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Chapter 7 starting at $999, plus filing fees and costs.
Chapter 13 starting at $2,500, plus filing fees and costs.
What is Chapter 13 Bankruptcy?
Chapter 13 is the most commonly filed re-organization type of bankruptcy. Unlike Chapter 7, it allows debtors to keep their non-exempt property and reorganize and repay some or all of the secured and unsecured debts under a court approved plan over 3 to 5 years. Under Chapter 13, the debtor can cure the arrearages on secured debts, such as home mortgage, and modify certain contractual obligations for secured debts (mortgages, promissory notes). Essentially, Chapter 13 operates as a debt consolidation loan under which the debtor makes monthly payments to a Chapter 13 trustee who then distributes the payments to the debtor’s creditors. The debtor receives a discharge once the debtor completes all payments under the plan.
Chapter 13 Eligibility
Individual Consumer Debtors
Chapter 13 is intended for individual consumer debtors, even if debtors are self-employed or operate an unincorporated business. Corporations and partnerships are ineligible for Chapter 13 relief. Chapter 13 may be filed by both spouses (joint case).
Total debts limit of $2,750,000
Total debts must be under $2,750,000, including the secured and unsecured debts. Only noncontingent liquidated debts (debts the amount of which can be readily determined, count toward the debt limit.
Regular income
Chapter 13 debtors must have regular income to be able to make payments under the plan. Regular income can come from personal investments, pension, benefits, welfare, Social Security payments, child support, disability payments, and contributions from family members.
Chapter 13 Pre-Filing Requirements
Debtor must receive credit counseling from an approved credit counseling agency within 180 days before filing of the bankruptcy petition. The credit counseling may occur on the same day as the filing as long as it is before the moment of filing of the petition.
Can prior bankruptcy disqualify debtor from Chapter 13?
If the debtor filed bankruptcy before, Chapter 13 discharge is prohibited in the following cases:
Prior Chapter 13 within 2 years
A Chapter 13 discharge cannot be granted in a case filed within 2 years of the filing of the prior Chapter 13 in which a debtor received a discharge. However, because it usually takes 3-5 years to complete a plan, the practical effect of this limitation is that the debtor typically is eligible for another Chapter 13.
Prior Chapter 7, 11, or 12 within 4 years
A Chapter 13 discharge cannot be granted in a case filed within 2 years of the filing of the prior Chapter 7, 11, or 12 in which a debtor received a discharge. However, a new Chapter 13 may be filed in most cases immediately following a prior Chapter 7 or 13, it is filed for other purpose than to obtain a discharge.
Prior bankruptcy dismissed within 180 days
The debtor is ineligible for Chapter 13 (or any other chapter), if within 180 days before filing bankruptcy a prior bankruptcy petition was involuntarily dismissed due to the debtor’s willful failure to appear before the court or comply with court orders or was voluntarily dismissed by the debtor after a creditor moved to lift automatic stay.
Chapter 13 Overview
Chapter 13 bankruptcy is a complex process. A debtor can commence a Chapter 13 case simply by filing a petition along with the appropriate filing fees. The required financial information (schedules) and the proposed Chapter 13 plan may be filed either with the bankruptcy petition or within 14 days of bankruptcy filing. The debtor is required to start making plan payments to the trustee within 30 days after filing the Plan or the petition, whichever is earlier.
The filing of the petition under chapter 13 stops most collection actions against both the debtor and the non-filing co-debtor. See Automatic Stay. Furthermore, a trustee is appointed to evaluate the case. The trustee will hold a meeting of creditors between 20-40 days of filing. See “341 Meeting”. No later than 45 days after the meeting of creditors, the judge must hold a confirmation hearing to decide if the proposed plan meets all legal requirements. See Chapter 13 Plan Requirements. If the judge approves the plan, the debtor will perform under the plan and upon completion will receive a discharge. See Discharge. If the debtor is unable to complete the plan, the court may grant the debtor a hardship discharge. If the court does not confirm the plan, the debtor may file a modified plan, convert the case to Chapter 7, or have it dismissed.
Chapter 13 Timeline
Pre-Bankruptcy Credit Counselling
Within 180 days before filingBankruptcy Planning
The debt must receive credit counseling from an approved credit counseling agency within 180 days before filing of the bankruptcy petition.
The credit counseling may occur on the same day as the filing as long as it is before the moment of filing of the petition. The credit counseling court generally last 60 to 90 minutes and may be completed online or over the phone.
Bankruptcy planning is recommended since timing the bankruptcy filing is critical to a successful Chapter 13 case.
Debtor also needs to gather extensive financial documents to evaluate and prepared the case for bankruptcy.
