Frequently Asked Questions

Some of the warning signs that you are accumulating too much debt include a lack of money in savings and paying only minimum payments on credit cards while continuing to make new purchases on those cards. Additionally, if you find yourself making late payments on bills or credit cards, bouncing checks or over-drafting your checking account, you are accumulating too much debt.

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There are a number of options people have to avoid filing for bankruptcy. First, they can sell assets and restructure living expenses. Other options include home equity debt consolidation loans and credit counseling services. Additionally, they can proactively negotiate payment terms with their creditors.

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Qualifying for bankruptcy differs from state to state and is complicated to determine. A means test was recently established to determine who is qualified for what type of bankruptcy. Suffice to say, around 70 percent of people who file for bankruptcy qualifies.

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The benefits of filing for bankruptcy are numerous. First of all, bankruptcy restructures your debt, making it more manageable. Bankruptcy also offers peace of mind by eliminating the burden of dealing with creditors and the obligation to pay off debts. Moving forward, filing for bankruptcy helps you get a new start and equips you with useful financial skills.

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There are numerous myths that people believe about bankruptcy. These include the belief that they will never be able to borrow money again; that both spouses in a marriage will have to file for bankruptcy; and that it is difficult to file for bankruptcy. Other people wrongly believe that filing for bankruptcy helps their credit rating or that they can only file for bankruptcy once.

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A bankruptcy legally can stay on your credit report for up to 10 years. The first way to rebuild your credit is by making sure that all accounts are included in bankruptcy and don’t remain open. The primary way to build back your credit score is by attaining and using credit. Sometimes that means applying for secured credit cards, which are usually reserved for people with poor credit, but rebuilding your credit can also include car payments. However, be prepared to pay hefty interest on these loans.

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The two types of personal bankruptcy that individuals can file under are Chapter 7 bankruptcy, often called a liquidation plan, and Chapter 13 bankruptcy, often called the debt restructuring plan.

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The answer to this question primarily depends on whether or not you would like to keep your home. If you are fine with your home being sold to reconcile your debt with the mortgage company, Chapter 7 is probably the right choice for you. If you would like to remain in your home, then Chapter 13 is your desired filing status.

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The debtor's attorney performs the following functions in the chapter 7 case of a typical consumer debtor:

1. Analyze the amount and nature of the debts owed by the debtor and determine the best remedy for the debtor's financial problems.
2. Advise the debtor of the relief available under both chapter 7 and chapter 13 of the Bankruptcy Code, and of the advisability of proceeding under each chapter.
3. Assemble the information and data necessary to prepare the chapter 7 forms for filing.
4. Prepare the petitions, schedules, statements and other chapter 7 forms for filing with the bankruptcy court.
5. Assist the debtor in arranging his or her assets so as to enable the debtor to retain as many of the assets as possible after the chapter 7 case.
6. Filing the chapter 7 petitions, schedules, statements and other forms with the bankruptcy court, and, if necessary, notifying certain creditors of the commencement of the case.
7. If necessary, assisting the debtor in reaffirming certain debts, redeeming personal property, setting aside mortgages or liens against exempt property, and otherwise carrying out the matters set forth in the debtor's statement of intention.
8. Attending the meeting of creditors with the debtor and appearing with the debtor at any other hearings that may be held in the case.
9. If necessary, preparing and filing amended schedules, statements, and other documents with the bankruptcy court in order to protect the rights of the debtor.
10. If necessary, assisting the debtor in overcoming obstacles that may arise to the granting of a chapter 7 discharge.

The fee paid, or agreed to be paid, to an attorney representing a debtor in a chapter 7 case must be disclosed to and approved by the bankruptcy court. The court will allow the attorney to charge and collect only a reasonable fee. Attorneys must collect all of their fee for work done prior to filing before the case is filed. More...

You should find out the experience level of your prospective attorney. Ask how many bankruptcy cases they deal with a year and how long have they have practiced bankruptcy law. Additionally, they should be honest, efficient, and have a great reputation.

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Once someone decides to file for bankruptcy, there are several pitfalls they often fall into. Some decide they want to accumulate debt in hopes of having it restructured in bankruptcy. Others ignore their current situation and pay back family and friends or ignore lawsuits filed against them. Others make the mistake of trying to save money and represent themselves in bankruptcy. Some even aren’t completely honest about their financial situation with their lawyer. All are costly mistakes.

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A debtor may repay as many dischargeable debts as desired after filing under chapter 7. By repaying one creditor, a debtor does not become legally obligated to repay any other creditor. The only dischargeable debt that a debtor is legally obligated to repay is one for which the debtor and the creditor have signed what is called a "reaffirmation agreement." More...

A chapter 13 case is filed in the bankruptcy court in the district where the debtor has lived or maintained a principal place of business for the greatest portion of the last 180 days. The bankruptcy court is a unit of the federal district court. Practically, nowadays, cases are filed online. More...

