1. What is a Chapter 13 bankruptcy?
In effect, filing for Chapter 13 establishes a debt repayment plan maintained the court. A person filing under Chapter 13 will be able to pay his/her debts under the supervision of the court. No interest or late penalties can be charged during the repayment plan. The debtor then must pay money to a court appointed trustee, who then pays out the money to the creditors according to the repayment plan.
2. Is a Chapter 13 filing more preferable than a Chapter 7 filing?
Filing for bankruptcy under Chapter 13 is the preferable option when the debtor has the ability to pay most of his/her unsecured debts. If you are deciding whether Chapter 13 or Chapter 7 is the preferable option, the first issue to consider is how much you hold in nonexempt property. Nonexempt property includes items that the court may consider ‘superfluous’, such as: a second car, a vacation home, collections of valuable items, or musical instruments (that is, unless you are a professional musician). Keep in mind that if you have a significant amount of such property, you could lose it if you file for Chapter 7 bankruptcy. Finally, even if you wanted to file for Chapter 7 bankruptcy, you cannot do so if you already received a Chapter 7 discharge within the last 8 years.
3. Can I choose my Chapter 13 trustee?
No, the trustee is appointed by the court. The trustee has the duty to collect payment from the debtor, make payments to creditors, and guarantee that the repayment plan established by the court is followed.
4. What happens if I stop paying or cannot pay the trustee?
If you believe you inability to pay the trustee is merely temporary, then you should contact the trustee and ask to work out an alternative payment plan. Typically, the trustee will work to make a new payment plan that can fit within the timeframe for you to pay your debts. However, if you cannot work out a plan or fail to make payments in good faith, then the trustee can have your case converted to a Chapter 7, or have the case completely dismissed. If the latter of these two scenarios occurs, you will lose all of your bankruptcy protection.
5. What is the difference between secured and unsecured creditors?
This difference is important for both Chapter 7 and Chapter 13 bankruptcy. Secured Creditors are those that have collateral in a specific piece of your property, such as your home. You pay these creditors directly, just as you normally would if you had not filed for bankruptcy. Unsecured Creditors, on the other hand, are those that do not have any collateral in your property. Unsecured creditors are to be paid under the repayment plan, and much of the debt remaining that is owed to unsecured creditors is discharged.
6. Who is eligible to file a Chapter 13?
In some cases a debtor cannot file under Chapter 13, as he/she does not have sufficient the disposable income to fund a repayment plan. 109(e) of Title 11 establishes debt limits for individuals to be eligible to file under Chapter 13. One must have unsecured debts of less than $360,475.00 and secured debts of less than $1,081,400.00 in order to file for Chapter 13.
The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code