Chapter 13 Bankruptcy Questions

What is Chapter 13 Bankruptcy?

Under Chapter 13 Bankruptcy, the debtor reduces his or her overall debt and extends the time period for when the debt is due. In the end, the debtor has less debt and one monthly payment for 3 to 5 years. The amount of the monthly payment, the reduction of debt, and whether the payments will be made continuously for 3 years or 5 years is decided by the repayment plan. Currently, most people prefer to file for Chapter 7 Bankruptcy, which doesn’t require repayment and under which most of the unsecured debt, such as credit cards and medical bills, is erased. However, a debtor in a Chapter 7 bankruptcy proceeding risks losing all of his or her non-exempt personal or real property. While chapter 7 bankruptcy has been more common, lately the trend in Denver, Colorado is that chapter 13 bankruptcies are increasing.

Am I eligible to file for Chapter 13 bankruptcy?

Generally, you cannot file for Chapter 13 Bankruptcy if you commenced a Chapter 13 bankruptcy case within the previous 6 years. Neither can you file for Chapter 13 bankruptcy if you had a previous bankruptcy case for Chapter 7 Bankruptcy or Chapter 13 bankruptcy dismissed within the past 180 days that was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they held liens. Further, you cannot file for Chapter 13 bankruptcy if you had a previous bankruptcy case dismissed due to your willful failure to appear before the court or to comply with court orders. This is true in Denver and throughout Colorado.

Additionally, in order to file your Chapter 13 bankruptcy in Denver or throughout Colorado, you must have resided in the state for at least 91 days out of the 180 days prior to filing, and you need to complete the requisite credit counseling requirement before filing. You will have to prove that you filed your federal and state income tax returns for the 4 years prior to your bankruptcy filing date, otherwise your Chapter 13 bankruptcy case will get dismissed.

Call us at (303) 781-1533. We can make this an easy step-by-step process, starting with a free consultation. Our offices are in Denver, though we help clients from all over Colorado. If you live in a remote area outside of Denver, you may request for a Free Telephone Consultation with one of our Denver bankruptcy attorneys.

How much debt am I allowed to include under my Chapter 13 bankruptcy?

As part of the Chapter 13 Bankruptcy eligibility requirement, you are not allowed to file for Chapter 13 bankruptcy if your unsecured debts or secured debts exceed a certain statutory limit. On April 1, 2010, those debt limits have increased by 7% over the prior Chapter 13 bankruptcy debt limits, arriving at $360,475 for unsecured debt, and $1,081,400 for secured debt. An unsecured debt does not give the creditor a right to take a particular piece of property. Most consumer debts are unsecured, including credit card debts, medical, legal and accounting bills, utility bills, personal loans, and certain department store charges.

If your debt load is greater than $360,000 unsecured and $1,080,000 secured, there are still options for you. If your debt is not beyond these amounts, you are Chapter 13 bankruptcy eligible.

How much will my monthly payment be under the Chapter 13 Bankruptcy Repayment Plan?

Calculating your monthly payment obligation under the repayment plan is a complicated process and requires an experienced bankruptcy attorney to assist you in minimizing your payment while maximizing the likelihood of confirmation of the plan by the Bankruptcy Judge. Please set up a free consultation with one of our experienced Denver bankruptcy attorneys to get an informed understanding of what your monthly payment for your repayment plan would be. Call us now at (303) 781-1533. Our offices are located in central and south Denver, Colorado.

How do I ensure my Chapter 13 bankruptcy repayment plan is confirmed by the bankruptcy court?

To ensure confirmation of your Chapter 13 Bankruptcy Repayment Plan, you must be able to show that you have enough disposable income. This is a number unique in each case, arrived at by subtracting certain allowed expenses and required payments on secured debts (such as a car loan or mortgage), to meet your repayment obligations. Your Repayment plan must propose to pay back some debts in full before the Bankruptcy Judge will consider its confirmation. While you must pay back certain debts in full, the total amount of your debt will be substantially reduced. The Bankruptcy Court in Denver features judges and trustees that are fair.

How do I fund my Chapter 13 bankruptcy repayment plan?

