Depending on the debtor’s circumstances, a Chapter 13 bankruptcy can be a great option. In a Chapter 13 bankruptcy, the debtor can generally keep all of the debtor’s property including property that is not exempt under state laws. Chapter 13 trustees do not take any of the debtor’s property to sell. Instead, those who file Chapter 13 cases are required to pay the Chapter 13 trustee a set amount of money each month for a period of three to five years (36 to 60 months). The Chapter 13 trustee acts as a plan administrator taking the debtor’s monthly payment and distributing the money to the debtor’s creditors. It is important to speak with your Salt Lake bankruptcy attorney about the Chapter 13 option.
When people hear about a Chapter 13 repayment plan, they often worry about not having the resources to repay all of their creditors everything over a five year period. Some people assume that they will be required to repay 100% of their debt. But, in the vast majority of Chapter 13 plans, the debtors only pay back a percentage of what they owe to their general unsecured creditors. Some debtors have monthly plan payments that are as low as $50 per month, while others pay thousands of dollars each month. The types of debts that a person has, the value of a debtor’s non-exempt assets, and the debtor’s income are big determining factors in computing a debtor’s monthly payment amount. Your Salt Lake bankruptcy attorney will assist in preparing your Chapter 13 plan.
Just as in a Chapter 7 case, as soon as a person files a Chapter 13 bankruptcy petition all of the debtor’s creditors must immediately stop all collection activities against the debtor, including repossessions, foreclosures, garnishments and sheriff sales. The creditors must also immediately stop all of the harassing phone calls and letters. When a Chapter 13 case is filed the debtor proposes a Chapter 13 plan to the court that a judge must approve. This plan must conform to bankruptcy laws and rules, but the debtor has a lot of choices to make in structuring the plan.
Chapter 13 plans allow debtors some great benefits. Through a Chapter 13 plan a debtor can keep the debtor’s home and get caught up on back payments. A debtor may also be able to restructure and lower car payments through a Chapter 13 plan. Many tax debts need to be paid back in full through the plan, but once the case is filed interest and penalties usually stop accruing on those tax obligations. If a debtor has a second or a third mortgage, the debtor may be able eliminate those obligations by stripping them from title. Often, debtors are only required to pay pennies on the dollar to general unsecured debts like medical bills and credit cards. A Salt Lake bankruptcy attorney can help you with understanding these details.
About one month after the Chapter 13 case is filed, the debtor must attend a 341 meeting or Meeting of Creditors. The Chapter 13 trustee or the trustee’s representative conducts this meeting. The Chapter 13 trustee will ask some routine questions and then more case-specific questions. Typically these case specific questions are meant to clarify any issues or questions that the trustee may have regarding the debtor’s bankruptcy schedules and Chapter 13 repayment plan. Your Salt Lake bankruptcy attorney attends this meeting as well to represent you.
After a 341 Meeting, the debtor must have his Chapter 13 bankruptcy plan confirmed by a judge. The Chapter 13 trustee and creditors may object to the debtor’s proposed Chapter 13 plan if they have a valid legal reason for their objections. The debtor’s attorney works with the trustee’s office and creditors to resolve these objections. About a month after the 341 Meeting the court conducts a hearing called a confirmation hearing where the judge decides whether or not to confirm the debtor’s plan. If all of the objections have not been withdrawn by this time, the judge may hear arguments from both sides before ruling on the objections. The majority of cases are eventually confirmed, although throughout the process the terms of a Chapter 13 plan may need to be amended or tweaked in order to resolve the concerns of the Chapter 13 trustee or creditors.
Once a plan is confirmed, the debtor must keep making the monthly payments and must abide by the other Chapter 13 plan provisions. At the end of the case (usually three to five years down the road), the debtor will receive a discharge wherein any of the general unsecured debts that were not paid back through the plan are discharged or eliminated. At this point the debtor’s case is closed and the debtor can move on with life. It is very important to have your Salt Lake bankruptcy attorney assist you with this entire process.