Chapter 13 Bankruptcy process

Chapter 13 bankruptcy is designed to help people who need help restructuring their debt. This type of bankruptcy plan is also known as a wage earner’s plan because those who file it must have a regular source of income for the plan to be approved by the court.


Filing for Chapter 13 bankruptcy has many benefits over other plans such as Chapter 7 bankruptcy. When a homeowner files Chapter 13 bankruptcy, all foreclosure proceedings on their home will be stopped. Your bankruptcy attorney will set up a plan that enables you to cure the delinquent amount over time, while making regular monthly payments. This enables bankruptcy participants to remain in their home while they catch up on payments. Secured debts may also be restructured, giving applicants time to pay these debts back over the lifetime of the bankruptcy plan.


The court system allows anyone who is employed, self-employed, or has other sources of regular income, such as regular contributions from family members, to file for Chapter 13 bankruptcy. The applicants total unsecured debts must be less than $360,475 and secured debts must be less than $1,081,400 (these amounts change every 3 years, the next change will be in 2013). A corporation cannot file for protection under a Chapter 13 plan. Filing for this type of bankruptcy requires debtors to file their bankruptcy petition in the district where they live. If you live in the St. Louis Metropolitan Area, your attorney will file the bankruptcy petition in St. Louis and if you live on the Illinois side, the petition will be filed in Federal Court in East St. Louis. Debtors must also provide the court information regarding total liabilities and assets, current income, monthly expenses and a statement of financial affairs. A certificate of credit counseling must also be filed and debtors must file their tax return for the last four years. If the a tax return is not filed for the last four years, the chapter 13 trustee might object to confirmation of the plan and/ or Missouri Department of Revenue will file a motion to dismiss for failure to file tax returns. When a petition for Chapter 13 bankruptcy is filed, all debtors must pay an administrative fee and a filing fee payable to the Clerk of the Court. In certain instances, the court may allow debtors to make payments in installments for filing and administrative fees. All debtors must provide financial information regarding their spouse, regardless of whether the debtor is filing jointly or individually. This is not the case when spouses are separated. Every so often, we have the case in which the non-filing spouse does not want to provide income or expense information to the filing spouse out of fear he or she could get involved somehow in the bankruptcy process. In these cases we explain to the spouse that the information provided does not affect the non-filing spouse and the name does not appear at any official documents.


When a Chapter 13 bankruptcy is granted, the court will appoint a trustee to oversee the debtor’s bankruptcy plan. The debtor must make all payments to the trustee during the lifetime of the plan. If an applicant’s home is in the process of being foreclosed upon, the automatic stay which takes effect automatically with filing of the bankruptcy case will keep the home safe during the bankruptcy. As long as the applicant makes all of the required payments during the Chapter 13 plan, the bank cannot foreclose on the home. Once all payments have been made, the trustee will file a certification with the court that all payments have been made. Before the court can issue the discharge that releases the debtor from all other debt, the debtor has to file a Domestic Support Statement and the Debtor Educational Certificate. Creditors cannot pursue the individual for any unpaid debt unless the debtor fails to complete the entire bankruptcy plan.


Chapter 13 bankruptcy can allow debtors to cure their debts while remaining in their home. Once the plan is complete, debtors can make home mortgage payments directly to their finance company. This type of bankruptcy is helpful for people who want to keep their home and pay their debts over time.

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