CHAPTER 13 BANKRUPTCY - Frequently Asked Questions:
Q: What is a Chapter 13 Bankruptcy?
A. A "Chapter 13 Bankruptcy" is often referred to as "wage earner" bankruptcy. It is a proceeding under Chapter 13 of the Bankruptcy Code for the "Adjustment of Debts of an Individual with Regular Income". When you file a Chapter 13, you are agreeing to pay all or a portion of your debts over time, and under the supervision of the bankruptcy court. Generally, it offers you an opportunity to keep your property while using your income to repay some or all of your debts.
Q: Who can file a Chapter 13 Bankruptcy?
A. Only individuals can file a Chapter 13 Bankruptcy. Married couples can choose to file jointly (one bankruptcy case for both spouses), or either spouse can file an individual bankruptcy case without the other spouse filing. An individual doing business as a sole proprietorship can file a Chapter 13. A individual doing business in a partnership with others may be able to file a Chapter 13 as to the debts he is personally liable for and which were derived from the business. Corporations, limited liability companies and most other business entities cannot file a Chapter 7 case.
Q: What are the qualifications for filing Chapter 13 Bankruptcy?
A. To qualify to file a Chapter 13 you must be an individual with regular income sufficient to make payments under your plan of repayment under the Chapter 13. You cannot have more than $360,475 in unsecured debts or more than $1,081,400 in secure debts (Note: These debt limits are adjusted periodically). These amounts are periodically adjusted). You must have filed your income tax returns for each of the four years prior tax years, or you must file these returns before the Creditors Meeting. You must also complete a course or seminar on credit counseling prior to filing your bankruptcy petition.
Q: What is the "Means Test"?
A. The "Means Test" is the common name for a system used in bankruptcy to evaluate whether or not you have the potential ability to repay all or part of your debts, and therefore should be required to file a Chapter 13 or a Chapter 11 case. The "Means Test" uses an average of your gross or total "household income" for the last six months to determine a "Current Monthly Income". It then checks to see if your Current Monthly Income (after some deductions for taxes, medical insurance payment, secured debt payment, and other items) is more or less than a national average needed for the basic support of a household of similar size. If your adjusted Current Monthly Income is above this national average, then you "do not pass the Means Test", and you cannot file a Chapter 7 Bankruptcy case.
Q: How long will I have to make payments on my Plan?
A. Your Plan will provide for a term of either three (3) years or five (5) years. If your income is less than the median income (i.e. you pass the Means Test), you can file a three (3) year Plan. If your income is above the median income (i.e. you fail the Means Test), you must file a five (5) year Plan. If you are eligible to file a three (3) year Plan, you may choose to make your payments over a longer period of time (up to 5 years) if you need that to be able to lower your payments but still pay all that is required by your Plan.
Q: How much will I have to pay each month on my Plan?
A. Generally, your monthly payments under the Plan must equal the amount of your discretionary income plus the prorated amount(s) necessary to pay off your secured debt (except residence), certain priority debts (past due taxes, etc.), past due amounts on secured debts, and the trustee's fees/administrative expenses of the bankruptcy.
Q: Is there a minimum amount that I must pay under my Plan?
A. Yes. Your Plan must provide for the payment to unsecured creditors of an amount equal to at least as much as they would have received if you had filed a Chapter 7 case, and all of your non-exempt assets (net of secured debt) had been sold for their benefit.
Q: Will I lose all of my property if I file a Chapter 13 Bankruptcy?
A. No. You are allowed to keep your car, house or other property under a Chapter 13. If that property is security for a debt (i.e. mortgage loan or car loan), then you must keep future payments on the debt current in order to keep the property, and your Plan must include provisions to pay-off any past due loan payments.
NOTICE: The services or benefits offered are bankruptcy relief under the provisions of the U.S. Bankruptcy Code. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