As soon as you filed for bankruptcy, the court protected you from just about all types of collection efforts. This protection is called the “automatic stay.” While the automatic stay is protecting you, secured creditors cannot repossess property that they have sold you. You already know that to keep secured property in bankruptcy you need to stay current on the secured loans. If you fall behind, the creditor can ask the court to allow it to repossess the collateral. This request is called a Motion for Relief from the Automatic Stay. If the motion is granted, the creditor can continue taking the steps to repossess its collateral. It also allows the creditor to work directly with you on loss mitigation and mortgage modification without requiring court approval. Just as important as what the Motion means is what it doesn’t mean. The creditor CANNOT collect any debts from you after the repo/foreclosure. The creditor CANNOT communicate directly with you without our permission. The creditor CANNOT foreclose faster than it could outside of bankruptcy.

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No.  You do not need to attend this hearing if you have an attorney.  The court will not listen to you even if you go.  If you have a reason to resist the motion, please call your attorney to discuss what actions may be taken .

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That depends on the answer to the following questions:

a.    Are you giving up the property?

If so, then you don’t need to take any action.  You don’t even need to call us.  Just ignore the motion altogether.



b.     Are you filing for Chapter 7 bankruptcy?

If so, you probably do not need to take any action.  This creditor will automatically gain the power that it is requesting at discharge which is 90 days after filing date.  Furthermore, the creditor cannot retake its collateral until after the hearing date on the front of the motion (3-4 weeks from now). The creditor isn’t gaining much time with this motion.



If you have some reason you really need the collateral for the period between the hearing and the discharge, you will have to pay at least a month’s regular payment to the creditor and $600 to Lincoln Law to attend the hearing and argue your case.  If you would like to pursue this option, please set up a phone appointment with the attorney.



c.    Are you filing Chapter 13 bankruptcy?

If so, and if you are not surrendering the property, then the creditor is alleging that you are behind on payments that came due after you filed your case.  If you want to keep the property, the court will require that you begin making all of your regular payments and catch-up payments for a period of months.  Please set up a telephone appointment with the attorney to discuss your ability to make catch-up payments.

 

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No. Certain property is exempt and cannot be taken by creditors, unless it is encumbered by a valid mortgage or lien. A debtor may also be allowed to retain certain encumbered (or secured) exempt property. More...

A chapter 7 case begins with the filing of the case and ends with the closing of the case by the court. If the debtor has no nonexempt assets for the trustee to collect, the case will most likely be closed shortly after the debtor receives his or her discharge, which is usually about three months after the case is filed. If the debtor has nonexempt assets for the trustee to collect, the length of the case will depend on how long it takes the trustee to collect the assets and perform his or her other duties in the case. Most consumer cases with assets last about six months, but some last considerably longer. More...

The Means test prohibits some people with a high income from filing a chapter 7 bankruptcy. A person who is not eligible for a chapter 7 discharge should not file under chapter 7. Also, a person who has substantial debts that are not dischargeable under chapter 7 should not file under chapter 7. In addition, it may not be wise for a person with current income sufficient to repay a substantial portion of his or her debts within a reasonable period to file under chapter 7, because the court may dismiss the case as constituting an abuse of chapter 7. And those who have unexempt assets that they do not wish to lose should not file for chapter 7. More...

It will usually worsen it, if that is possible. However, some financial institutions openly solicit business from persons who have recently filed under chapter 7, apparently because it will be at least eight years before they can again file under chapter 7. In most cases, the debtor’s credit score will better a year after filing than it was at the time of filing because the old debts have a zero balance and the debtor has disposable income. More...

Employers are not usually notified when a chapter 7 case is filed.

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When a chapter 7 case is filed, it becomes a public record and the name of the debtor may be published by some credit-reporting agencies. However, newspapers do not usually report or publish the names of consumers who file under chapter 7. More...

No. It is illegal for either private or governmental employers to discriminate against a person as to employment because that person has filed under chapter 7. It is also illegal for local, state, or federal governmental units to discriminate against a person as to the granting of licenses (including a driver's license), permits, student loans, and similar grants because that person has filed under chapter 7. More...

No. Filing under chapter 7 is not a criminal proceeding, and a person does not lose any civil or constitutional rights by filing. More...

In a chapter 7 case, the debtor is required to turn over to the trustee only the nonexempt money or property that he or she possessed at the time the case was filed. Many nonexempt assets of consumer debtors are liquid in nature and tend to vary in size or amount from day to day. It is wise, therefore, for the debtor to engage in some negative estate planning so as to minimize the value or amount of these liquid assets on the day and hour that the chapter 7 case is filed. The most common nonexempt liquid assets, and the assets that the trustee will be most likely to look for, include the following:

1. cash,
2. bank accounts,
3. prepaid rent,
4. accounts receivable,
5. accrued earnings, and
6. tax refunds.

