Chapter 13

So you’ve decided to file Chapter 13 … now what?

Words of wisdom for the indecisive Debtor:

  • Income
  • Dischargeability of debts
  • Retaining Secured Property
  • Retaining non-exempt property
  • Protecting co-signors
  • Time and Expense
Getting the Monkey off the Debtor’s Back: The Plan and Schedules
  • Plan
  • Unless otherwise ordered, Debtor must file Plan in 15 days of filing Petition and commence payments within 30.
  • Code requires that Plan be completed and paid within 3 years (or 5 years for cause shown)
  • Schedules
  • Creditors must be able to anticipate their recovery in the event of a Chapter 7
  • Debtors must disclose expected earnings allow creditors to determine whether Plan is feasible
Those who fail to Plan … Plan to fail
  • Determining feasibility of a Plan
  • Secured Creditors;
  • Percentage unsecured
  • Percentage over secured
  • Arrearage
  • Assets
  • Necessity of asset
  • Amount of equity in non-exempt property
  • Any co-signors Debtor seeks to protect
  • Whether payments can be made inside/outside Plan
  • Costs/fees
  • Trustee
  • Attorney
  • Income
  • Steady or is it likely to change during life of Plan
Plan Confirmation and other Goals

Plan shall be confirmed according to §1325 if:

  • Fees and charges are paid;
  • Plan is proposed in good faith;
  • Holders of secured claims accept the Plan;
  • Debtor will be able to comply with the Plan.

Property of the Estate

Chapter 13 Estate consists of:

  • Interest of the Debtor in property as of commencement
  • Interest of the Debtor in “community property”
  • Interests that Trustee recovers on behalf of Estate
  • Interests in property that would have been property of the Estate if acquired within 180 days
  • Proceeds from property of the Estate
  • Interests of the Debtor in property that Estate acquires after commencement of the case
Regular Income/Retaining Property
  • Regular income
  • To qualify for Chapter 13 Debtor must have regular income as defined by §101(30)
  • Employment with sufficient, regular income to make payments under a Plan
  • Retaining Secured Property
  • Curing default for automobile or mortgage
  • Debtor needs to, and can, cure arrearages
  • Retaining Non-exempt Property
  • If Debtor has too much property or equity, Chapter 13 is the way to go Protecting Co-signors/Time & Expense
  • Unlike in Chapter 7, §1301 of the Code provides for co-signor stay that prevents creditors from moving against co-signers as long as the Debtor pays.
  • Time is Money:
  • Chapter 13 - longer and more expensive usually lasting 3-5 years with discharge only at the end.
  • Fees and expenses are also higher