Texas Chapter 13 Bankruptcy
Click the links for general information on the following topics!
- What is Chapter 13?
- What’s the Difference Between Ch 7 and Ch 13?
- Talk to an Attorney
- Your Attorney’s Role
- Credit Counseling Requirements
- The Process of Filing
- Meeting of Creditors
- Where will my case be filed?
- Do I have to go to Court?
- Repayment Plan
- Approving the Plan
- Debtor Education
- Will I lose my property?
- Garnishments and Lawsuits
- Effect on Credit Rating
- Foreclosure During Repayment
- Credit Purchases During Repayment
- Who can file?
- Husband and Wife Filing
- Child Support
- Benefits of Chapter 13
- Is Chapter 13 right for you?
What is Chapter 13 Bankruptcy?
Chapter 13 is a proceeding under the Federal Bankruptcy laws where a person turns his debts, together with a plan for repaying them, over to the Bankruptcy Court. The debtor (you) will make regular installment payments to a person called the Chapter 13 Trustee. The Trustee collects the installment payments and pays required creditors in the manner prescribed in the Plan. While the Plan is in effect, the court puts into effect an Automatic Stay which prevents collection efforts from all creditors.
Chapter 13 bankruptcy often provides a solution for people who have faced short-term financial setbacks like job loss, illness, or large unexpected expenses. Chapter 13 may work for you if you have experienced an unexpected crisis that has caused you to fall behind on bills, but still have regular income and can make regular monthly payments. Chapter 13 could be what you need to get the breathing room to get yourself back together financially.
Chapter 13 combines the Automatic Stay, with the ability to catch up past due payments over a period of three to five years after filing bankruptcy while keeping current payments up to date. Many people looking to stop foreclosure or avoid repossession choose Chapter 13 for this reason.
Could Chapter 13 bankruptcy help you? We at The Wright Firm highly recommend you contact a local bankruptcy attorney to evaluate your options.
CALL THE WRIGHT FIRM TODAY TO BOOK A FREE CONSULTATION!
What’s the difference between Ch 7 and Ch 13?
In a Chapter 7 bankruptcy, you don’t pay off your debts. Instead, you must turn over all non-exempt property to the Chapter 7 Trustee. The Trustee will sell all non-exempt assets, and creditors are paid from the proceeds of this sale.
In a Chapter 13 you may keep all of your property. You have the opportunity to take (usually) 3 to 5 years to get caught up on debts that have fallen behind, while still making all current debt payments.
Talk to an Attorney
Any kind of bankruptcy is complicated and paperwork intensive. A mistake in your Chapter 13 filing may result in your payment plan not getting approved, cause delays in the process, cost you your automatic stay, or even cause your case to be dismissed.
A local bankruptcy attorney can explain your options and guide you through the process, helping to ensure that all filing requirements and deadlines are met and that you’ve accounted for all of your allowable expenses and proposed a plan that will allow you to make payments while keeping up your regular expenses. We at The Wright Firm highly recommend you contact a local bankruptcy attorney to evaluate your options.
CALL THE WRIGHT FIRM TODAY TO BOOK A FREE CONSULTATION!
Your Attorney’s Role
Your attorney will:
- Assist you in determining whether a Chapter 13 Plan is possible. If a Chapter 13 Plan is possible, then determining the type of plan which best suits your situation.
- Assist you in preparing a budget.
- Assist you in devising a plan acceptable to the court and to secured creditors.
- Preparation of the proper pleading and forms to filed with the court.
- Contact creditors to solicit their acceptance of your plan.
- File the Chapter 13 Petition and all other papers with the court.
- Attend the “Meeting of Creditors” and any subsequent court hearings.
- Assist you in gaining confirmation of the Chapter 13 Plan.
- Attend the Confirmation Hearing.
- Assist you in overcoming any obstacles (legal or non-legal) that arise during the course of the plan. In most cases legal services provided after confirmation accrue additional fees.
Before You File
Since October of 2005, all personal bankruptcy petitioners filing bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code have been required to complete a U.S. Trustee approved Credit Counseling Briefing. Your bankruptcy attorney will file the Credit Counseling certificate with your bankruptcy petition. Without this certificate, you case may be DISMISSED, allowing creditors a window in which to take collection action, even to move forward with foreclosure or repossession, while the automatic stay is not in effect.