It is usually advantageous for the debtor to take steps to insure that the value of each of these assets is as low as possible on the day and hour that the chapter 7 case is filed. By doing this the debtor will not be cheating or acting illegally; the debtor will simply be using the law to his or her advantage, much the same as a person who takes advantage of loopholes in the tax laws.

Cash. If possible, the debtor should have little cash on hand when the chapter 7 case is filed. Further, if the debtor has received cash or the equivalent of cash in the form of a paycheck or the closing of a bank account shortly before the filing of the case, the debtor should obtain receipts when disposing of the funds in order to prove to the trustee and the court that the funds were disposed of prior to the filing of the case. Money possessed by the debtor shortly before the filing of a chapter 7 case may be spent on such items as food and groceries, the chapter 7 filing fee, the attorney's fee in the chapter 7 case, regular payments on secured debts if the debtor intends to keep the property, which are exempt or have no equity, and payments on priority debts. Payments should not be made to friends or relatives, however, as the trustee may later recover these payments.

Bank Accounts. The best practice is to close out all bank accounts before filing under chapter 7. If a bank account is not closed, the balance of the account should be as close to zero as the bank will allow and all outstanding checks must clear the account before the case is filed. If the debtor has written a check to someone for, say, $50 and if the check has not cleared the account when the case is filed, the $50 in the account to cover the outstanding check will be deemed an asset of the debtor and if not exempted will have to be paid to the trustee.

Tax Refunds. In most states, including California, a tax refund is not specifically exempt and becomes the property of the trustee if it has not been received by the debtor prior to the filing of a chapter 7 case. Therefore, if the debtor is scheduled to receive a non-exempt tax refund, a chapter 7 case should not be filed until after the refund has been received and disposed of. Even if the case is filed before the end of the tax year, if the debtor later receives a refund, the trustee may be entitled to the portion of the refund earned prior to the filing of the case. The best practice, then, is to either file the chapter 7 case early in the tax year (but after the refund from the previous year has been received) or make arrangements to insure that there will be no tax refund for that year. More...

A chapter 7 discharge releases only the debtor. The liability of any other party on a debt is not affected by a chapter 7 discharge. Therefore, a person who has cosigned or guaranteed a debt for the debtor is still liable for the debt regardless of the debtor's chapter 7 discharge. The only exception to this rule is in community property states where the spouse of a debtor is released from certain community debts by the debtor's chapter 7 discharge. More...

When a chapter 7 discharge is granted, the court enters an order prohibiting the debtor's creditors from later attempting to collect any discharged debt from the debtor. Any creditor who violates this court order may be held in contempt of court and may be liable to the debtor in damages. If a creditor later attempts to collect a discharged debt from the debtor, the debtor should give the creditor a copy of the order of discharge and inform the creditor in writing that the debt has been discharged under chapter 7. If the creditor persists, the debtor should contact an attorney. If a creditor files a lawsuit against the debtor on a discharged debt, it is important not to ignore the matter, because even though a judgment entered against the debtor on a discharged debt can later be voided, voiding the judgment may require the services of an attorney, which could be costly to the debtor. More...

Usually by mail. Most courts send a form eared "Discharge of Debtor" to the debtor and to all creditors. This form is a copy of the court order discharging the debtor from his or her dischargeable debts, and it serves as notice that the debtor's discharge has been granted. It is usually mailed about three months after a chapter 7 case is filed. More...

Yes. A financial counselor has no legal right to prevent anyone from filing under chapter 7. More...

The debtor should immediately notify the bankruptcy court in writing of the new address. Because most communications between a debtor and the bankruptcy court are by mail, it is important that the bankruptcy court always have the debtor's current address. Otherwise, the debtor may fail to receive important notices and the chapter 7 case may be dismissed. Many courts have change-of-address forms for debtors to use when they move, and the debtor should obtain one if a move is planned. More...

The filing of a chapter 7 case automatically stays (or stops) virtually all collection and other legal proceedings pending against the debtor. A few days after a chapter 7 case is filed, the court mails a notice to all creditors ordering them to refrain from any further action against the debtor. If necessary, this notice may be served earlier by the debtor or the debtor's attorney. Any creditor who intentionally violates the automatic stay may be held in contempt of court and may be liable to the debtor in damages. Criminal proceedings and actions to collect alimony, maintenance, or support from exempt property or property acquired by the debtor after the chapter 7 case was filed are not affected by the automatic stay. The automatic stay also does not protect cosigners and guarantors of the debtor, and a creditor may continue to collect debts of the debtor from those persons after the debtor files a chapter 7 case. More...

If, within 20 days after a chapter 7 case is filed, the debtor furnishes a utility company with a deposit or other security to insure the payment of future utility services, it is illegal for a utility company to refuse to provide future utility service to the debtor, or to otherwise discriminate against the debtor, if its bill for past utility services is discharged in the chapter 7 case.

