Chapter 13 Bankruptcy, What Is It All About?

Chapter 13 Bankruptcy law enables individuals to repay some or all of their debts under a bankruptcy repayment schedule of 3-5 years. While Chapter 7 Bankruptcy involves liquidation of all unsecured debt, Chapter 13 Bankruptcy does not automatically discharge debts, but allow individuals to keep some of their belongings.

Filing for Chapter 13 Bankruptcy helps to stop home foreclosure repossessions, proceedings and end wage garnishments or creditor calls. In order to file Chapter 13 Bankruptcy, an individual should essentially have a constant source of income to meet bankruptcy repayment schedule requirements.

Working of Chapter 13 Bankruptcy:

With Chapter 13 Bankruptcy, individuals are required to create a bankruptcy repayment schedule and will require making the payment to the trustee. All the outstanding debts will be prioritized and paid according to the bankruptcy law. After opting for Chapter 13 Bankruptcy, debts will not be discharged instantly, but by the end of the bankruptcy schedule.

Why do you need Chapter 13 Bankruptcy Lawyer Atlanta?

Filing for personal bankruptcy has become more difficult with the new bankruptcy laws. By filing Chapter 13 Bankruptcy, many individuals who may be eligible for Chapter 7 Bankruptcy will now be forced to repay some or all of their debts.

Present bankruptcy is governed by centralized rules and regulations. Although you can file for bankruptcy on your own, it is always recommended to opt for Chapter 13 Bankruptcy Lawyer.

The purpose of bankruptcy confirmation hearings is to ensure debt repayment plans adhere to new bankruptcy laws. Chapter 13 payment plans must include payment amounts to each creditor along with payment dates.

Once bankruptcy refinance plans are approved, debtors submit payments to the court Trustee. Chapter 13 payments are generally paid on a bi-monthly or monthly schedule. Trustees distribute payments to creditors until debts are repaid.

Shortly after bankruptcy petitions are filed, notification to creditors is sent out to inform them of the bankruptcy filing and scheduled date of the 341 creditors meeting. 341 meetings give debtors the opportunity to meet face-to-face with creditors and explain their financial situation and ability to repay debts. Creditors can agree to accept a reduced payoff, lower interest rates, or remove late fees and penalties.

Information obtained at creditor meetings is given under oath. Debtors who provide false information are subject to criminal charges and their petition of bankruptcy will be denied.

In 2005, Congress enacted new bankruptcy laws which have made filing bankruptcy protection more difficult. The Bankruptcy Abuse Prevention and Consumer Protection Act require debtors to repay a portion of their debt and undergo credit counseling.

Few people can abide by BAPCPA regulations without legal counsel. Unfortunately, locating bankruptcy attorneys has become more challenging and expensive because the new laws hold lawyers accountable for information provided by their clients.

Several bankruptcy lawyers changed to other legal fields; leaving a deficiency of lawyers willing to assist with petition filings. Those who have remained in this field of law charge higher fees to cover increased business insurance premiums and potential litigation fees.

Debtors filing for Chapter 13 bankruptcy are required to undergo the means test to determine the amount of debt to be repaid. The means test compares debtors’ income to that of their states’ median income level.

When income is equal to or greater than median levels, debtors must file Chapter 13 and develop a confirmed debt reorganization plan. If income falls below median income, debtors might qualify for Chapter 7 which discharges all outstanding debts.

Bankruptcy repayment plans typically extend between three and five years. Debtors are prohibited from incurring new debt during the repayment period without court authorization. Chapter 13 payments are in addition to normal household expenses. One unexpected expense could cause debtors to fail out of bankruptcy.

If debtors are unable to adhere to bankruptcy repayment plans, creditors can petition the court seeking dismissal. If approved, debtors lose protection from the court and creditors are allowed to proceed with collection actions.

Bankruptcy confirmation can help debtors overcome financial hardships. However, individuals should become informed about the advantages and disadvantages of this action. Research bankruptcy alternatives including: debt consolidation, debt settlement, credit counseling or budgeting, to determine if similar results can be achieved.

The second requirement you must meet before filing bankruptcy is to take the so-called means test.  This means test is key in determining whether you need to file chapter 7 or chapter 13 bankruptcy.  The means test examines your income level against a state-determined median, and determines the amount of disposable income you have which may or may not be sufficient, when filing bankruptcy, to support the repayment plan included in a chapter 13 bankruptcy.  Because the median income differs from state to state, the income level associated with a chapter 13 bankruptcy also differs from state to state.  A third requirement you must meet before filing chapter 13 bankruptcy is that you avow all documentation and information submitted to the court is well grounded in fact, and warranted by existing law or a good faith argument for the modification of the existing law.  If you are filing chapter 13 bankruptcy this means that you declare to know and understand the chapter 13 bankruptcy laws that apply when filing bankruptcy.  If you claim ignorance of the chapter 13 bankruptcy laws at any point during your chapter 13 bankruptcy filing, it will not count as an excuse.  Due to this pre-required knowledge of chapter 13 bankruptcy law, it is always in your best interest to retain the services of an experienced chapter 13 bankruptcy lawyer before filing bankruptcy.

