Chapter 13

If you have been named as a defendant in a foreclosure action, a petition filed under Chapter 13 of the U.S. Bankruptcy Code may enable you to save your home. The debtor must prove to the bankruptcy court that; 1) that you have more equity in a secured assets than can be protected with by Chapter 7 bankruptcy exemptions, and; 2) that you have a regular source of income with sufficient funds to repay all, or part, of the debt you've already incurred. In simpler terms, the prospective Chapter 13 filer debtor must prove that their income each that they earn each month is more than their expenses.

Under Chapter 13 the debtor files a detailed petition with schedules identifying assets, creditors, debts, unexpired leases, and other interests, along with a proposed bankruptcy plan. The bankruptcy plan must propose to repay all, or part, of the debtor’s existing debt. The plan must list all of the creditors and the amount to be repaid to each one. A key issue in formulating the specifics of the plan is to evaluate the debtor’s disposable income. The repayments are generally spread over the course of sixty (60) months, and they commence immediately after the filing of your petition. Before the plan is confirmed, you will attend a Meeting of Creditors as required by Section 341 of the Bankruptcy Code. At the meeting the Trustee will review your petition and the Plan and ask any questions he or she may have, including those related to your income, assets, and creditors. Based upon the documents filed and any additional information obtained as a result of the Meeting, the Trustee will appear at a subsequently scheduled Confirmation Hearing before the United States Bankruptcy Court.

At the Confirmation Hearing, the Trustee will either recommend to the Court that the proposed Plan is adequate and should be confirmed, and that all payments required to date have been made. Alternatively, the Trustee will can request that the plan be revised and presented to the Court again in approximately thirty (30) or sixty (60) days.

A key issue in any plan is how much money is earmarked for the unsecured creditors, or the credit card companies. A good bankruptcy lawyer will always try to have no monies paid to the unsecured creditors, or to the credit card companies. However, if the debtor is a high income person, and if there is disposable income, then the Trustee may reject the first proposed plan because it does not pay anything to the credit card companies. In addition to a mortgage foreclosure, a Chapter 13 can be used to cure arrearages on car loans, to pay back taxes, to stop interest from accruing on your state or federal tax debt, and to wipe out the New Jersey DMV surcharges. Chapter 13 can also be useful to the debtor who has significant non-dischargeable debts such as student loans.

Once a debtor successfully completes the plan, all remaining dischargeable debt will be released. The bankruptcy will remain on your credit report for seven (7) years. Nonetheless, this will not scare off future sources of credit. The reason for this is because once a debtor has completed the Chapter 13 Plan, he has demonstrated an ability to repay his debts over time. Overall, the negative impact of a Chapter 13 bankruptcy is much less than a Chapter 7 bankruptcy. Mr. Sliwinski, Esq. understands that you have valuable assets into which you have already made significant investment. Whether it's the house or a brand new car, the prospect of losing these assets is devastating. If you find yourself in danger of foreclosure or repossession, contact our bankruptcy attorney, Theodore Sliwinski, Esq. at (732) 257-0708. He will move quickly and carefully to protect your car or home.

THE PROCESS: FILING AND GOING TO COURT

A debtor must submit what is known as a "Chapter 13 Plan" along with a bankruptcy petition, and a debt repayment schedules. The bankruptcy plan will outline for the court and your creditors how you intend to repay your debts. The debtor must begin to make their Chapter 13 Plan payments immediately after they file their case with the court.

The debtor must then appear at a Meeting of Creditors. Here, a court-appointed Trustee will review your plan, the petition, the schedules, and he will ask you any questions that believes are important. Even though you are sworn to tell the truth, this meeting is extremely informal. The judge is not present, and questioning is usually completed in a few minutes. The Trustee's main objective is to determine if the plan is feasible, and if the debtor is hiding any assets.

Some time after the Meeting of Creditors, the debtor will be called before the judge for a Confirmation Hearing. At this meeting, the Trustee will make a recommendation as to whether your Chapter 13 Plan is adequate for the repayment of your debts. The judge will then either approve your Chapter 13 plan or require you to revise the Plan and come back again. One major reason for the court refusing to approve your plan would be a failure to repay certain creditors over the life of the plan.

HOW LONG CHAPTER 13 STAYS ON YOUR CREDIT REPORT

A Chapter 13 bankruptcy remains on your credit report for seven years after your is filed with the bankruptcy court. The impact of a Chapter 13 is much less severe than that of a Chapter 7. Chapter 13 stays on your credit report for 7 years, and Chapter 13 stays on your credit report for 10 years. Moreover, your creditors look upon a completed and successful Chapter 13 Plan much more positively than a Chapter 7, because you have shown that you are ready, willing and able to repay your debts over time.

Chapter 13

THE PROCESS: FILING AND GOING TO COURT

HOW LONG CHAPTER 13 STAYS ON YOUR CREDIT REPORT

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