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The answer depends on the status of the debtor's dischargeable debts, the nature and status of the debtor's nonexempt assets, and the actions taken or threatened to be taken by the debtor's creditors. The following rules should be followed:

1. Don't file under chapter 7 until all anticipated debts have been incurred, because it will be another eight years before the debtor is again eligible for a chapter 7 discharge. For example, a debtor who has incurred substantial medical expenses should not file under chapter 7 until the illness or injury has either been cured or covered by insurance, as it will do little good to discharge, say, $50,000 of medical debts now and then incur another $50,000 in medical debts in the next few months.
2. Don't file under chapter 7 until the debtor has received all nonexempt assets to which he or she may be entitled. If the debtor is entitled to receive an income tax refund or a similar nonexempt asset in the near future, he or she should not file under chapter 7 until after the refund or asset has been received and disposed of. Otherwise, the refund or asset will become the property of the trustee.
3. Don't file under chapter 7 if the debtor expects to acquire property through inheritance, life insurance or divorce in the next 180 days, because the property will have to be turned over to the trustee unless it is exempt.

If a hostile creditor action threatens a debtor's exempt assets or future income, the case should be filed immediately to take advantage of the automatic stay that accompanies the filing of a chapter 7 case. If a creditor has threatened to attach or garnishee the debtor's wages or if a foreclosure action has been instituted against the debtor's residence, it may be necessary to file a chapter 7 case immediately in order to protect the debtor's interest in the property.

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Generally, both husband and wife should file if one or more substantial dischargeable debts are owed by both spouses. If both spouses are liable for a substantial debt and only one spouse files under chapter 7, the creditor may later attempt to collect the debt from the non-filing spouse, even if he or she has no income or assets. In community property states it may not be necessary for both spouses to file if all substantial dischargeable debts are community debts. California is a community property state. More...

Yes. A husband and wife may file a joint petition under chapter 7. If a joint petition is filed, only one set of bankruptcy forms is needed and only one filing fee is charged.

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An unsecured creditor is a creditor without a valid lien or mortgage against property of the debtor. If the debtor has nonexempt assets, unsecured creditors may file claims with the court within 90 days after the first date set for the meeting of creditors. The trustee will examine these claims and file objections to those deemed improper. When the trustee has collected all of the debtor's nonexempt property and converted it to cash, and when the court has ruled on any objections to improper claims, the trustee will distribute the funds in the form of dividends to the unsecured creditors according to the priorities set forth in the Bankruptcy Code. Administrative expenses, claims for wages, salaries, and contributions to employee benefit plans, claims for the refund of certain deposits, claims for alimony, maintenance support, and tax claims, are given priority, in that order, in the payment of dividends by the trustee. If there are funds remaining after the payment of these priority claims, they are distributed pro rata to the remaining unsecured creditors. More...

In the office of the clerk of the bankruptcy court in the district where the debtor has resided or maintained a principal place of business for the greatest portion of the last 180 days. The bankruptcy court is a federal court and is a unit of the United States district court. Practically nowadays, cases are filed online. More...

 

The filing fee is $299 for either a single or a joint case. If a debtor is unable to pay the filing fee when the case is filed and earns less than 150% of the poverty level, the filing fee may be waived. Otherwise, it may be paid in installments, with the final installment due within 120 days. The period for payment may later be extended to 180 days by the court, if there is a valid reason for doing so. If the filing fee is not paid, the case will be dismissed and the debtor will not receive a discharge. The fee charged by the debtor's attorney for handling the chapter 7 case is in addition to the filing fee. More...

If, from the debtor's chapter 7 forms, it appears that the debtor has no nonexempt property, a notice will be sent to the creditors advising them that there appears to be no assets from which to pay creditors, that it is unnecessary for them to file claims, and that if assets are later discovered they will then be given an opportunity to file claims. This type of case is referred to as a no-asset case. Approximately one-half of all chapter 7 cases that are filed are no-asset cases. More...

It is usually converted to cash, which is used to pay the fees and expenses of the trustee and to pay the claims of unsecured creditors. The trustee's fee is usually $45 per case plus a percentage of the amount collected from the debtor. More...

Any person who resides in, does business in, or has property in the United States may file under chapter 7, except a person who has been involved in another bankruptcy case that was dismissed within the last 180 days on certain grounds. More...

The law requires the debtor to cooperate with the trustee in the administration of a chapter 7 case, including the collection by the trustee of the debtor's nonexempt property and providing the trustee with 60 days worth of pay-stubs, tax returns, and other financial statements in the debtor’s possession. If the debtor does not cooperate with the trustee, the chapter 7 case may be dismissed and the debtor may be denied a discharge. More...

