Bankruptcy - Las Vegas
  - Chapter 7 Bankruptcy
  - Chapter 11 Bankruptcy
  - Chapter 13 Bankruptcy
  - Creditor's Rights

CHAPTER 13 BANKRUPTCY

Who Can File for Chapter 13?

In short, Chapter 13 is for individuals whose regular income levels are high enough so that cannot qualify for Chapter 7.  It also can be used by lower-income persons who are significantly behind on payments, but who have equity in their homes and do not wish to lose it in a Chapter 7 filing.  A corporation or partnership may not be a Chapter 13 debtor.

Any individual, even if self-employed or operating a sole proprietorship, is eligible for Chapter 13 relief as long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650.  If debt levels are higher than either of those thresholds, and they cannot qualify for Chapter 7, then the individual will need to file under Chapter 11.

An individual cannot file under Chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.

In addition, mandatory credit counseling is required of all individuals debtors BEFORE they file for Chapter 13 (or 7).  This credit counseling must be from an approved credit-counseling agency. (We can provide you a list of these approved agencies.  The cost of counseling is usually about $50).  If a debt management plan is developed during credit counseling, it must be filed with the Court.

A husband and wife may file a joint petition or either may file an individual petition.

What is Chapter 13?

When someone files for bankruptcy under Chapter 13 of the Bankruptcy Code, their aim is to have the opportunity to repay some or all the debts in their name, in better terms (such as with lower or no interest, or only pennies-on-the-dollar for credit card debt and other unsecured loans). Unlike Chapter 7, which involves liquidation of assets, this process allows the debtor to use whatever income they may have in the future to pay off the creditors.

Under Chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause."  If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.  The entire process, including the payments made during those 5 years, is carried out under the supervision of the courts.

What are the Advantages of Chapter 13?

Chapter 13 offers individuals a number of advantages over Chapter 7 liquidation.  Perhaps most significantly, Chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the Chapter 13 plan on time.

Another advantage of Chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the Chapter 13 plan.  Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on consumer debts.  This provision may protect co-signers

Finally, Chapter 13 acts like a debt consolidation loan under which the individual makes the plan payments to a Chapter 13 trustee, who then distributes payments to creditors.  Individuals have no direct contact with creditors while under Chapter 13 protection.

How Does Chapter 13 Work?

Although several steps are involved in Chapter 13 cases, the process is rather straightforward. For a detailed overview of the components, click here (pdf).

In a Chapter 13 bankruptcy, debtors are allowed to keep all of their property, in contrast to a court-ordered liquidation / forced sale under Chapter 7.  This factor is the most attractive thing about Chapter 13: it allows you to keep your property—especially your home and car—which might otherwise be lost, so long as you make timely payments going forward.

The central part of a Chapter 13 case is filing a plan showing how, over the next three to five years, you will pay off some of your past-due and current debts.  This written plan is created giving details of all the transactions that will occur, and the duration of the same. These payments will include regular monthly mortgage payments and an amount sufficient to pay off the fair market value of your car, along with some payment to your unsecured creditors. You will also be required to pay off any priority claim such as back taxes, child support and certain other types of debts. The repayment must begin within thirty to forty-five days after the case has started.  Payments are typically made directly to the creditors (unlike Chapter 7, in which the trustee disburses the money to creditors), although, in some Chapter 13 situations a trustee does get involved in disbursements.

It is possible for a repayment plan can be created and approved by the Court even if creditors disagree with it.  Creditors must strictly adhere to the court-ordered repayment plan, and are in fact prohibited to further collect any claims from the debtor.  If a debtor manages to complete all necessary payments in the plan, he/she is given a full plan discharge.

How Much Does Chapter 13 Cost?

We charge an up-front fee of only $1,519 for a Chapter 13 bankruptcy filing.  We will include incorporate the remainder of our fees as part of your Chapter 13 plan, which does not change your plan payment amounts due (it only reduces the amounts ultimately distributed to unsecured creditors).  Additional fees may apply in certain circumstances (such as if you are attempting to remove a second mortgage from your property).

If you are not sure whether bankruptcy is right for you, we will perform a consultation with you for $150.  If you decide to proceed with a filing, that consultation charge will be applied against the filing fee, so it ends up being no net cost.