Chapter 13 Wage Earner bankruptcy filing basics
September 5th, 2020 by admin
Before your financial challenges become too serious, readers are strongly encouraged to consult Financial Pathways of the Piedmont, a well-regarded and United Way supported nonprofit in Winston-Salem. Contact them at 336-896-1191 or info@financialpaths.org to set up a remote, confidential and generally courtesy initial session. The best personal bankruptcy is the one which is never necessary.
But if bankruptcy is necessary, a Chapter 13 Wage Earners plan may be your best bankruptcy option, especially if you are behind on the payments on your home mortgage.
Advantages of Chapter 13:
- Opportunity to save home from foreclosure. Individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time.
- Ability to reschedule, possibly, other secured debt, other than your mortgage; and
- Special provisions in the law which protect third parties who are liable, which may protect co-signers.
Who can file?
- Any individual, even if self-employed or operating an unincorporated business, if their debts are slightly less than $400,000 and secured debts which are less than nearly $1.2 million
- There are some exceptions by statute.
- A corporation may not file a Chapter 13; and
- Some additional standard requirements.
To file a petition in bankruptcy you should provide:
- A list of all creditors and the amount and nature of their claims.
- The source and frequency of your income.
- A list of all your property.
- A detailed list of your monthly living expenses, i.e. food, clothing, shelter, utilities, taxes, transportation, medicine and others.
- Proof that you have completed the required credit counseling within the time prescribed by law; and
- Various required filing fees, such as a case filing fee and an administrative fee, which must be paid to the clerk of the court upon filing.
Once the petition is filed, the court issues an order that automatically stays (stops) most collection actions against the debtor or the debtor’s property. (There are a few exceptions.) The automatic stay also protects co-debtors. An impartial trustee is appointed to administer the case. The trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors.
Confirmation hearing
A debtor generally must file a repayment plan with the petition or within 14 days after the petition is filed. The court must approve any plan. The trustee then distributes the funds to plan creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
There are three types of claims: priority, secured and unsecured.
Priority claims: Most taxes, and the costs of bankruptcy proceeding, generally, must be paid in full. You continue to pay family support payments after the plan, too.
Secured claims: Liens on property, such as your home mortgage, you continue to pay, and after the plan as well, until the debt is paid in full.
Unsecured claims: General debts. (No liens on vehicle titles, for example.) The debtor may not have to pay in full, depending on one’s “disposable income” (determined by statutory formula.)
Occasionally, a change in circumstances may justify a modification of payments.
Payments are made over the life of the plan, generally over 3 to 5 years. If payments are made in a timely fashion, certain debts are discharged, which means you do not have to pay them further — unsecured claims, generally, depending on your “disposable income,” as noted.
Payments may be made through payroll deduction.
Citizens should talk to a lawyer who files bankruptcy petitions regularly for clients to consider their options. The initial session to discuss your options is generally provided by these firms as a courtesy.
Remember: An informed choice is a smart choice.
This article was originally written by Mike Wells and published by the Winston-Salem Journal. To read the full article, visit the Winston-Salem Journal online here.Tags: Law
Posted in: WS Journal Articles