Chapter 13 Bankruptcy: The Strategy To Pay Back Creditors Over Time

Written by Adam Peck Category: Nursing Homes January 23rd, 2013 4 min read

You may have wondered how certain companies declare bankruptcy and yet they continue operating. What these companies do is undergo reorganization under Chapter 11, which allows them to reduce or eliminate certain debts while keeping assets that allow them to continue functioning. Chapter 13 is a similar idea but for individuals.

If you have assets that you wish to keep – such as your home – then Chapter 13 may be a better option for you than Chapter 7, depending on your state rules. Also, if you have steady income you may be required to use Chapter 13 states Los Angeles Bankruptcy Attorney Steven C. Peck.

Under Chapter 13, you create a strategy to pay back your creditors, generally during the next three to five years, depending on your income level.

Unlike Chapter 7, you will typically keep possession of your assets. One potentially important difference – it takes an average of four years for you to receive a discharge in Chapter 13 while it only takes around four months in Chapter 7.

The Chapter 13 Process
Chapter 13 begins just like Chapter 7 in that you file a petition in the proper court within 180 days of your required counseling session. Scroll down this checklist to see a list of documents and information you must provide to file Chapter 13.

You’ll pay the clerk of the court a filing fee of $235 and an administrative fee of $39 when you file your case, although the court may allow you to pay in installments. Once you file your petition, creditor phone calls and letters should stop.

You must submit a repayment plan to the court at the time you file your petition or within the next 15 days.

•This plan has to make the same payment at the same time each week or month.

•There are three categories of debts you will have to repay:

1.priority, which receive exceptional treatment under the law, such as taxes;

2.secured, which means your creditor is allowed to seize particular assets if you do not pay; and,

3.unsecured, which means you creditor does not have a right to take your assets.

•Your plan has to completely pay priority claims.

•If you do not want a secured creditor to seize specific property, then you have to pay at minimum how much that property is worth.

•Your plan is not required to completely pay unsecured creditors if all your extra money is paid to them for three to five years, depending on your income level.

•You have to begin payments under your plan within 30 days of filing your case, even if the court has not yet agreed to it.

The court will appoint a trustee to manage your case.

Around three to seven weeks after you file your petition, the trustee will conduct a meeting with your creditors that’s called a 341 meeting, named after the section of bankruptcy code that requires it. The trustee will ask you questions while you’re under oath. Any of your creditors who choose to attend may also ask you questions.

Throughout your bankruptcy, you will pay the trustee a single payment according to your payment plan; the trustee will then pay your creditors. That means you will not have any immediate connections with your creditors during the execution of your Chapter 13 plan.

A confirmation hearing will be held within 45 days of the creditors meeting. At this hearing, a judge will make the decision as to whether your plan is workable and fits the requirements of the bankruptcy code. Your creditors may object to the plan.

If the court doesn’t approve your plan, then you may rework and resubmit it.

If the court approves your plan, then you and your creditors become obligated to it and you have to pay your trustee at the agreed times. Also, you are not allowed to take on new debts unless you first discuss it with your trustee.

Discharge of debts in Chapter 13 is very complicated and so it’s important for you to seek legal counsel before bringing your case.

Generally, you receive a discharge once you have made all payments according to your plan, you confirm you have met your current domestic support commitments, you have not had another discharge within a specified amount of time, and you have finished a sanctioned financial management course.

Share it

Questions? Check with Peck Today

Blog Lead Form

Elder Abuse and Neglect in Assisted Living Facilities

Elopement in Nursing Homes

Assisted Living Abuse

Settlement Reached in Assisted Living Facility Death

Assisted Living Abuse and Neglect Attorneys

Written by Adam Peck

Expertise: Personal Injury

Adam J. Peck, ESQ is a principal with Peck Law Group, APC. In 2008, Mr. Adam Peck received his Juris Doctorate from Whittier Law School where he graduated Cum Laude. His practice is primarily dedicated to representing Elders, Dependent Adults, along with their loved ones and family members, who have suffered horrific personal injuries.