CHapter 13 Bankruptcy
Chapter 13 of the federal Bankruptcy Code allows a consumer to repay all or a majority of his or her debts through a payment plan approved by the Bankruptcy Court. When the plan is in place, creditors generally are prohibited from collecting debts directly from the debtor. Instead of paying his or her creditors directly, the debtor pays a certain amount every month to the Chapter 13 trustee, and the trustee distributes the money to the creditors, as provided in the Chapter 13 plan. When the last payment is made, the debtor receives a discharge for the remainder of his or her dischargeable debts.
A: For those who earn less than the median income for the state they live in, a Chapter 13 plan can be completed in as little as three years (36 months). If the debtor’s monthly income is higher than the median income in their state of residence, the plan will generally last for five years (60 months). By law, a Chapter 13 repayment plan cannot last longer than five years.
A: The essential difference between Chapter 7 and Chapter 13 is in the handling of the debtor’s property. In a Chapter 7 case, all nonexempt property owned by the debtor is sold, and the proceeds are used to pay as many of the debtor’s debts as possible. In a Chapter 13 case, a debtor’s income is applied towards payment of as many of the debtor’s debts as possible, with little or no impact on the debtor’s property. In addition, the discharge issued in a Chapter 13 case is usually broader than a Chapter 7 discharge, and will relieve the debtor of liability for several types of debts that are not discharged by a Chapter 7 case.
If both the husband and wife owe a significant amount of money, they may wish to file jointly under Chapter 13, even if only one of them has income. Otherwise, the non-filing spouse could still be liable for the unpaid debts.
Yes. A Chapter 7 case may be converted to a Chapter 13 case at the request of the debtor at any time before the case is closed, unless the case was converted previously from Chapter 13 to Chapter 7.
In the United States Bankruptcy Court for the District of Northern Illinois, you will have to appear for a First Meeting of Creditors meeting. This meeting is conducted by the Chapter 13 Trustee’s office. The bankruptcy judge will not be attending this meeting. This will be held about a month after your case is filed. Your testimony at the meeting should not be lengthy.
Confirmation hearings are handled by your attorney and the Chapter 13 Trustee. You should check with your attorney on whether your attendance at the confirmation hearing is necessary.