Chapter 13 Bankruptcy Lawyers in Tacoma, WA
Chapter 13 bankruptcy allows an individual to consolidate his or her debt while paying off some past-due and current debts. A payment plan is proposed which repays the debt over a three to five year period. A Chapter 13 case allows an individual to keep valuable property which could otherwise be foreclosed upon or repossessed, if monthly payments are made according to the payment plan accepted in the bankruptcy proceeding. The amount of the monthly payment and the length of the repayment plan is based upon the following factors:
- Monthly income of the person and household size
- Monthly expenses of the person
- Amount and nature of the debt
The most common uses of Chapter 13 involve:
- Repayment of mortgage arrears (back amounts owed). In some cases junior mortgages can be eliminated if the value of the property is consumed by the first mortgage.
- Restructuring of some auto loans to save a vehicle
- Secured debts are paid 100% on the dollar, while unsecured debts may be paid less than 100% on the dollar. A person receives a discharge under Chapter 13 at the completion of the payment plan.
When do I get my discharge?
After completion of the payments under the Chapter 13 Plan that has been confirmed by the Bankruptcy Court.
What role does the Chapter 13 Trustee play in the case?
The Chapter 13 Trustee performs many roles. The Trustee serves as a disbursing agent for payments under the plan. The Trustee examines the debtor at the meeting of creditors and is actively involved in the certification process. The Trustee can also object to confirmation of the plan and makes a determination in each case whether the debtor has satisfied the “disposable income test” and the “best interest of creditors test.” If either of the tests is not met, it is the Trustee’s duty to object to confirmation. The Trustee can also file a motion to dismiss the Chapter 13 case for a “bad faith filing” or for failure to make payments called for by the plan. We pride ourselves in structuring plans that meet the requirements of the trustee’s office and we seldom have issues in getting our plan confirmed.
What is the meeting of creditors and what happens?
The meeting of creditors is a scheduled meeting conducted by the Chapter 13 Trustee where you are examined under oath concerning your assets and debts. Creditors who choose to attend the meeting either in person or through their attorney can ask questions concerning anything relevant to the case. As a practical matter, creditors rarely attend the meeting of creditors. The average meeting of creditors lasts about 3 to 5 minutes. It is mandatory for all filers to attend the meeting of creditors. If you retain us as your bankruptcy attorney, we will accompany you to the hearing.
What is the “disposable income test” in Chapter 13?
Under the new bankruptcy laws the amount of money you have to pay to creditors in a Chapter 13 case is determined by a fairly complicated formula that takes into account your gross income and compares it to State Median Incomes for a family of your size. The expenses that are allowed are determined by a combination of your actual expenses and expense allowances determined by the IRS. In many cases these allowances when combined may exceed your actual expenses and result in lower payments to creditors. You must commit this hypothetical “surplus” to the plan for the life of the plan. In all cases your bankruptcy attorney will work with you to come up with a repayment plan that meets your needs and the requirements of the new bankruptcy laws.
What is the “best interest of creditors test” in Chapter 13?
This test requires the debtor to make sure that under the Chapter 13 Plan the unsecured creditors receive at least as much under Chapter 13 as they would receive if the case were handled under Chapter 7. This involves completing a liquidation analysis by your bankruptcy attorney to determine what the unsecured creditors would receive under Chapter 7. The Chapter 13 Plan must provide at least that much to the unsecured creditors.
Do I have to list all of my creditors?
Yes. Bankruptcy law requires a full and complete disclosure to whom the debtor owes money. Bankruptcy schedules are signed under the penalty of perjury and the debtor will be asked under oath at the meeting of creditors if all debts were disclosed.
Can I transfer ownership of my home, car, boat, collectibles, tools, etc. to someone else to keep these items out of bankruptcy?
No. Such transfers will almost invariably violate provisions of the law that prohibit concealment of property or the transfer of valuable property to friends or relatives. The Chapter 13 Trustee has the power to set these transfers aside. The Trustee can also ask for the case to be dismissed for a “bad faith filing.” Moreover, federal law could be invoked to initiate criminal proceedings based on bankruptcy crimes if you intentionally conceal property from your case. Bottom line, don’t do this and report all such activity to your bankruptcy attorney before the case is filed.
Are certain debts dischargeable in Chapter 13 that are not dischargeable in Chapter 7?
Yes. Credit card fraud, embezzlement, larceny, defalcation, conversion, and certain IRS debt owed by non-filers can be discharged in Chapter 13. Alimony, child support, student loans (most but not all), and personal injury in DUI cases and certain IRS debt are not dischargeable in Chapter 13. However, marital property settlement debts can be discharged in a Chapter 13 but not in a Chapter 7.
Can the Trustee or a creditor object to confirmation of a Chapter 13 Plan?
Yes. It is the Trustee’s responsibility to object to Chapter 13 Plans that are deficient. A creditor may also object, but generally most objections will come from the Chapter 13 Trustee. Most objections are worked out or resolved prior to the confirmation hearing but occasionally the court has to take evidence and rule. This is routine.
How long does a Chapter 13 remain on a credit bureau report?
Ten years. However, credit can usually be established as soon as the discharge is granted. The significance of the 10 year period is that the reference to bankruptcy will be deleted from the public records section of your credit report after 10 years. As a practical matter your credit is usually in bad shape before you get to our office. Our experience is that most of our clients experience a normal credit life after bankruptcy, including the ability to acquire mortgage financing.
What is a co-debtor stay?
If the joint debt is a consumer debt (secured or unsecured) and the plan proposes to pay the debt in full, the creditor is blocked by the Chapter 13 filing from taking collection action against the non-filing co-debtor.
Can my junior mortgage be released in a Chapter 13? Lien Stripping.
In some cases where the amount owing on senior mortgages is greater than the value of the property, junior mortgages can be stripped away. This procedure requires some significant additional bankruptcy attorney work for which additional fees will be charged. For example, if your house is worth $100K, with a first mortgage of $125K, and a second mortgage of any amount (say $50K) we can make the second mortgage go away completely at the conclusion of your case. There is no value to which the second mortgage can attach, so we make it go way.
Call today to get help with a chapter 13 bankruptcy filing! 253-627-0132
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