What is a Chapter 13 bankruptcy case?

A chapter 13 bankruptcy proceeding is a reorganization proceeding only available to individuals. Businesses are not permitted under the Bankruptcy Code to file for chapter 13 relief. If a business wants to reorganize, it would have to file a chapter 11 proceeding. A chapter 13 case is more streamlined and less expensive than a chapter 11 case. In a chapter 13 case, the debtor or individual that files the case, must prepare a plan that will delineate how he/she is going to pay back the creditors. A chapter 13 case may be filed jointly by spouses. However, two people who are not married may not file a joint bankruptcy petition. This rule applies to a chapter 13 as well as a chapter 7 case. A chapter 13 trustee will be appointed to administer the estate. However, the role and duties of a chapter 13 trustee are very different from the those of a chapter 7 trustee. One of the most important jobs of a chapter 13 trustee is to collect monthly plan payments from the debtor and to make distributions to the creditors.The length of the debtor's plan is between three to five years. The debtor will propose a chapter 13 plan that will have to be approved by the Bankruptcy Court. Within thirty days of filing, the debtor will be required to make plan payments to the trustee and the trustee will collect those payments for future distribution to the creditors after the plan is approved by the Court. In a chapter 13 case, the debtor retains his/her assets so the trustee is not selling any non-exempt assets. If you have assets that cannot be fully exempted and you wish to keep those assets but need debt relief, a chapter 13 case is an option to look into. It allows you to pay your pre-petition debts through a three to five year plan. You also may be able to propose a plan which pays your general unsecured creditors a percentage of their claims. The Bankruptcy Code provides guidelines as to what creditors are entitled to receive under the plan. A general unsecured creditor is a creditor whose claim is not protected by a security interest. For example, credit card debt is typically unsecured and there is no collateral that the credit card company has a security interest in that they could go after in the event you default. On the other hand, your mortgage lender will have a security interest in your house and may seek authorization to sell your house in the event you default. The mortgage company is a secured creditor. Many people who are behind in their mortgage payments opt to file a chapter 13 because this will allow them to keep their home and provide them with with time to cure the arrears due to the mortgage lender through the chapter 13 plan. While a chapter 13 is not as complicated as a chapter 11, it can be tricky and it is important to consult the assistance of bankruptcy counsel if you want to file a chapter 13. It is definitely a way to help you keep your family in the home they love.

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