The following persons are not eligible for a chapter 7 discharge:

1. A person who has been granted a discharge in a chapter 7 case filed within the last eight years.
2. A person who has been granted a discharge in a chapter 13 case filed within the last six years.
3. A person who files a waiver of discharge that is approved by the court in the chapter 7 case.
4. A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or  the trustee in the chapter 7 case.
5. A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.
6. A person who makes false statements or claims in the chapter 7 case, or who withholds recorded information from the trustee.
7. A person who fails to satisfactorily explain any loss or deficiency of his or her assets.
8. A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy  case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.

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The trustee is an officer of the court, appointed to examine the debtor, collect the debtor's nonexempt property, and pay the expenses of the estate and the claims of creditors. In addition, the trustee has certain administrative duties in a chapter 7 case and is the officer in charge of seeing to it that the debtor performs the required duties in the case. A trustee is appointed in a chapter 7 case, even if the debtor has no nonexempt property. More...

All debts of any kind or amount, including out-of-state debts, are dischargeable under chapter 7 except the debts listed below. The following is a list of the most common debts that are not dischargeable under chapter 7:

1. Most tax debts and debts that were incurred to pay federal tax debts.
2. Debts for obtaining money, property, services, or credit by means of false pretenses, fraud, or a false financial statement if the creditor files a complaint in the case (included here are debts for luxury goods or services and debts for cash advances made within 60 days before the case is filed).
3. Debts not listed on the debtor's chapter 7 forms, unless the creditor knew of the case in time to file a claim.
4. Debts for fraud, embezzlement, or larceny, if the creditor files a complaint in the case.
5. Debts for alimony, maintenance, or support and, if the creditor files a complaint in the case, certain other divorce-related debts including property settlement debts.
6. Debts for intentional or malicious injury to the person or property of another, if the creditor files a complaint in the lease.
7. Debts for certain fines or penalties.
8. Debts for educational benefits and student loans are not dischargeable unless a court finds that not discharging the debt would impose an undue hardship on the debtor and his or her dependents.
9. Debts for personal injury or death caused by the debtor's operation of a motor vehicle while intoxicated.
10. Debts that were or could have been listed in a previous bankruptcy case of the debtor in which the debtor did not receive a discharge.

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After the meeting of creditors, the trustee may contact the debtor regarding the debtor's property, and the court may issue certain orders to the debtor. These orders are sent by mail and may require the debtor to turn certain property over to the trustee, or provide the trustee with certain information. If the debtor fails to comply with these orders, the case may be dismissed and the debtor may be denied a discharge. More...

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. Some debts, however, are not dischargeable under chapter 7, and some persons are not eligible for a chapter 7 discharge. More...

The first court appearance is for a hearing called the "meeting of creditor." This hearing usually takes place about a month after the case is filed. At this hearing the debtor is put under oath and questioned about his or her debts and assets by the hearing officer or trustee. In most chapter 7 consumer cases no creditors appear in court; but any creditor that does appear is usually allowed to question the debtor. If the bankruptcy court decides not to grant the debtor a discharge or if the debtor wishes to reaffirm a debt and is not represented by an attorney, there will be another hearing about two to three months later which the debtor will have to attend

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Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation. A person who files under chapter 7 is called a debtor. In a chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor's creditors. In return, the debtor receives a discharge of most or all his debt

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The filed attorney performs the following functions in a typical chapter 13 case:

1. Examining the filed financial situation and determining whether chapter 13 is a feasible alternative for the debtor, and if so, whether a single or a joint case should be filed.
2. Assisting the debtor in the preparation of a budget.
3. Examining the liens or security interests of secured creditors to ascertain their validity or avoidability, and taking the legal steps necessary to protect the filed interest in such matters.
4. Devising and implementing methods of dealing with secured creditors.
5. Assisting the debtor in devising a chapter 13 plan that meets the needs of the debtor and is acceptable to the court.
6. Preparing the necessary pleadings and chapter 13 forms.
7. Filing the chapter 13 forms and pleadings with the court and paying, or providing for the payment of, the filing fee.
8. Attending the meeting of creditors, the confirmation hearing, and any other court hearings required in the case.
9. Assisting the debtor in obtaining court approval of a chapter 13 plan.
10. Checking the claims filed in the case, filing objections to improper claims, and attending court hearings thereon.
11. Assisting the debtor in overcoming any legal obstacles that may arise during the course of the case.
12. Assisting the debtor in obtaining a discharge upon the completion or termination of the plan.

The fee charged by an attorney for representing a debtor in a chapter 13 case must be reviewed and approved by the bankruptcy court. This rule is followed whether the fee is paid to the attorney prior to or after the filing of the case, and whether it is paid to the attorney directly by the debtor or by the chapter 13 trustee. The court will approve only a fee that it finds to be reasonable. More...

Yes. A self-employed person meeting the eligibility requirements listed in the answer to Question 46 below may file under chapter 13. A debtor engaged in business may continue to operate the business during the chapter 13 case.

