Friday, September 22, 2006

Chapter 13 Questions and Answers Bankruptcy Pre-BAPCPA

Chapter 13 of the Bankruptcy Code
It is this author's experience that chapter 13 of the Bankruptcy Code is the least understood chapter of the Bankruptcy Code-provided below are 10 frequently asked questions about chapter 13.

10 Most FAQ (Frequently Asked Questions) About Chapter 13

1. Who can file under chapter 13 and what is the filing fee?
Any person or unincorporated entity may file under chapter 13 and the filing fee is $194.

2. What are the debt limitations for filing chapter 13?
Unsecured debts of less than $290,525 and secured debts of less than $871,550.

3. Why file a chapter 13?
To save a car, house or lease from foreclosure or sale.

4. What is the difference between chapter 7, chapter 11, and chapter 13?
A chapter 7 filing is a liquidation of the debtor's property to obtain a discharge for a debtor and give them a "fresh start"
-A chapter 11 filing is a full-blown reorganization which is expensive and time consuming
-A chapter 13 filing may be thought of as a blend between chapter 7 and 11

5. What is the most important document in a chapter 13 filing?
The plan! It is prepared by counsel for the Debtor and filed with the Court-it provides how much money the debtor will pay to the chapter 13 trustee, how long the debtor's payments will continue, which creditors will be paid inside the plan and which creditors will be paid outside of the plan.

6. Who is a chapter 13 trustee?
A chapter 13 trustee is an attorney appointed by the United States Trustee to collect payments from the debtor, make payments to creditors in the manner set forth in the debtor's plan, and administer the debtor's chapter 13 case until it is closed.

7. When must the debtor begin making payments to the chapter 13 trustee and how must they be made?
The debtor must begin making payments to the chapter 13 trustee within 30 days after the debtor's plan is filed with the Court, and the plan must be filed with the Court within 15 days after the case is filed. The payments are usually made on a monthly basis.

8. How long does a chapter 13 plan last?
Chapter 13 plans generally range from 3 years to a maximum of 5 years.

9. What is required for court approval of a chapter 13 plan?
The Court may confirm a chapter 13 plan if: (1) the plan complies with the legal requirements of chapter 13, (2) all required fees, charges and deposits have been paid, (3) the plan was proposed in good faith, (4) each unsecured creditor will receive under the plan at least as much as it would have received had the debtor filed under chapter 7, and (5) it appears that the debtor will be able to make the required payments and comply with the plan.

10. What if the court does not approve a debtor's chapter 13 plan?
If the Court will not approve the plan proposed be a debtor, the debtor may modify the plan and seek court approval of the modified plan. If the court does not approve a plan, it will usually give its reasons for refusing to do so, and the plan may then be appropriately modified so as become acceptable to the court. A debtor who does not wish to modify a proposed plan may either convert the case to chapter 7 or dismiss the case.

Shenwick & Associates is available to assist all clients with any personal bankruptcy or debtor/creditor issues.

Jim Shenwick

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