Bankruptcy Laws - Chapter 13

Filing bankruptcy, under Chapter 13 of the US Bankruptcy Code, is appropriate for self-employed individuals and sole proprietors who find it impossible to settle their mounting debts. Partnerships and corporations are not eligible to file bankruptcy under Chapter 13.

Bankruptcy Laws: Chapter 13

Eligibility
Before filing bankruptcy, under Chapter 13, one must ensure that the level of unsecured and secured debts do not exceed $336,900 and $1,010,650 respectively. The debtor is also expected to seek credit counseling, from an approved credit counseling agency, before filing Chapter 13 bankruptcy. A debtor, who had previously filed a bankruptcy petition, that had been dismissed by the bankruptcy court, is ineligible to file bankruptcy under Chapter 13 unless the new appeal is filed after 180 days of dismissal of the old petition.

Procedure
The debtor is expected to file a petition with the bankruptcy court serving the area where the petitioner/debtor is resident or domiciled. The debtor would need to submit the following details to the court:

• List of assets and liabilities
• Details of current income and expenditure
• Details of unexpired lease and other obligations
• The current financial situation
• Certificate of counseling
• Copy of the detailed debt repayment plan developed by the credit counseling agencies
• Evidence that the debtor has a steady monthly income
• A copy of the tax return or transcripts for the most recent tax year

The petitioner would be required to fill out an official bankruptcy form. The following details would be required for filling out this form:

• List of creditors and their dues
• Details regarding the debtor's income, personal property and monthly living expenses

The bankruptcy court will charge $235 as case filing fee and $39 as miscellaneous administrative fee. A person who is unable to pay the fee, all at once, is allowed to pay the fee in installments. In case a couple files jointly and the wife is the co-debtor, the creditors are not allowed to try and collect the debts from the co-debtor provided the debts are a consequence of personal, family, or household reasons. Such debts are often referred to as consumer debts. Hence, chapter 13 bankruptcy laws have special provisions to protect the co-debtor.

Repayment Plan
The repayment of debts begins with the debtor filing a repayment plan with the petition or within 15 days of filing the petition. Bankruptcy Laws (Chapter 13) have been designed to ensure that the creditors receive their dues. The claims of the creditors can be broadly classified as priority, secured and unsecured. The repayment plan should ensure that the priority debts are discharged completely unless the creditor is willing to accept less than what is actually due. Secured claims entitle the creditor to seize the asset in the event of the debtor being unable to pay the dues. As far as unsecured debts are concerned, the creditors should at least receive an amount that is equal to the amount that they would have received had the debtor opted for the liquidation of assets. The debtor is expected to start making payments to the creditors, in accordance with the repayment plan, within 30 days of filing bankruptcy regardless of whether the plan has been approved by the court. The creditors are allowed to object to the provisions of the plan and the bankruptcy court judge has to decide on the feasibility of the plan within 45 days of the creditors' meeting. Once the plan has been approved by the court, the debtor must make biweekly or monthly payments to the trustee who in turn distributes the funds to creditors according to the terms of the plan.

Chapter 13 is the wage earner's plan that ensures the settlement of dues, within a period of 3 to 5 years, without the liquidation of the debtor's assets. Chapter 13 bankruptcy laws entitle the debtor to a discharge upon fulfillment of the financial obligations in accordance with the provisions of the repayment plan.