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A debtor who is unable to complete the chapter 13 payments has three options:

1. dismiss the chapter 13 case,
2. convert the chapter 13 case to chapter 7 if eligible, or
3. if the debtor is unable to complete the payments due to circumstances for which he or she should not be held accountable, the debtor may qualify to close the case and obtain a partial chapter 13 discharge.

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If both spouses are liable for any significant debts, they should speak with an attorney about filing jointly under chapter 13, even if only one of them has income. More...

The debtor has the right to either dismiss a chapter 13 case or convert it to chapter 7 if eligible at any time for any reason. However, if the debtor simply stops making the required chapter 13 payments, the court may compel the debtor or the filed employer to make the payments and to comply with the orders of the court. Therefore, the debtor who wishes to discontinue a chapter 13 case should do so through his or her attorney.

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A husband and wife may file jointly under chapter 13 if each of them meets the requirements listed in the answer to Question 46 below, except that only one of them need have regular income and their combined debts must meet the debt limitations described in the answer to Question 46 below.

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The debtor should immediately notify his/her attorney, the bankruptcy court, and the chapter 13 trustee in writing of the new address. Most communications in a chapter 13 case are by mail, and if the debtor fails to receive an order of the court or a notice from the chapter 13 trustee because of an incorrect address, the case may be dismissed. Many courts have change-of-address forms that may be used if the debtor moves. More...

Any natural person may file under chapter 13 if the person  

1. resides in, does business in, or owns property in the United States,
2. has regular income,
3. has unsecured debts of less than $360,475,
4. has secured debts of less than $1,081,400,
5. is not a stockbroker or a commodity broker, and
6. has not been a debtor in another bankruptcy case that was dismissed within the last 180 days on certain technical grounds.

  A person meeting the above requirements may file under chapter 13 regardless of when he or she last filed a bankruptcy case or received a bankruptcy discharge. Corporations, partnerships and limited liability companies may not file under chapter 13. More...

Only two types of credit obligations or debts incurred after the filing of the case may be included in a chapter 13 plan. These are: (1) debts for taxes that become payable while the case is pending, and (2) consumer debts arising after the filing of the case that are for property or services necessary for the debtor’s performance under the plan and that are approved in advance by the chapter 13 trustee. All other debts or credit obligations incurred after the case is filed must be paid by the debtor outside the plan. Some courts issue an order prohibiting the debtor from incurring new debts during the case unless they are approved in advance by the chapter 13 trustee. Therefore, the approval of the chapter 13 trustee should be obtained before incurring credit or new debts after the case has been filed. The incurrence of regular debts, such as debts for telephone service and utilities, do not require the trustee's approval. More...

If a cosigned or guaranteed consumer debt is being paid in full under a chapter 13 plan, the creditor may not collect the debt from the cosigner or guarantors. However, if a consumer debt is not being paid in full under the plan, the creditor may collect the unpaid portion of the debt from the cosigner or guarantors at the end of the case or with leave of the court. A consumer debt is a non-business debt. Creditors may collect business debts from cosigners or guarantors even if the debts are to be paid in full under the debtor’s plan. More...

If the debtor is temporarily out of work, injured, or otherwise unable to make the payments required under a chapter 13 plan, the plan can usually be modified so as to enable the debtor to resume the payments when he or she is able to do so. If it appears that the debtor’s inability to make the required payments continues indefinitely or for an extended period, the case may be dismissed or converted to chapter 7.

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There are four methods of dealing with secured creditors under chapter 13:  

1. The creditor may accept the debtor's proposed plan,
2. The creditor may retain its lien and be paid the full amount of its secured claim under the plan,
3. The debtor may surrender the collateral to the creditor and treat any remaining balance as an unsecured claim, or
4. The creditor may be paid or dealt with outside of the plan.

  It is important to understand that a creditor has a secured claim only to the extent of the value of its security, which cannot exceed the value of the property securing the claim. Thus, a creditor with a lien on, say, a $1500 automobile, cannot have a secured claim for more than $1500 regardless of how much is owed to the creditor. Security interests in certain types of property are excluded from this rule, including cars used for personal or family use purchased within the last 910 days. If the debtor is in default to a secured creditor, the default must be cured (made current) within a reasonable time. Also, interest must be paid on secured claims. More...

Unsecured creditors must file their claims with the bankruptcy court within 90 days after the first date set for the meeting of creditors in order for their claims to be allowed. Unsecured creditors who fail to file claims within that period are barred from doing so, and upon completion of the plan their claims will be discharged. The debtor may file a claim on behalf of a creditor, if desired. After the claims have been filed, the debtor may file objections to any claims that he or she disputes. When the claims have been approved by the court, the chapter 13 trustee begins paying unsecured creditors as provided for in the chapter 13 plan. Payments to secured creditors, priority creditors, and special classes of unsecured creditors may begin earlier, if desired. More...