Talk to your bankruptcy attorney about where to get your Credit Counseling Briefing.
Beginning the Process
Step 1: Complete your Credit Counseling Briefing.
Step 2: File your bankruptcy petition in the appropriate court.
Step 3: The court will enter an automatic stay, prohibiting creditors from taking any further collection action while the bankruptcy case is pending, or until further order of the bankruptcy court.
Step 4: The bankruptcy court will send notice to all of the creditors listed in the Chapter 13 petition, and will assign a bankruptcy trustee to the case.
Step 5: Within about 15 days after the petition is filed, the court will send a Notice of Commencement of Case to the bankruptcy petitioner and to all of the creditors listed in the bankruptcy petition. This notice will include important information like the time, date and location of the creditors meeting and the deadlines for claims and/or objections from creditors.
Step 6: Schedules containing information about the petitioner’s debts, assets, income and expenses MUST be filed within 15 days after the case is commenced. These schedules may be filed with the petition. If the petitioner is filing bankruptcy in order to stop foreclosure or repossession, the schedules may be filed separately so that the petition can be filed immediately, without waiting to collect the required information and documentation for the schedules.
Meeting of Creditors
The Meeting of Creditors will usually take place within 30 to 45 days after your petition is filed. The meeting is informal and your attorney will prepare you for this occasion. The “Meeting of Creditors” usually does not last longer than 15 to 20 minutes.
Where will my Chapter 13 case be filed?
In the United States District Court in the district where you reside or where you work. The Bankruptcy Court is a part of the United States District Court.
Will I have to appear in Court?
Generally speaking, NO. You will be required to attend a Personal Financial Management Course. This will usually be given by the Chapter 13 Trustee on the same day you attend the Meeting of Creditors. If problems arise during the course of your plan, you may have to make other court appearances. The hearings, however, are mostly informal and you will always have the opportunity to explain your views or problems to the judge.
The Repayment Plan
Chapter 13 bankruptcy is intended to help people facing financial difficulty keep their property while gradually catching up on past due balances. A typical Chapter 13 bankruptcy repayment plan is 36 to 60 months long. During that time, the bankruptcy petitioner keeps current payments current, but makes monthly payments toward past due balances. Debts are prioritized, which means they are put into order by who gets paid when. Secured creditors (like the mortgage company) get paid first. Any income leftover goes to pay unsecured creditors (like credit card companies). If all payments have been made as scheduled, unsecured debt remaining at the end of the plan may be discharged.
Who Approves My Repayment Plan?
Only the Bankruptcy Court must approve your plan. The Bankruptcy Court will approve your plan if:
- It is proposed in Good Faith;
- The required fees are paid;
- Each of your secured creditors is paid the lesser of:
- What you owe or
- The value of the collateral (with some exceptions), or
- The collateral has been surrendered to satisfy the claim
- You make the required payments to the Chapter 13 Trustee timely.
Before you can get a Discharge
In addition to making payments as agreed to when filing bankruptcy under the Chapter 13 plan, Chapter 13 bankruptcy petitioners must complete a U.S. Trustee approved financial management course (often called Debtor Education) before a discharge may be granted. Taking a Debtor Education course after filing bankruptcy is a bit like taking Defensive Driving after getting a speeding ticket. The purpose is to teach you how to avoid making the mistakes that got you in trouble, and how to do things better the next time around. Your bankruptcy attorney can refer you to an approved financial management course in your area.
Will I lose any property if I file a Chapter 13?
No. Under a Chapter 13 plan, your debts are satisfied by the installment payments to the Chapter 13 Trustee. At your option, you may choose to give back (“surrender”) collateral to your secured creditors. If you surrender property through the Chapter 13, you will cancel the debt on that property equal to the value of the property you are giving back. For example, if you decide to give a car back to the finance company, and the car is worth $8,000, then you will get $8,000 of your debt to that finance company canceled.
I already have a lawsuit/garnishment filed against me
The filing of Chapter 13 automatically stays (stops) all lawsuits, garnishments, attachments and other attempts by your creditors to take your property. A few days after your case is filed, the Bankruptcy Court will mail a notice to all of your creditors ordering them to stop all action against you.
