Chapter 13

 

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The information contained within the Iowa Northern Pro Se Information Center is accurate as of the date of publication, but it should not be cited or relied upon as legal authority. This information is provided solely as an overview to the bankruptcy process, and should not be used as a substitute for reference to the United States Bankruptcy Code (title 11, United States Code), the Federal Rules of Bankruptcy Procedure, or to local rules or standing orders of this court. Finally, the information contained within this site should not substitute for the advice of competent legal counsel.

The law and procedures in Chapter 13 is very complicated. You should seriously consider retaining an attorney to assist you with your case. Attorney fees may be paid in a Chapter 13 plan over time.

Chapter 13 is also known as the "wage earners plan." In a Chapter 13 bankruptcy case, the debtor has regular income and is permitted to develop a plan to repay all or part of his/her debts. Depending upon the circumstances of the case, the repayment plan may call for installment payments to creditors over three to five years. During this time the law forbids creditors from starting or continuing collection efforts on debts that existed before the petition was filed.

To commence your Chapter 13 case you will need to file a Chapter 13 petition and pay the appropriate filing fee. Chapter 13 filing is a package of documents (including the petition, numerous documents in support of the petition and the proposed repayment plan). Make sure you have chosen the correct forms for your case. To visit the Iowa Northern Forms page, click here. Read the instructions carefully before you complete the forms. Make sure that all of the required information is attached to the forms and documents. (See the checklist for the chapter you are filing under to make certain that you have all the required forms/documents.) Make photocopies for your own records and keep them in a folder that you can find easily.

Be prepared to pay the required filing fees at the time you file the papers. (Note: Only certain forms of payment are accepted. No personal checks or credit cards are accepted.)

Key Terms and Concepts in a Chapter 13 Case

Automatic Stay - The filing of a petition under Chapter 13 acts as an automatic stay (stop) to most collection actions against the debtor or the debtor's property. However, filing the petition does not stay certain types of actions, and the stay may be effective only for a short time in some situations. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, garnish your wages, or even place telephone calls demanding payments from you.

Chapter 13 Plan - You will be required to file a Chapter 13 plan with the court, within 14 days of the filing of your petition. This plan is your detailed description of how you propose to pay your creditors' claims using your future earnings over a fixed period of time (usually 3 to 5 years). The detailed description should include what your monthly payments to the trustee will be throughout the course of the plan.

Plan Payments - Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, you must start making plan payments to the trustee. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment of their claims.

Types of Claims - There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of the bankruptcy proceeding. Secured claims are those for which the creditor has the right to take back certain property (i.e., the collateral) if you do not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property you own.

Confirmation Hearing - Normally within 45 days after the meeting of creditors, the bankruptcy judge will hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. Your creditors will receive notice of the hearing and may object to the confirmation of the plan. The most frequent objections are that payments offered under the plan are less than creditors would receive if your assets were liquidated or that the proposed plan does not commit all of your projected disposable income for the three or five year term of the plan.

Discharge - As a chapter 13 debtor, you will most likely receive your discharge upon completion of all payments under the confirmed plan. You should be aware that there may be circumstances that would keep you from receiving a discharge (i.e.: you received a discharge in a prior case filed within two years for prior Chapter 13 cases and four years for prior Chapter 7, 11 and 12 cases; you have not completed a U.S. Trustee approved course in financial management; or you have not certified that all domestic support obligations that came due prior to making such certification have been paid). The bankruptcy law regarding the scope of the Chapter 13 discharge is complex and has recently undergone major changes. Therefore, you may want to consult competent legal counsel prior to filing.