ARRANGE AN APPOINTMENT

• Chapter 7
• Chapter 11
• Chapter 13
• Florida Exemptions
• Bankruptcy and Credit

Bankruptcy - Chapter 13

The main advantage of a chapter 13 filing is that the debtor is not required to relinquish any property while a court-approved repayment plan is in effect.  In addition, the debtor can pay most non-dischargeable federal taxes over the term of the chapter 13 plan without interest.

Not all individuals are eligible to apply for chapter 13, and corporations and partnerships are never eligible.  Only individuals with less than $100,000 in unsecured debts and less than $350,000 in secured debts are eligible to file a chapter 13 bankruptcy.  In addition, the debtor must have a job or prove to the court that he or she has the ability to earn a regular and stable income.

Why file chapter 13 instead of chapter 11?

The decision to file a chapter 13 bankruptcy rather than a chapter 7 bankruptcy usually arises in four scenarios:

1. Substantial Non-Exempt Assets
   In circumstances where debtors have substantial excess assets over their allowed exemptions, but unmanageable debt,  a chaper 13 filing may be more efficient than to have the debtor attempt to redeem any excess value from the chapter 7 trustee.  A successful chapter 13 allows the debtor to retain his non-exempt assets and pay out the value of those assets to his creditors over time.

2. Secured Arrerage:  Debtors Delinquent on Payments to Secured Creditors
   One of the most common reasons for filing a chapter 13 is to prevent immediate foreclosure on the debtor’s principal residence.  When a debtor has fallen behind on his mortgage payments, the bank usually requires a lump sum payment to cover the arrerage.  Typically, the debtor does not have the cash required to cover the obligation.  Chapter 13 allows the debtor to stop the foreclosure action and make monthly payments, including the regular mortgage payment and a portion of the arrerage,  to a chapter 13 trustee.

3. Super Discharge
   Certain types of debts that are not eligible fore discharge under chapter 7 may be dischargeable under chapter 13.  In certain circumstances, debtors who have committed fraud upon creditors but are capable of making partial restitution to their creditors under chapter 13, may be discharged from the balance of the debt.  The same may be true in certain circumstances for debtors who have caused willful or malicious injury to creditors.  The broader discharge is available in return for the willingness of the debtor to undergo the discipline of a repayment plan for three to five years.

4. Co-Debtor Stay
   The filing of a petition under chapter 13 automatically stays most collection actions against the debtor or the debtor’s property.  As long as the “stay” is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishment or telephone calls demanding payment. Conversely, in chapter 7 cases, such “stay” does not protect another party liable with the debtor on a particular debt.  Chapter 13 contains a special automatic stay provision applicable to creditors.  Specifically, after the commencement of a chapter 13, case, unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” (not occurred for business needs) from any individual who is liable with the debtor.  This may be beneficial for debtors wanting to protect a co-debtor.

There are several stages to a chapter 13 case.  They are:

1. An individual debtor files a petition; only the debtor can file the petition.  In addition, the debtor files a plan providing for payments to creditors.  The plan does not have to provide for full payment to creditors, but it must provide creditors at least the same amount of money they would receive in a chapter 7 liquidation proceeding.
2. The court reviews the plan and determines whether the plan meets the requirements for confirmation.
3. Once confirmed, the debtor makes payments according to the plan.
4. The debtor receives a discharge.