You can fund your Chapter 13 Bankruptcy Repayment Plan from the following sources of income: wages or salary; self-employment income; seasonal work compensations; pensions; Social Security benefits; commissions; unemployment benefits; welfare payments; disability or workers’ compensations; rents; royalties; proceeds from sale of property; child support, maintenance, or other domestic support payments; gifts or regular household contributions from your friends, household members, or other relatives; or your working spouse’s income.

Can I file under Chapter 13 bankruptcy for my business?

No. Any business entity, even a sole proprietorship, cannot file for Chapter 13 Bankruptcy in the name of that entity. Businesses generally file for Chapter 11 bankruptcy when they need to reorganize their debts.

As an individual owning a business, however, you may file under Chapter 13 bankruptcy and include business-related debts which you are personally liable for. An exception to this rule is that commodity brokers and stockbrokers cannot file under Chapter 13 bankruptcy even if they want to discharge only consumer but non-business debts. Chapter 7 Bankruptcy is also an option for some business debt situations.

Will I lose any assets under a Chapter 13 bankruptcy?

No, you will not lose any assets under Chapter 13 Bankruptcy. Chapter 13 Bankruptcy differs from Chapter 7 Bankruptcy in that it does not seek liquidation of the debtor’s assets.

How does a Chapter 13 bankruptcy affect my credit score and how is it different from a Chapter 7 bankruptcy?

Your Chapter 13 Bankruptcy will show up on your credit report. However, as you make your payments under the repayment plan consistently, you will establish a positive pattern that will help improve your credit standing.

Chapter 13 bankruptcy is usually viewed less harshly by future creditors than Chapter 7 Bankruptcy. In a Chapter 7 bankruptcy case, the debts are simply wiped out and creditors receive no payments at all. Under Chapter 13 bankruptcy, however, payments are made towards the outstanding debts and distributed to the creditors. Additionally, a tough repayment plan that has been confirmed and followed by the debtor is a sign of improved spending habits and more responsible payment of debt which could be a good sign for creditors. You are also allowed to keep you home and car under Chapter 13 bankruptcy by continuing to make payments to the secured creditors, which means that you will have these collateral to secure future loans.

In sum, creditors look more favorably on Chapter 13 bankruptcy debtors, thereby making it more likely for you to be approved for credit after filing Chapter 13 bankruptcy than with Chapter 7 bankruptcy.

Do I have the right to a discharge under Chapter 13 bankruptcy?

In a Chapter 13 Bankruptcy case, you are usually entitled to a discharge upon completion of all payments under the repayment plan. However, a discharge may not occur if the debtor fails to complete the requisite personal financial management course. Unlike Chapter 7 Bankruptcy, creditors have no standing to object to the discharge under Chapter 13 bankruptcy if you have completed making plan payments. However, creditors may initially object to confirmation of the repayment plan.

How long does a Chapter 13 bankruptcy case take before I can receive a bankruptcy discharge?

Under Chapter 13 Bankruptcy, a debtor is allowed to reorganize his or her debts by submitting a Chapter 13 Bankruptcy Repayment Plan with the bankruptcy court proposing to pay the debtor’s disposable income to the Chapter 13 Bankruptcy Trustee over a period of 3 years to 5 years. In all Chapter 13 bankruptcy cases, the debtor must pay all of his or her disposable income to the Chapter 13 Bankruptcy Trustee on a monthly basis for at least 3 years (36 months). The amount of monthly payments may also vary based on the type of debt the debtor owes.

How much is the court filing fee for Chapter 13 bankruptcy?

The court filing fee for Chapter 13 Bankruptcy is $274.00.

Additional Bankruptcy Information

• Chapter 13 Bankruptcy: Overview of Chapter 13 bankruptcy protection.
• Chapter 7 Bankruptcy: Overview of Chapter 7 bankruptcy protection.
• Chapter 7 Bankruptcy FAQ: Questions and answers about filing for Chapter 7 bankruptcy protection.
• Consumer Bankruptcy: General information about consumer bankruptcy issues and other bankruptcy solutions.
• Consumer Bankruptcy FAQ: Questions and answers about consumer bankruptcy protection and other bankruptcy solutions.

The information contained here is intended to be educational and informative only. It is not intended to be legal advice nor does it create an attorney-client relationship. You should consult with an experienced bankruptcy attorney for advice about your particular situation. Call our office today at (303) 781-1533. We represent Bankruptcy clients in Denver and throughout Colorado.
 

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