A Chapter 13 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under Chapter 13 of the bankruptcy code. Chapter 13 is the chapter of the bankruptcy code which allows a person to repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. The bankruptcy code is the federal law that deals with bankruptcy. A person who files a Chapter 13 bankruptcy case is called the debtor. In a Chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective. If the court approves the debtors plan, most creditors will be prohibited from collecting their claims from the debtor. The debtor must make regular payments to a person called the Chapter 13 trustee, who collects the money paid by the debtor and disburses it to the creditors, in the manner called for in the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.

The basic difference between a Chapter 7 case and a Chapter 13 case is that in a Chapter 7 case the debtor’s nonexempt property (if any exists) is liquidated to pay as much of the debtor’s debts as possible, while in a Chapter 13 case a portion of the debtor’s future income is used to pay as much of the debtor’s debts as is feasible, under the debtor’s circumstances. As a practical matter, any Chapter 7 case the debtor loses all or most of his or her nonexempt property and receives a Chapter 7 discharge, which releases the debtor from liability for most debts. In a Chapter 13 case, the debtor usually retains his or her nonexempt property, but must pay off as much of his or her debts as the court deems feasible, and receives a Chapter 13 discharge, which is slightly broader than a Chapter 7 discharge and releases the debtor from liability for a few types of debts that are not dischargeable under Chapter 7. However a Chapter 13 case normally lasts much longer than a Chapter 7 case and is usually more expensive for the debtor.

Chapter 13 is usually preferable for a person who:
Wishes to repay all or most of his or her unsecured debts and has the income with which to do so within a reasonable time,
Has valuable nonexempt property which would be lost in a chapter 7 case,
Is not eligible, under means testing, to obtain a Chapter 7 case,
Is not eligible for a Chapter 7 discharge, because he or she received a Chapter 7 discharge in the previous 8 years,
Has one or more substantial debts that are dischargeable under Chapter 13 but not under Chapter 7
Has sufficient assets with which to repay most of his or her debts, but needs temporary relief from creditors in order to do so.

In a Chapter 13 case, the bankruptcy court can provide relief to the debtor that a private debt consolidation service cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor’s property, to force unsecured creditors to accept a Chapter 13 plan that pays only a portion of their claims, and to discharge of debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay.

A full chapter 13 discharge granted upon the completion of all payments required in the plan discharge is a debtor from all debts except:
Debts that were paid outside of the plan and not covered in the plan
Debts for domestic support obligations, which includes debts for child support and alimony
Debts for death or personal injury caused by the debtors operation of a motor vehicle, vessel, or aircraft while intoxicated
Most tax debts
Debts for restitution or criminal fines included in a sentence imposed on the debtor for conviction of a crime,
Debts for fraud, embezzlement or larceny,
Debts for student loans or educational obligations unless a court rules that not discharging that would impose an undue hardship on the debtor and his or her dependents,
Debts for damages caused by willful or malicious conduct by the debtor,
Debts incurred while the plan was in the fact that were not paid under the plan,
Debts owed to creditors who did not receive notice of the chapter 13 case, and
Long-term debts upon which payments were made under the plan.

It is a written plan presented to the bankruptcy court by a debtor that states how much money or property the debtor will pay to the Chapter 13 trustee, how long the debtor’s payments to the Chapter 13 trustee will continue, how much will be paid to each of the debtors and creditors, and certain other matters.

The Chapter 13 trustee is a person, appointed by the United States trustee, who collects payments from the debtor, makes payments to creditors in the manner set forth in the debtor’s plan, and administers the debtor’s Chapter 13 case until it is closed. In some cases the Chapter 13 trustee is required to perform certain other duties. The debtor is required to cooperate with the Chapter 13 trustee.

Any debts whatsoever, whether they are secured or unsecured. Even debts that are non-dischargeable such as debts for student loans or child support may be paid under a Chapter 13 plan.

No. While priority debts, such as debts for domestic support obligations and taxes, and fully secured debts on assets the debtor wishes to keep must be paid in full under a Chapter 13 plan, only an amount that the debtor can reasonably afford must be paid on most debts. The unpaid balances of most debts that are not paid in full under a Chapter 13 plan are discharged upon the completion or termination of the plan.

A husband and wife may file a joint Chapter 13 case if EACH of them meets requirements for qualifying for a Chapter 13 case, EXCEPT THAT only one of them needs to have regular income and their combined debts must meet the debt limitations currently listed in the bankruptcy code.

If both spouses are liable for any significant debts, they should file a joint Chapter 13 case, even if only one of them has income. Also if both of them have regular income they should file a joint case.
The Taylor Law Firm, PC, is committed to providing top quality legal representation in the field of Chapter 7 and Chapter 13 Bankruptcy, and provides prompt and courteous service to all of our clients.