Chapter 13 bankruptcy is a reorganization plan and is also known as the wage earner’s plan. A Delaware bankruptcy lawyer helps develop a repayment plan under Chapter 13 of the Bankruptcy Code. The debtor’s plan must contain a repayment plan to pay some or all of his or her debt within three to five years. The time frame is dependent on the state’s median. During the time the debtor is within the plan and is making payments to the Chapter 13 trustee, creditors cannot start or continue collection efforts.
Advantages of Chapter 13
There are some advantages of filing for Chapter 13 reorganization over filing for Chapter 7 liquidation:
- Filing Chapter 13 allows a debtor an opportunity to save his or her home from foreclosure.
- Chapter 13 allows the debtor to reschedule secured debts (not including the mortgage on his or her primary residence) over a period of time (over the Chapter 13 plan)
- Chapter 13 works like a consolidation loan—the debtor makes payments to the Chapter 13 trustee. The trustee distributes the payments to the creditors.
- There is no direct contact between the debtor and the creditors.
A Delaware bankruptcy attorney will explain these advantages in more detail and will also explain a debtor’s rights under Chapter 13.
Requirements of Filing Chapter 13
Certain requirements must be met before and during a Chapter 13 filing:
- The debtor must create and file a repayment plan. The plan should preferably be submitted with the petition, but a debtor has up to 15 days after the filing of the petition to file the repayment plan.
- The plan must provide for the payoff of fixed amounts to the trustee. The payments must be on a regular schedule (weekly, bi-monthly, monthly).
- The plan must outline priority claims—priority, secured and unsecured. The Law Office of Vivian Houghton helps the debtor fit his or her assets into the proper categories when preparing a Chapter 13 plan. Priority claims must be paid in full under most circumstances.
- The debtor must attend a meeting of the creditor, commonly called a “341 Meeting.”
The provision of a plan that has been confirmed by the bankruptcy court is binding on the creditors and the debtor. The debtor may make payments directly to the trustee or he or she may have it pay via payroll deduction.
The scope of the Chapter 13 discharge has recently changed and may always undergo additional changes. Certain debts are not dischargeable under Chapter 13 bankruptcy. A Delaware bankruptcy lawyer can advise a debtor as to the ability to discharge certain debt and will take this into consideration when completing a Chapter 13 plan for the debtor.