NO. To become effective, a chapter 13 plan must be approved by the court, not by the creditors. The court cannot approve a plan unless secured creditors are dealt with in the manner described in the answer to Question 31. Also, unsecured creditors are permitted to file objections to the debtor’s plan, and these objections must be ruled on by the court before it can approve the debtor’s chapter 13 plan. More...

If the court will not approve the plan proposed by a debtor, the debtor may modify the plan and seek court approval of the modified plan. If the court does not approve a plan, it will usually give its reasons for refusing to do so, and the plan may then be appropriately modified so as to become acceptable to the court. A debtor who does not wish to modify a proposed plan may either convert the plan to chapter 7 or dismiss the case. More...

All debtors have to appear in court at least once for a hearing called the meeting of creditors. If creditors do not consent to a plan or other disagreements arise, debtors may have to appear for a hearing on the confirmation of the debtor’s chapter 13 plan. The meeting of creditors is usually held about 2 months after the case is filed. The confirmation hearing generally takes place one or more months later. The debtor’s testimony should not be lengthy at either hearing, however. If difficulties or unusual circumstances arise during the course of a case, additional court appearances may be necessary.

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The debtor must begin making payments to the chapter 13 trustee within 30 days after the debtor’s plan is filed with the court, and the plan must be filed with the court within 15 days after the case is filed. The payments must be made regularly, usually on a monthly basis. If the debtor is employed, some courts require the payments to be made by the debtor’s employer, otherwise, the payments can be made by either the debtor or the debtor's employer. More...

The court may confirm a chapter 13 plan if: (1) the plan complies with the legal requirements of chapter 13, (2) all required fees, charges, and deposits have been paid, (3) all priority claims will be paid in full under the plan, (4) the plan was proposed in good faith, (5) each unsecured creditor will receive under the plan at least as much as it would have received had the debtor filed under chapter 7, (6) it appears that the debtor will be able to make the required payments and comply with the plan, and (7) each secured creditor has been dealt with in the manner described in the answer to Question 31 below.

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Usually all of the disposable income of the debtor and the debtor’s spouse for a three-year period must be paid to the chapter 13 trustee. Disposable income is income received by the debtor and his or her spouse that is not reasonably necessary for the support of the debtor and the debtor’s dependents. This income is calculated by the Means Test. More...

No. It is illegal for either private or governmental employers to discriminate against a person because that person has filed under chapter 13. It is also illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses, permits, student loans, and similar grants because that person has filed under chapter 13.

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No. If there is a reasonable basis for doing so, unsecured debts can be divided into separate classes and treated differently. It may be possible, therefore, to pay certain unsecured creditors in full while paying little or nothing to others.

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No. Filing under chapter 13 is a civil proceeding and not a criminal proceeding. Therefore, a person does not lose any legal or constitutional rights by filing a chapter 13 case. Bankruptcy does not impede progress toward citizenship. More...

No. While priority debts, such as debts for alimony, maintenance and support and debts for taxes, and fully short-term secured debts must be paid in full under a chapter 13 plan, only an amount that the debtor can reasonably afford may be paid on most debts. The unpaid balances of most debts that are not paid in full under a chapter 13 plan are discharged upon completion of the plan. More...

In some cases, yes. Some courts require a debtor’s employer to make payments to the chapter 13 trustee on the debtor’s behalf, although, the Northern District of California does not as long as direct payments from the debtor are timely. Also, the chapter 13 trustee may contact an employer to verify the debtor's income. However, if there are compelling reasons for not informing an employer in a particular case, it may be possible to make other arrangements for the required information and payments. More...

It may worsen it, at least temporarily. However, if most of a person’s debts are ultimately paid off under a chapter 13 plan, that fact may be taken into account by credit reporting agencies. If very little is paid on most debts, the credit-rating effect of a chapter 13 case may be similar to that of a chapter 7 case. More...

The filing of a chapter 13 case automatically stays (stops) lawsuits, attachments, garnishments, foreclosures, and other actions by creditors against the debtor or the debtor’s property. A few days after the case is filed, the court will mail a notice to all creditors advising them of the automatic stay. Certain creditors may be notified sooner, if necessary. Most creditors are prohibited from proceeding against the debtor during the entire course of the chapter 13 case. If the debtor is later granted a chapter 13 discharge, the creditors will then be prohibited from collecting the discharged debts from the debtor after the case is closed. More...

Yes. A financial counselor has no legal right to prevent a person from filing any type of bankruptcy case, including a chapter 13 case.

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It is a written plan presented to the bankruptcy court by a debtor that states how much money or other property the debtor will pay to the chapter 13 trustee, how long the debtor’s payments to the chapter 13 trustee continue, how much will be paid to each of the debtor's creditors, and certain other technical matters. More...

