Bankruptcy Law

Ch. 13 Bankruptcy: Checklist for Filers

Chapter 13 bankruptcy is often referred to as the wage earner's plan. This is because debts are paid off over a period of three or five years using regular income. During the repayment period, creditors generally cannot take actions such as repossessing a car or foreclosing on a house. Let's look at the process of determining if Chapter 13 bankruptcy is the best option for a debtor and the process of obtaining relief from creditors.

Is Chapter 13 the Best Option?

Chapter 13 bankruptcy may seem like an appealing option for someone who is looking to obtain relief from debts that may be difficult to repay. However, it is important to know that filing may result in a significant drop to a person's credit score, and the bankruptcy will stay on a credit report for seven years.

Other options to obtain debt relief may include debt consolidation, selling assets or asking for a forbearance. In some cases, a creditor may take less than the full balance owed on a debt in exchange for considering the account paid in full. The amount of debt that a person has may also influence whether it is in their best interest to file.

For those who are intent on filing for bankruptcy, Chapter 13 may be the best option to possibly protect property or for those who are not eligible for Chapter 7. Individuals who have child support, student loan or tax debts must generally pay them in full. However, interest generally won't accrue on tax debts during the repayment period.

Limits on Secured and Unsecured Debts

To file for Chapter 13 bankruptcy, an individual must have unsecured debts of less than $394,725 and secured debts of less than $1,184,200. Furthermore, only individuals are allowed to file for a wage earner's plan.

Calculating Debts and Property

Individuals will generally use Schedule J to calculate their current debts. However, they are not to include credit card payments that have been made prior to filing. They should also refrain from including business expenses as well as expenses incurred from renting property. This is because the net profit or loss will be declared on Schedule I. Those who are married should include their spouse's income when creating a monthly estimate of expenses.

Almost anything of value that a debtor owns will need to be accounted for when filing for Chapter 13 bankruptcy. Examples of assets that should be listed include a principal residence, other real estate owned, or a car. An attorney may be able to further explain if other assets should be listed when filing a Chapter 13 case.

Filing Forms

There are several forms that a debtor must fill out when it comes time to file for bankruptcy. For instance, it may be necessary to declare any property that a debtor wishes to exempt as well as any creditors that may have an unsecured claim against that person. Debtors will also be asked to list any creditors that have a secured claim against them.

Forms 122C-1 and 122C-2 are declarations of monthly income and the amount of disposable income that a person may have. The amount of disposable income may determine the minimum amount that creditors must receive from a debtor each month. It is generally recommended that an individual have the assistance of an attorney when filling out and filing the forms as failing to do so properly may complicate a case.

Meeting With the Trustee and Creditors

Prior to a plan being approved, a debtor must attend a meeting with the trustee and any creditors who wish to attend. The judge presiding over the case may also attend. In many cases, unsecured creditors will not attend. If secured creditors attend, they will generally limit their questions to whether or not the asset will be surrendered.

The trustee will likely review the information that has been submitted and make any objections to a proposed plan. Debtors should also be ready to answer questions from the trustee under oath. These questions will generally revolve around a person's ability to make payments to creditors if a plan is approved.

Preparing for the Confirmation Hearing

Creditors may object to any part of a proposed repayment plan until it is confirmed by a judge. During the hearing, a creditor or trustee may object to some or all of the plan. The debtor has the ability to argue for the merits of the plan as it currently exists. In the event that there are no objections, the judge in the case may have questions for the debtor.

However, depending on where the case is being heard, the debtor may not be required to attend. Furthermore, the timing of the hearing may depend on where the case has been filed. In some cases, it will take place hours after the creditor and trustee meeting while it may be scheduled several weeks out in others.


The final step in the bankruptcy process is to have some unsecured debts discharged at the end of the repayment plan. This will occur roughly three or five years after the payment plan has been confirmed. Once the debts have been discharged, the debtor has no legal obligation to repay them.

Chapter 13 bankruptcy may make it easier to deal with both secured and unsecured debts in a timely manner. Talking with an attorney may make it easier to understand the process of filing and the obligations a debtor may have before, during and after their case is resolved.

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