Cases under this chapter begin with the debtor filing a petition in court. They must also submit financial records to back up the need of filing a petition. These records include a current balance sheet, an income statement and a financial statement. They must also submit a summary of tax payment to the trustee.

The court, once a petition has been filed charges some fees. These fees are paid to the court clerk once the petition has been filed. However payment may be paid in not more than four installments and the full amount should be completed by the end of four months. These fees are meant for paying the trustee’s surcharge, miscellaneous court charges and also the filing fee. In cases where the debtor is not in a position to pay the fees even in installments, the court may decide to waive the charges completely.

Once the court charges have been fulfilled, one has to fill out a form. This bankruptcy form shows a list of creditors, the amount and frequency of the debtor income, a net amount of living expenses and assets that the debtor has. They are what determine the kind of ruling the jury will give.

A bankruptcy discharge is a special treatment of the debtors property which in most cases prevents both the debtor and the creditor from having claim over property meant to pay a debt. This means that the creditor is not allowed to recoup the property and the debtor too is not allowed to have any claims on the property in question. Before a discharge has been issued it is normally important that the debtors go through a counseling session to allow them gain knowledge on how to deal with handling debt and managing cash flow. This is done irrespective of whether or not the debtor will pay up or not.

Just like in chapters 7 and 13, there are categories of debt that are not discharged and these include those acquired for child support, mortgages, alimony and those assets that are obtained out of fraud or false presentation. The chapter 12 bankruptcy laws are complex and anyone willing to go this way should first contact experts on the matters.

In circumstances where the debtor is not in a position to fulfill the conditions of the bankruptcy discharge conditions, the hardship discharge is issued. This is issued if only the debtor has been unable to pay his debts due to unavoidable circumstances.

1. It is much faster then the other Chapters. With a little effort on your side, you can have the entire process over in next four to six months.

2. It is also simpler to file. No frequent visits to court are required.

3. There are no after payments. Once your bankruptcy is discharged that is it, you are debt free. (Under the 2005 bankruptcy law, not all debts can be discharged anymore so consult with your attorney before filling).

On the other hand, Chapter 7 has a catch, the court will decide whether you are allowed to file for it or not. One of the main reasons why you can be denied to file for Chapter 7 is your income. If it happens to be sufficient to payoff some of your debts (after your allowed living expenses have been counted in) then you might be forced to file under Chapter 13 bankruptcy law.

How to check if you can apply?

First thing you need to do is to calculate your average earnings in the last 6 months and compare it with average income for the state you live in. You will be allowed to file under Chapter 7 if your income happens to be lover or the same as the median income of the state you live in.

In case that your average income is higher than that, and you still want to apply for Chapter 7 bankruptcy you will have to go through one more test called the Means Test.

So what is a means test?

It is a test based on the results calculated for your allowed living expenses.

How to calculate my living expenses and what can I include in it?

It is actually quite easy to calculate it. Take all your income from one average month and deduct the following allowed expenses:

1) Utility bills, transport (gas), food, clothing. (Make sure to use IRS amounts for these or the court will not take it in to account).

2) Your secured monthly payments like child support, car loan, mortgage and tax.

After you finish with the calculation and your average disposable income per month is lover then $100, you have passed the means test and you stand a fair chance of being approved to file for bankruptcy under Chapter 7.

If on the other hand your disposable income happens to be more than that (figure most often mentioned is $166, but it can vary), you will most likely have to file under Chapter 13 of the bankruptcy law. That is unless you can provide evidence that there are some special considerations to be taken in your account.

For any figures between $100 and $166, it is best to consult with your attorney. Make sure to find an attorney that specialize in bankruptcy and credit repair and has the solid reputation.

A majority of consumers choose to go with Chapter 7 bankruptcy. There are a variety of differences between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy does not require you to make a plan of repayment. When you file for Chapter 7 bankruptcy, your debt is not immediately wiped out. Instead, a bankruptcy trustee will sell off your non-exempt assets in order to pay off your debts. It is important that you understand with Chapter 7 bankruptcy, you could potentially lose any property that you currently own.

However, with Chapter 13, you are not required to liquidate your assets in order to repay your creditors. Instead, you make a repayment plan to pay a portion or all of your unsecured debt back. This is done through the court system and payments can be made over a 36 to 60 month period. The amount you repay your creditors must be equal to or greater than what they would receive should you have liquidated your assets, as with Chapter 7 bankruptcy. If you follow through with your repayment plan, then your remaining unsecured debt will then be discharged.