A full chapter 13 discharge must be granted upon the completion of all payments required in the plan. This discharges a debtor from all debts except:

1. valid secured debts on property the debtor is keeping,
2. debts for alimony, maintenance, or support,
3. debts for death or personal injury caused by the debtor’s operation of a motor vehicle while unlawfully intoxicated,
4. debts for willful personal injury,
5. certain tax debts,
6. debts to tax-advantaged retirement plans (IRA’s and 401K’s are included),
7. government funded or guaranteed student loans including benefit overpayments,
8. debts for fines and penalties to government, 
9. certain debt’s based on fraudulent conduct,
10. some homeowner’s association fees,
11. installment debts whose last payment is due after the completion of the plan,
12. debts that were paid outside of the plan and not covered in the plan,
13. debts not listed in the bankruptcy schedules.

A partial chapter 13 discharge granted when a debtor is unable to complete the payments under a plan due to circumstances for which the debtor should not be held accountable, discharges the debtor from all debts that would be discharged in a Chapter 7.

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A pending chapter 7 case may be converted to chapter 13 at any time at the request of the debtor, if the debtor has not been previously converted to chapter 7 from chapter 13. More...

Chapter 13 is that part (or chapter) of the Bankruptcy code under which a person may repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. A person who files under chapter 13 is called a debtor. In a chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective. If the court approves the debtor’s plan, most creditors will be prohibited from collecting their claims from the debtor during the course of the case. The debtor must make regular payments to a person called the chapter 13 trustee, who collects the money paid by the debtor and disburses it to creditors in the manner called for in the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts. More...

A chapter 13 plan typically lasts for three years, unless all debts can be paid off in full in less time. However, a chapter 13 plan can last for as long as five years, if necessary. The time required is based upon a comparison of the disposable income and expenses (the Means Test). More...

Any debts whatsoever, whether they are secured or unsecured. Even debts that are non-dischargeable, such as debts for student loans, alimony or child support may be paid under a chapter 13 plan. More...

 The basic difference between chapter 7 and chapter 13 is that under chapter 7, the debtor’s nonexempt property (if any exists) is liquidated (sold) to pay as much as possible of the debtor’s debts, while in most chapter 13 cases, a portion of the debtor’s future income is dedicated to pay as much of the debtor’s debts as is feasible considering the debtor's circumstances. A chapter 13 case normally lasts much longer than a chapter 7 case and is usually more expensive for the debtor.

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Chapter 13 is usually preferable for a person who:

1. wishes to repay all or most of his or her unsecured debts and has the income with which to do so within a reasonable time,
2. has valuable nonexempt property or has valuable exempt property securing debts, either of which that would be lost in a chapter 7 case (i.e. a house severely in arrears),
3. is not eligible for a discharge under chapter 7,
4. has one or more substantial debts that are dischargeable under chapter 13 but not under chapter 7, or
5. has sufficient assets with which to repay most debts, but needs temporary relief from creditors in order to do so.

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In a chapter 13 case, the bankruptcy court can provide aid to the debtor that private debt consolidation services cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor's property, to force unsecured creditors to accept a chapter 13 plan that pays only a portion of their claims, and to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.

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Usually not under chapter 13. Creditors are usually paid out of the debtor’s income and not from the debtor’s property. However, if a debtor has valuable nonexempt property and has insufficient income to pay enough to creditors to satisfy the court, some of the debtor’s property may have to be used to pay creditors. More...

There is a $274 filing fee charged when the case is filed, which may be paid in installments if necessary. In addition, the chapter 13 trustee assesses a fee of around 10% on all payments made under the plan. Thus, if a debtor pays a total of $5,000 under a chapter 13 plan, the total amount of fees charged in the case will be $774 (a $500 trustee's fee, plus the $274 filing fee). Some of the attorney’s fees are also paid through the plan in an amount generally set by local standards or the amount of time spent on the case. More...

When a chapter 13 case is filed, it becomes a public record and the name of the debtor may be published by some credit reporting agencies. However, newspapers do not usually publish the names of persons who file under chapter 13. More...

A chapter 13 trustee is a person appointed by the United States Court to collect payments from the debtor, make payments to creditors in the manner set forth in the debtor’s plan, and administer the debtor’s chapter 13 case until it is closed. In some cases the chapter 13 trustee is required to perform certain other duties, and the debtor is always required to cooperate with the chapter 13 trustee. More...

It is a court order releasing a debtor from all dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. There are two types of chapter 13 discharges: a full or successful plan discharge, which is granted to a debtor who completes all payments called for in the plan, and a partial or unsuccessful plan discharge, which is granted to a debtor who is unable to complete the payments called for in the plan due to circumstances for which the debtor should not be held accountable. A full chapter 13 discharge is broader and discharges more debts than a chapter 7 discharge, while a partial chapter 13 discharge is more limited.

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