Overview of Bankruptcy
What is a chapter 13 bankruptcy and how does it work?
Chapter 13 is one form of Bankruptcy in which you obtain relief from your creditors and submit a plan to pay some or all of your debts. The Court prohibits your creditors from trying to collect from you during the time you are paying your creditors according to your Plan. You must make regular payments to the Chapter 13 Trustee for a specified period of time. The Chapter 13 Trustee collects your money paid according to your plan and disburses it to your creditors in the proportions and manner you determined in your plan. Click here for more information.
Where is a chapter 13 case filed?
A Chapter 13 petition is filed with the Clerk of the Bankruptcy Court in the Federal District where you have lived, had your principal place of business, or had your principal assets located for the last 180 days.
The Bankruptcy Court is a part of the system of Federal courts. The Bankruptcy Courts were created by Congress just to hear bankruptcy cases and make decisions about disputes between debtors and creditors.
If you are represented by an attorney, (s)he is responsible for filing all necessary bankruptcy documents. Your Chapter 13 bankruptcy case is filed in the United States Bankruptcy Court for the District of Nevada. All original papers may only be filed with the Clerk of the Bankruptcy Court office. Your attorney will file the documents electronically. If you do not have an attorney, your documents should be sent or personally delivered to:
Clerk, United States Bankruptcy Court
300 Las Vegas Blvd. South 4th Floor
Las Vegas, NV 89101
What court fees are charged in a chapter 13?
There is a $310.00 filing fee when a case is filed. While not a government employee, the Chapter 13 Trustee receives a fee of up to 10% of the amount received under the Plan. This fee is subject to change, but will never exceed 10%. The Trustee’s fees are in addition to the fees charged by your lawyer and the Bankruptcy Court.
Who is eligible to file under a chapter 13?
Any natural person who resides in, owns property in, or does business in the United States, who has regular income, and who has unsecured debts of less than $383,175.00 and secured debts of less than $1,149,525.00 is eligible to file under Chapter 13, except stockbrokers and commodity brokers.
May a person who owns a business file under chapter 13?
Yes. A self-employed person is eligible to file under Chapter 13 if the person has regular income and meets the other requirements described in the answer to the last question. A debtor who owns his or her own business is normally permitted to continue to operate the business during the Chapter 13 case. Corporations and partnerships are NOT eligible to file Chapter 13. If you are operating a business the Chapter 13 may examine your business records and practices as part of her review of your bankruptcy case.
May a husband and wife file jointly under a chapter 13?
A husband and wife may file a joint petition under Chapter 13 if both of them reside in, own property in, or do business in the United States, and if neither of them is a stockbroker or commodity broker, provided that their total debts are within the limits previously described and provided that at least one of them has regular income. If a joint petition is filed, only a single filing fee is charged, and usually only a single set of Chapter 13 forms need to be filed. Joint cases are usually administered together.
Do I have to list all my creditors? For example, my parents loaned me some money before the bankruptcy. I didn't want to list them because I am embarrassed and don't want them to know this Chapter 13 is happening.
You are required by law to list all of your liabilities (debts) and assets (your possessions) in your bankruptcy papers and the petition you signed has you affirm under your oath, subject to penalty of perjury, that you have done so. Nobody can pick and choose who gets listed. If you forgot to list someone, that debt will probably not be discharged. However, it is not too late to add them. You can add creditors you forgot by amending your schedules. This requires a small fee to the bankruptcy court. If you forgot a creditor, be sure to inform your attorney at once.
REMEMBER: The Bankruptcy Code prohibits you from favoring one creditor over another. This means you cannot pay a creditor “on the side” unless it is specifically allowed under your plan. In some cases, your Plan may instruct you to pay some secured creditors directly (car loans, mortgage payments). However, under no circumstances should you be paying back any creditor unless your Plan so states. If you have any questions about this, talk to your attorney before you make any payments.
May a person who recently filed chapter 7 file under chapter 13?
Yes. Generally, a person may file under Chapter 13 regardless of when he or she filed previously either Chapter 7 or Chapter 13. However, the Court should enter your Chapter 7 discharge before filing another case.
May I change to chapter 13 if my chapter 7 case is still open?
Yes. A Chapter 7, 11 or 12 case may be converted to Chapter 13 at any time provided that you are eligible to be a debtor under Chapter 13 and that the case has not been previously converted from that Chapter.
How does chapter 13 differ from chapter 7?
Chapter 13 has gained widespread acceptance across the country as an attractive alternative to a straight bankruptcy which is also known as Chapter 7. Under Chapter 7, a debtor must turn over all of his or her nonexempt property to a bankruptcy trustee, who then pays the unsecured creditors out of the proceeds of the sale of the property. A debtor must continue to make current payments to secured creditors or those creditors are permitted to repossess the property upon which they have valid liens. Under Chapter 13, you are usually permitted to keep all of your property, whether or not it is exempt; and both the secured and unsecured creditors are paid out of the periodic payments you make to the Chapter 13 Trustee.
When is chapter 13 preferable to chapter 7?
Chapter 13 may be preferable for the debtor who –
(a) wishes to repay all or some of his unsecured debts and has the income to do so within a reasonable time, usually from three to five years;
(b) has valuable nonexempt property or exempt property pledged as security for debts, either of which the debtor would lose if the debtor filed under Chapter 7;
(c) is NOT eligible for a discharge under Chapter 7;
(d) has one or more substantial debts that are that are NOT dischargeable under Chapter 7; or
(e) has sufficient assets with which to repay his debts, but needs temporary relief from his creditors in order to do so.
How does chapter 13 compare with private debt consolidation services?
Under Chapter 13 the Court possesses powers to aid the debtor that private debt consolidation services do not have. For example, the Court has the power to prohibit creditors from attaching or foreclosing on the debtor’s property, the power to force unsecured creditors to accept a Chapter 13 plan which does not pay their claim in full, and the power to discharge a debtor from the unpaid portions of claims. Private debt consolidation services have none of these powers.
Will a chapter 13 bankruptcy affect my credit rating?
Your credit rating during and after completion of Chapter 13 will ultimately be based upon the personal opinion of any credit grantor who looks over your credit record. A credit rating is a record of all your past credit performances. This record is made available to a creditor and he or she makes up his or her own mind, by his or her own standards as to whether credit may be granted to you. Any credit record that has been blemished by a payment problem must be gradually rebuilt.