Day 1 of Bankruptcy Filing
Petition and List of CreditorsFiling Chapter 13 Bankruptcy
Chapter 13 begins either when the debtor files a bankruptcy petition and a list of creditors along with payment of the filing fee of $313, or when the debtor converts the case from Chapter 7. A petition must also be filed with a list of creditors and verification of creditor matrix.
The petition is filed in the bankruptcy court located in the district where the debtor has lived for 91 days prior to filing.
The filing of the bankruptcy petition automatically stops most collection activity against the debtor and codebtors with consumer debts and creates a bankruptcy estate consisting of all property of the debtor. The automatic stay is in effect until the case is closed, with some exceptions. For more information, see Automatic Stay.
A trustee is appointed to administer the case. The chapter 13 trustee evaluated the case and collects and disburses payments made under the plan to creditors.
Day 1-14
Schedules, Statements, Proposed Chapter 13 PlanAll Other Required Documents
All other schedules and documents, including a proposed Chapter 13 plan, must be filed with the court within 14 days of filing, if not filed with the petition. If a case is converted to Chapter 13, the plan must be filed within 14 days after conversion.
Shortly After Bankruptcy Filing
Notice of Chapter 13 Bankruptcy CaseNotice of Commencement of Case
The court mails the Notice of Chapter 13 Bankruptcy Case to the debtor and the creditors. The notice is confirmation that a Chapter 13 case has been filed and it contains the date, time and Zoom link for the meeting of creditor, the confirmation hearing, important deadlines, and other important information.
Day 1-30
Proposed Plan PaymentsChapter 13 Plan Payments
Debtor needs to begin making payments to Chapter 13 trustee in the amount proposed in the Plan no later than 30 days after bankruptcy filing. Debtor may propose to continue making certain payments outside of the plan if the debts are not in default.
Other than payments to secured creditors for adequate protection, the trustee retains all payments until confirmation or denial of confirmation of the Plan. If the Plan is confirmed, the trustee with disburse the funds to the creditors. If the Plan is not confirmed, the trustee will return the undisbursed plan payments to the debtor after subtracting certain administrative expenses not previously disbursed.
At least 7 days before Meeting of Creditors
unless the debtor has circumstances beyond his controlMost Recent Tax Return
The debtor shall provide a copy of the debtor’s most recent Federal income tax return to the trustee and to any creditors that have requested it. (If the case is pending in the bankruptcy court for the Middle District of Florida, the debtor must provide copies of tax returns for the two years preceding the petition date, or a declaration or affidavit stating that the debtor was not required to file tax returns).
No later than 7 days before Meeting of Creditors
Document to Trustee
In addition to tax returns for the two years preceding bankruptcy, the debtor must provide the trustee copies of all pay stubs, pay advices, or documentation of income sources for the six-month period ending on the last day of the month preceding the month of the petition date and other documentation as the trustee may request, including information regarding any non-debtor’s income and other documents required to administer the Chapter 13 case.
Before Meeting of Creditors
unless extended by trusteeFiling Pre-Petition Tax Returns
No later than the day before the meeting of creditors, the debtor must files all tax returns for the four-year pre-petition period, if not previously filed.
For past due tax returns, the trustee may extend the deadline by 120 days from the date of bankruptcy filing.
For returns that are not past due, the trustee may extend the deadline by 120 days after the meeting of creditor or the date on which the return is due, including the last automatic extension, whichever date is later.
Day 21-50
Meeting of Creditors, or “341 Meeting“Examination of Debtor
Debtors must attend a meeting of creditors for examination under oath by their creditors and the trustee. The meeting of creditors is held via Zoom call and usually lasts 5-10 minutes.
In most cases, the creditors do not appear, and the questioning is done solely by the trustee.
Prior to the meeting, debtors must deliver to the trustee the certain financial documents, such as copies of tax returns, bank statements, pay stubs, titles, etc.
Within 30 Days after Meeting of Creditors
or 30 days after amendments to the schedulesDeadline to Object to Exemptions
If the Trustee or other party of interest objects to the debtor’s claim of exempt property, they must make their objection within 30 days after the conclusion of the 341 meeting, or after the amendment of the property and exemptions schedules, whichever is later.
The objecting party has the burden of proving that an exemption was not properly claimed.
Within 45 days after Meeting of Creditors
20-45 days after Meeting of CreditorsInitial Confirmation Hearing
The Confirmation Hearing is the time when the court reviews the proposed plan and determines whether it is feasible and meets the requirements for confirmation. For more information, see Chapter 13 Plan Requirements.
