, people choose Chapter 13 because it offers certain benefits and advantages that Chapter 7 simply does not offer.
1. You don’t qualify for Chapter 7.
If your income is too high and you fail the Chapter 7 means test, Chapter 13 can be a great option. Chapter 13 is designed so that you pay only what you can afford. We will draft a budget and determine a Chapter 13 plan payment that you can afford to pay. Also, if you have received a Chapter 7 discharge in the last eight years, you may not qualify for a discharge in Chapter 7; however, you may qualify to get a discharge if you file Chapter 13.
2. You are behind on your mortgage payments.
Chapter 13 lets you catch up on delinquent mortgage payments over three to five years. Even if your home is in foreclosure, we can usually still use Chapter 13 to get you back on track. As long as you make all of your Chapter 13 plan payments, you will be completely current on your mortgage payments when you finish your bankruptcy case. Important: If your home is in foreclosure and is scheduled for sheriff sale, call us immediately to determine your options.
3. You are behind on your car payments.
If you are behind on your car payments, Chapter 13 allows you to immediately catch up. Your car payment will be a part of your Chapter 13 plan payment. As long as you make all of your plan payments, you will own your car free and clear when your bankruptcy ends. Even if your car has been repossessed, we can usually recover it if you file your bankruptcy case before the car is sold.
4. You have tax debts.
If you owe taxes (federal, state, or local), Chapter 13 can allow you to pay these debts over three to five years. Some tax debts do not even need to be paid in full. In most cases, as long as you make all Chapter 13 plan payments and stay current with your ongoing tax obligations, you will have no tax debt when your bankruptcy ends.
5. You owe a domestic support obligation.
If you are behind on alimony or child support payments, Chapter 13 can allow you to get current on these obligations over three to five years. It is important to remember that you still must
make your ongoing child support and alimony payments as they come due.
6. You own non-exempt assets.
If you own a non-exempt asset that could be taken by a Chapter 7 Trustee and liquidated, Chapter 13 can be a great option. Chapter 13 Trustees do not liquidate assets. You will need to propose a plan that pays to creditors at least the value of the non-exempt asset over three to five years.
7. You have unmanageable student loan payments.
Chapter 13 can pause student loan payments and allow you to take care of other debts for three to five years. It is very important to remember that most student loans cannot be discharged in bankruptcy. Further, student loans continue to accrue interest during Chapter 13. When you meet with The Jones Law Firm, we will let you know the advantages and disadvantages of filing Chapter 13 when you have student loan debts.
8. You want to pay some of your debts.
Some people simply wish to pay some of their debts. Even a person who otherwise qualifies for Chapter 7 can file a Chapter 13 instead just to pay some of their debts. If circumstances change during the case, you may even have the option to convert your case to a Chapter 7. Chapter 13 is a totally voluntary bankruptcy. You can’t be forced to file a Chapter 13, and you can’t be forced to remain in a Chapter 13.
Fees for Chapter 13 Bankruptcy
A huge benefit of Chapter 13 is that most of your attorney’s fees
can be deferred over three to five years and paid as part of your Chapter 13 plan payments. You will need to pay the court filing fee prior to filing the case.
You must complete a credit counseling class prior to filing bankruptcy. During your initial consultation, we will provide you information about this course. The course usually takes less than an hour and can be completed online or over the phone. After completing credit counseling, you will receive a certificate of credit counseling that is valid for six months. Please contact us immediately after completing your course so we can schedule your appointment to sign your bankruptcy petition.
Filing Your Case
When you are ready to file your Chapter 13 case, we will schedule an appointment for you to sign your petition. We will provide you with a list of all documents and information you will need to provide our office before you file, as well as the information you will need to bring to your petition signing appointment. Some items that may be required include the following:
- Six months of paystubs
- Car title
- Proof of insurance (vehicle and homeowner’s)
- Deed and mortgage documents
- Bank statements
- Retirement account statements
- List of all your debts (**we can help you get your credit report)
- List of all your assets
Meeting of Creditors
Within about two months of filing your case, you will attend a meeting of creditors. This is a meeting conducted by your court appointed trustee. Despite its name, creditors rarely attend the meeting. Although the meeting is conducted at the courthouse, it does not involve a judge. The meeting generally lasts less than 15 minutes. The trustee will ask you a series of questions about your bankruptcy petition. The main purpose of this meeting is to ensure the accuracy of the documents we prepared together. Don’t worry — we will thoroughly prepare you for this meeting. Some people are nervous about this meeting, but usually find that it is simple and quick.