How will a Chapter 13 case affect my Credit Rating?
Generally speaking, if you are filing for bankruptcy, you have probably already done damage to your credit rating. The effect a Chapter 13 will have on your credit will depend on your present history and your situation. A Chapter 13 may stay on your credit history for the period of 7 years from the date of filing.
Can I be foreclosed on during my Payment Plan?
The court has the power to prevent secured creditors, even those secured by real estate, from foreclosing upon or repossessing your property for as long as the plan is in effect provided you have equity in the property and the property is worth at least as much as you owe.
This does not mean the court will always prevent a creditor from foreclosing. But, if you are making an honest effort to satisfy a secured creditor and if your payments to that creditor are reasonably current, the creditor will not be permitted to foreclose.
However, if you do not keep your payments current to the trustee (and direct to the creditor if required) the court may lift the stay and allow the creditor to foreclose or repossess its collateral.
Can I purchase something on credit during the plan?
If your plan lasts for a number of years, it may become necessary to purchase a different car, a larger house, or some other item that is needed for the well being of you or your family. You must petition the court for permission before making the purchase. If the judge feels the purchase is reasonably necessary, he will allow you to make the purchase on credit. This is especially true if the new debt doesn’t impair your ability to make the installment payments in your plan.
Who Can File for Chapter 13?
To qualify for Chapter 13 bankruptcy, a debtor must:
- Have a regular source of income;
- Have enough income left over after covering current necessary living expenses to make regular payments to the trustee; and
- Fall within pre-set limits for secured and unsecured debts. The limits are updated periodically, and a local bankruptcy attorney can tell you the exact current limits.
For those who do not qualify for Chapter 13 bankruptcy, you may want to consider filing in the form of Chapter 7 bankruptcy.
Can /Should both husband and wife file under Chapter 13?
Yes, they CAN. Unless one of the spouses is a stockbroker or a commodity broker, a husband and wife can file a joint petition under Chapter 13 if both reside in, do business in, or own property in the United States.
Whether they SHOULD can be a very tricky question. You need to discuss this matter with your attorney. If this is the first bankruptcy either you or your spouse has filed then it is usually better if both spouses filed jointly.
You must remain current on your post-petition child support obligation. One condition of a discharge in Chapter 13 is that you MUST have paid all post-petition child support prior to the discharge.
The Benefits of Chapter 13 Bankruptcy
Often, people find Chapter 13 bankruptcy helpful when:
- They are behind on payments on secured property that they want to keep. Many people file Chapter 13 bankruptcy petitions specifically to stop foreclosure or vehicle repossession, but Chapter 13 may be equally useful for catching up on other secured debts while keeping the property that secures the debt.
- They have tax debts that cannot be discharged in a Chapter 7 bankruptcy case. Certain tax debts are non-dischargeable, but may be included in a Chapter 13 repayment plan and paid over time.
- They have non-exempt property that they want to keep. In a Chapter 7 bankruptcy case, non-exempt property can be liquidated (sold) for the benefit of creditors, but in a Chapter 13 repayment plan, the debtor maintains his or her property while making scheduled payments.
- They have filed for Chapter 7 bankruptcy within the previous eight years, and thus are not eligible to file under Chapter 7.
- They wish to protect co-signers on certain debts. In a Chapter 7 bankruptcy case, a co-signer remains liable for a debt even if that debt has been discharged. However, if a debt is included in a Chapter 13 repayment plan, the cosigner is protected so long as the debtor complies with the plan.
- They have past-due student loan debt. Student loans are not dischargeable in a Chapter 7 bankruptcy case except under certain very narrow circumstances, but student loan debt may be included in a Chapter 13 repayment plan.
Is Chapter 13 Bankruptcy the Right Answer for You?
Every person’s situation is different. The best way to figure out if Chapter13 is right for you is to speak with a local bankruptcy attorney.
CALL THE WRIGHT FIRM TODAY TO BOOK A FREE CONSULTATION!
We will be happy to help you assess your financial situation and discuss your legal rights and options. The best decisions are based on thorough, accurate information, and a Chapter 13 bankruptcy attorney may be the best source of that information when examining how filing bankruptcy may be able to help you keep the items most important to you. Don’t wait until your circumstances are desperate to talk to a bankruptcy lawyer!