May a person whose debts are being administered by a financial counselor file under chapter 13?
March 28, 2008
Yes. A financial counselor has no legal right to prevent a person from filing any type of bankruptcy case, including a chapter 13 case.
What types of debts are dischargeable under chapter 13?
March 28, 2008
A full chapter 13 discharge must be granted upon the completion of all payments required in the plan discharges a debtor from all debts except:
- debts that were paid outside of the plan and not covered in the plan,
- debts for alimony, maintenance, or support
- debts for death or personal injury caused by the debtor’s operation of a motor vehicle while unlawfully intoxicated,
- debts for restitution or criminal fines included in a criminal sentence imposed on the debtor,
- debts for most student loans or educational obligations that first became less than 7 years before the case was filed,
- installment debts whose last payment is due after the completion of the plan, and
- debts incurred while the plan was in effect that were not paid under the plan.
A partial chapter 13 discharge granted when a debtor is unable to complete the payments under a plan due to circumstances for which the debtor should not be held accountable, discharges the debtor from all debts except
- secured debts (i.e., debts secured by mortgages or liens),
- debts that were paid outside of the plan and not covered in the plan,
- installment debts whose last payment is due after the completion of the plan,
- debts incurred while the plan was in effect that were not paid under the plan, and
- debts that are not dischargeable under chapter 7.
How does filing under chapter 13 affect collection proceedings and foreclosures previously filed against the debtor?
March 28, 2008
The filing of a chapter 13 case automatically stays (stops) an lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor’s property. A few days after the case is filed, the court will mail a notice to all creditors advising them of the automatic stay. Certain creditors may be notified sooner, if necessary. Most creditors are prohibited from proceeding against the debtor during the entire course of the chapter 13 case. If the debtor is later granted a chapter 13 discharge, the creditors will then be prohibited from collecting the discharged debts from the debtor after the case is dosed.
What is a chapter 13 discharge?
March 28, 2008
It is a court order releasing a debtor from all dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. There are two types of chapter 13 discharges: a full or successful plan discharge, which is granted to a debtor who completes all payments called for in the plan, and a partial or unsuccessful plan discharge, which is granted to a debtor who is unable to complete the payments called for in the plan due to circumstances for which the debtor should not be held accountable. A full chapter 13 discharge is broader and discharges more debts dm a chapter 7 discharge, while a partial chapter 13 discharge is similar to a chapter 7 discharge.
Will a person lose any property if he or she files under chapter 13?
March 28, 2008
Usually not under chapter 13. Creditors are usually paid out of the debtor’s income and not from the debtor’s property. However, if a debtor has valuable nonexempt property and has insufficient income to pay enough to creditors to satisfy the court, some of the debtor’s property may have to be used to pay creditors.
How does chapter 13 differ from a private debt consolidation service?
March 28, 2008
In a chapter 13 case, the bankruptcy court can provide aid to the debtor that private debt consolidation services cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor’s property, to force unsecured creditors to accept a chapter 13 plan that pays only a portion of their claims, and to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers
What fees are charged in a chapter 13 case?
March 28, 2008
There is a $185 filing fee charged when the case is filed, which may be paid in installments if necessary. In addition, the chapter 13 trustee assesses a fee of 10 percent on all payments made under the plan. Thus, if a debtor pays a total of $5,000 under a chapter 13 plan, the total amount of fees charged in the case will be $685 (a $500 trustee’s fee, plus the $185 filing fee). These fees are in addition to the fee charged by the debtor’s attorney.
When is chapter 13 preferable to chapter 7 for a debtor?
March 28, 2008
Chapter 13 is usually preferable for a person who:
- wishes to repay all or most of his or her unsecured debts and has the income with which to do so within a reasonable time,
- has valuable nonexempt property or has valuable exempt property securing debts, either of which would be lost in a chapter 7 case,
- is not eligible for a discharge under chapter 7,
- has one or more substantial debts that are dischargeable under chapter 13 but not under chapter 7, or
- has sufficient assets with which to repay most debts, but needs temporary relief from creditors in order to do so.
Where is a chapter 13 case filed?
March 28, 2008
A chapter 13 case is filed in the bankruptcy court in the district where the debtor has lived or maintained a principal place of business for the greatest portion of the last 180 days. The bankruptcy court is a unit of the federal district court.
May a chapter 7 case be converted to chapter 13?
March 28, 2008
A pending chapter 7 case may be converted to chapter 13 at any time at the request of the debtor, if the debtor has not been previously converted to chapter 7 from chapter 13.