Chapter 13 Plan Payments
You will begin making your Chapter 13 plan payments about 30 days after you file. If your financial situation changes or you ever have difficulty making your plan payment, call us immediately — in most cases, we can temporarily suspend or lower your plan payment.
Once you have finished making all of your plan payments, you will receive your discharge. This document certifies that you are no longer legally responsible for most of the debts you had prior to filing. Make sure to save a copy of this form. As long as you have made all of your plan payments, you should be completely current on any mortgage payments, car payments, tax obligations, and domestic support obligations. The Jones Law Firm will always be available, even after you receive your discharge, to answer any questions about your case. If a creditor tries to collect on a debt that was discharged in your bankruptcy case, call us immediately.
Myths about Filing Chapter 13 Bankruptcy
I will have to give up everything I own after I file.
False. Chapter 13 does not involve the liquidation of assets. Instead, you propose a plan of reorganization and make payments to a Chapter 13 Trustee (based on how much you can afford to pay).
I will have to appear before a judge.
In most cases, the only time you go to court is to attend your meeting of creditors. This meeting is conducted by your trustee (not a judge) and usually lasts less than 15 minutes. Sometimes, it is necessary for a Chapter 13 debtor to appear at a court hearing. While this is relatively rare, it is not something to be nervous about. Bankruptcy attorney Michael Ryan Jones
and The Jones Law Firm have extensive experience in bankruptcy court and will zealously advocate on your behalf. We will make sure you completely understand what is happening in your case and what each proceeding will involve.
Filing Chapter 13 will permanently ruin my credit.
While a Chapter 13 bankruptcy filing will appear on your credit report for up to 10 years, you can immediately start rebuilding your credit after you receive your discharge. The more time that passes, the less important the bankruptcy filing is on your credit report. Plus, every month you have a late payment or other negative credit activity, it is reflected on your credit report. When you receive your bankruptcy discharge, most of that negative credit reporting ends immediately. Think of it like ripping off a band-aid — you will be well on your way to rebuilding your credit! Plus, many creditors look favorably on individuals who have successfully completed a Chapter 13 plan.
Filing bankruptcy is expensive.
The Jones Law Firm offers very competitive rates. In addition, most attorney’s fees are deferred in Chapter 13 over three to five years and are paid as part of your plan payment. You will still need to pay your court filing fee prior to filing your case.
I will lose my job after if I file bankruptcy.
The federal Bankruptcy Code prohibits employers from negatively discriminating against an employee based solely on the fact that the employee filed bankruptcy. If you feel an employer has discriminated against you because you filed bankruptcy, call us immediately.
My case will fail if I cannot make my plan payments.
In many cases, your plan payments can be temporarily suspended or lowered if you are having trouble making payments. The important thing is that you contact us immediately if you know you are going to have trouble making a plan payment.
I will not be able to afford my plan payments.
The Bankruptcy Code requires that you propose a plan that is feasible. In other words, we must draft and propose a plan that you can reasonably be expected to comply with. Occasionally, due to specific debts and other circumstances, we are unable to draft a feasible plan. If this is the case, we will discuss other bankruptcy and non-bankruptcy options. The Jones Law Firm will never put you in a Chapter 13 plan that we know you will not be able to afford to pay.
Free Consultation: Is Chapter 13 Bankruptcy Right for You?
If you are experiencing financial distress or the burden of debts you cannot pay, we encourage you to contact The Jones Law Firm for a free consultation
about how we can help
and whether Chapter 13 bankruptcy is right for you. With offices in Reynoldsburg, Ohio, The Jones Law Firm works with clients in and around Columbus and throughout central Ohio.