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There are several debts that are not dischargeable in a Chapter 13 bankruptcy. These are almost the same items that are not discharged in a Chapter 7 bankruptcy with the exception of some family law-related debts. Certain taxes are not dischargeable. Anything that has been deemed not dischargeable in a previous bankruptcy, and anything related to fraud or personal injury due to driving under the influence are not dischargeable in a Chapter 13 bankruptcy.
The reason for filing a Chapter 13 bankruptcy is to avoid losing any property. If you have property that you cannot exempt and you are in a Chapter 13, your choices are to sell the property and pay the value of the property into the Chapter 13 or buy your property back from the bankruptcy. For example, if you own a car worth $6,500 and you cannot exempt it, it is your responsibility to see that that $6,500 value gets paid to your unsecured creditors. That gets paid by submitting $6,500, over the life of your plan, to the Chapter 13 trustee. When you do that, you are fulfilling the obligation and basically buying the equity of that vehicle. If you cannot afford to buy the vehicle back, then you would sell the vehicle, deliver the sale proceeds to the Trustee and we would adjust the plan accordingly.
You get to keep all of your property in a Chapter 13; the creditor gets paid off over the life of your plan, which is somewhere between 36 and 60 months long. With the recent COVID-19 legislation, that can be extended to seven years, depending on certain circumstances. The property remains in your possession and it is paid off over the life of the plan. Often, people file a bankruptcy because they can’t afford their current monthly payments but they want to keep all of their property. We would spread those payments over 60 months or 36 months, depending on which they qualify for. For example, if you have a large car payment that you only owe 24 more payments on, that would be adjusted to be paid over the life of the plan, 36-60 payments reducing the monthly payment amount accordingly.
To file a Chapter 13 bankruptcy, one must be a natural person; a corporation or a partnership cannot file Chapter 13 bankruptcy. A married couple may file jointly or individually. You must have some sort of income because Chapter 13 is designed for people who have a current income and can use it to make monthly payments. There are other requirements under Chapter 13 that determine the applicable commitment period. That is determined based on your current monthly income and your projected disposable income. You also must be below the debt limits.
The moment you file a Chapter 13, the automatic stay takes effect. That stays any collection effort on everything from normal debts to judgments against you and includes proceeding with a lawsuit. Bank levies and wage garnishments must stop immediately. Once granted the relief of the automatic stay, you can proceed with your plan of effectively reorganizing your debts and coming up with the repayment plan.
The trustee in a Chapter 13 bankruptcy case is a standing trustee appointed by the United States Trustee to administer Chapter 13 cases in a specific district. The Chapter 13 trustee conducts the meeting of creditors, reviews the case on behalf of all creditors, acts as the referee between the creditors and the debtor, and reviews all of the claims that come in. They are the ones who will look and see if the Chapter 13 plan that the debtor proposes meets the law and if the debtor can afford it. The trustee will file appropriate objections, if they don’t believe the debtor can afford it, to inform the court of their position.
The trustee does not have the final say on anything and is only is an intermediary. They go to the court and tell the court their opinion. The other thing they do is collect the money and pay the money out. The debtor pays their payment to the Chapter 13 trustee and the trustee takes their percentage as a fee and then disburses the balance of the funds according to the confirmed Chapter 13 plan.
Your Chapter 13 plan must be confirmed by the court before the trustee has the authority to make the payments. The trustee cannot make payments to your creditors without a court order. The trustee can, however, collect your payments prior to getting the court order. Upon filing your case, your first payment is due within 25 days. If it takes three months to get your plan confirmed and your mortgage payment is being paid through the plan, then upon confirmation, your mortgage lender will receive three payments in one lump sum.
A Chapter 13 case will have a commitment period of either 36 or 60 months. That does not mean your case is going to be over immediately after that period. It takes three to twelve months after your last payment is made to finalize your bankruptcy because the Chapter 13 closing process requires the trustee to generate a final report and account and have it approved by the court. They can’t send it out until all of the checks they have sent out have cleared. If a check hasn’t cleared, then there is a delay in sending out the final report. You cannot get your discharge until the final report has been approved. The complete process can take anywhere from 48 months to 72 months from filing bankruptcy through the case closing.
If you are not eligible for a Chapter 13 bankruptcy, you have the option of filing a Chapter 7 or a Chapter 11. Within Chapter 11, there is the new subchapter V for small business debtors. There is a bankruptcy for everyone.
Yes! In my experience, about one percent of self-represented debtors get their bankruptcies approved and that includes attorneys who are debtors and representing themselves. It is just like any other legal matter where there is a degree of expertise that is needed. There are nuances as well as the matter of knowing your judges and your trustees. A bankruptcy attorney knows the process, knows how to negotiate things with the trustee, and knows how to deal with the judge. You can handle any legal matter on your own but you will have a fool for a client.
For more information on Chapter 13 Bankruptcy, an initial consultation with an experienced California Chapter 13 Bankruptcy Attorney is your next best step. Get the information and legal answers you are seeking by calling (916) 685-7878 today.
Mr. Cianchetta is an OUTSTANDING attorney. I was a little nervous about seeing an attorney for my case. Mr. Cianchetta and his staff made my wife and I feel right at ease. He took extra time explaining what to expect before, during and after our process. His advice was right on!
- Jack M.