If you have lost your job or have no means of repaying your debt, then you should probably consider filing for Chapter 7 bankruptcy. However, if you are still able to meet some of your monthly obligations, but cannot pay off your entire debt, then you may want to consider filing for Chapter 13 bankruptcy.

It is important that you have a full understanding of the lasting impact of filing for bankruptcy. Whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are financial consequences. Chapter 7 bankruptcy will have a steeper impact on your financial situation. By filing Chapter 7 bankruptcy you are telling creditors that you cannot be trusted to pay off your debts. Therefore, you will have a hard time finding creditors to lend you money in the future. This will be extremely important if you are ever in the need for a new car, mortgage or even a simple credit card.

Chapter 13 has less of an impact on your overall credit rating. Since you are still paying off your debt, just in a restructured form or at a lower interest rate, creditors see you as less of a financial risk, than someone who has wiped out there entire debt through Chapter 7.

Be aware that there are certain types of debt that cannot be discharged with either chapter of bankruptcy, so make sure you have a thorough understanding of bankruptcy law, especially with the major recent changes to the laws.

There are both pros and cons to filing either Chapter 7 bankruptcy or Chapter 13 bankruptcy. Before committing to either one, you should sit down with a financial adviser and go over your obligations and options completely. Weighing out the pros and cons of both types of bankruptcy and basing your decision on your current situation, you will be able to easily decide which bankruptcy route you should go with.

If you feel that there are no alternatives to your situation in terms of repayment to your creditors, the last resort could probably be filing for bankruptcy. This means that you have to put a record in court to show that you are no longer able to pay your creditors. In as much as this will paint a negative image about your credibility, it will save you from the agony of being called every now and then by your creditors.

In addition, the creditors, by law, will be required to stop any further action they may be planning to take against you. You need to know that there are various chapters of the law governing bankruptcy. The five most common ones are 7, 9, 11, 12 and 13. While they all talk of the different approaches to insolvency, let us take some special attention on chapter 13 bankruptcy law.

It is also referred to as ‘Adjustment of Debts of an Individual with Regular Annual Income.’ It actually makes one feel like life is giving you a second chance because it gives you up to 5 years to clear your debts. Your assets are not liquidated and you are allowed to keep them. All you need is to make a commitment of how you will repay your creditors over this period of time through a trustee.

Unlike in other chapters, the family farmer or fishermen bankruptcy chapter is voluntary. This means that the debtor files the petition himself as opposed to involuntary filing of a petition where the debtor is forced to file such a petition. This chapter applies to family farmers and fishermen in one category and partnerships and corporations in another category.

For the individual debtors under this chapter who fall in the first category, they must fulfill a few requirements. These include the fact that the individuals activities must be either farming or fishing, that a good proportion  of the individuals debts must have been generated from the fishing or farming activities.

For the second category of partnerships and corporations, they must have part of owed assets owned by one of the members or a family of the partner who must be engaged in fishing or farming activities. In case corporations that deal in stock choose to file petition under this chapter they must therefore not issue stock to the public.  They must be willing to go through counseling as the bankruptcy laws requires.

What Is Chapter 7 Bankruptcy

Chapter 7 bankruptcy is the option for the debtors to get rid of all the debts that they owe to various creditors. In this method, the bankruptcy court appoints a trustee to liquidate all the assets of the debtor and settle the claims of the creditors with the money thus collected. The advantage to the debtor is that he or she is now responsible to pay as much debt as is the value of their assets. They will not have the obligation to repay the debts that could not be paid with the money collected from liquidation of assets.

That is the reason most people who have caught themselves in too much debts to be paid off with the means and assets available to them look at chapter 7 bankruptcy as an attractive option. It provides them an excellent opportunity to give their financial life a fresh start with no obligation to repay the debts they owe.

Is Chapter 7 Bankruptcy Easy To Be Granted For The Debtors

Whether or not the chapter 7 bankruptcy is easy for the debtors depends upon the specific bankruptcy case. However, in order to prevent bankruptcy frauds, the bankruptcy laws require the debtors to go for a Means test before they are declared as bankrupt. The objective of the means test is to compare the debtors monthly income to that of the states median income. If the debtors monthly income is greater than the state’s median income, he or she is not granted bankruptcy under chapter 7.

Rather they are asked to file for bankruptcy again under chapter 13 where they will be suggested a repayment plan to pay off the debts along with the opportunity to reorganize their finances under the expert guidance of the trustee appointed by the bankruptcy court. Therefore, it is very important for you to check out everything before you file for chapter 7 bankruptcy. I must add that converting the bankruptcy claim from one type to another will require you to pay the conversion fees, which is substantial in nature.

Therefore, the prudent way is to let your bankruptcy attorney be aware of all the facts so that they could help you find the best possible solution.