The court will also consider all pending motion and objections, including any motion to dismiss, objections to confirmation, and objections to claim.
The debtor, the debtor’s attorney, and the Chapter 13 trustee must attend the hearing. Creditors may also attend if they have objections to confirmation.
If the court confirms the plan, the Chapter 13 trustee will distribute funds received under the plan to the creditors provided for in the plan and going forward, the debtor must make regular payments to the trustee as provided by the plan either directly or through payroll deduction.
If the court does not approve the plan, the debtor may propose a modified plan, dismiss the case, or convert the case to Chapter 7 if the debtor qualifies for Chapter 7.
If the plan is not confirmed and the case is dismissed, the trustee must return all remaining funds to the debtor, other than funds already disbursed or due to creditors.
Day 1-70
from filing or conversionDeadline for Filing Proofs of Claim
Proof of claim is a signed statement describing a creditor’s claim. Creditors must file their proofs of claim to be paid even if their claim is listed in the schedules.
Creditors must file their claims within 70 days of bankruptcy filing of conversion. The court may extend this deadline by up to 60 days.
The debtor must ensure that all claims are filed for non-dischargeable claims, otherwise the creditor will not receive payment even if the debt is scheduled or provided for in the plan.
If a creditor does not file a proof of claim by the deadline, the debtor or trustee may do so within 30 days after the creditor’s time to file expires.
No later than 28 days after the deadline for filing proofs of claims
Pre-Confirmation Deadline for Filing Amended Plans and Certain Motions
Amended plans, if necessary to obtain confirmation, motions to determine secured status of claims, and motions to avoid liens, if necessary to obtain confirmation, must be filed no later than 28 days after the deadline for filing proofs of claims.
Lien avoidance is a process to legally remove a creditor’s lien on from the debtor’s property. See Lien Avoidance in Bankruptcy.
No later than 28 days after the deadline for filing proofs of claims
or 14 days after a creditor files an amended proof of claimDeadlines for Filing Objections to Claims
Day 1-90
unless extended by the court for good causeMotion for Mortgage Modification Mediation
The U.S. Bankruptcy Court of the Middle District of Florida has implemented the Mortgage Modification Mediation (“MMM”) program that allows debtors to modify their mortgages in bankruptcy. The MMM is available in all cases and for any type of real estate property, home or investment.
Under the MMM program, a neutral mediator is appointed to facilitate negotiations between the debtor and the lender regarding the interest rate reduction (either temporary or permanent), moving payment for mortgage arrears to the end of the loan, or reducing principal.
To participate, the debtor must file a motion requesting the MMM within 90 days from the bankruptcy petition filing. Generally, once the referral is requested, strict deadlines and obligations are imposed on both the debtor and the lender.
For more information, see Mortgage Modification Mediation in Bankruptcy.
Day 1-180
from filing or conversionDeadline for Filing Governmental Proof of Claim
Governmental creditors must file their claims within 180 days of bankruptcy filing of conversion or within 60 days of when the tax returns are filed. The court may extend this deadline by up to 60 days.
Within 60 days after the first date set for the meeting of creditors
unless the court extends the timeDeadline to File a Complaint to Challenge Dischargeability of Certain Debts
See Discharge and Non-Dischargeable Debts.
After Plan Completion
3-5 yearsFinal Requirements Before Discharge
After completion of all payments under the plan, with some exceptions, the debtor must complete an instructional course concerning personal financial management and file a certificate of completion with the court.
If the debtor is under domestic support obligations, the debtor must also file a certification confirming that the debtor is current on all obligations.
3-5 Years
after bankruptcy filingChapter 13 Discharge
The Chapter 13 discharge releases the debtor from all debts provided for by the plan, with some exceptions. See Non-Dischargeable Debts. Creditors provided for in full or in part under the Chapter 13 plan may no longer collect the discharged debts.
14 Days After Discharge
after the last order is enteredCase Closed
The court will close the case a minimum of 14 days after the last order in the case is entered, which in most cases, the last order is the discharge.
What are debtor’s options with respect to secured debts in Chapter 13?
The Chapter 13 debtor has the following options with respect to secured debt:
For more information, see Modification of Secured Debts in Chapter 13.
Benefits of Chapter 13 over Chapter 7
Although filing bankruptcy under Chapter 13 requires re-payment of all or part of the debtor’s debts, Chapter 13 offers many benefits over debt liquidation under Chapter 7.
Chapter 13 offers a chance to retain non-exempt property by paying its value to creditors through the plan payments over 3-5 years. In Chapter 7, the non-exempt property has to be turned over to the trustee for liquidation and distribution to creditors, unless the debtor is able to buy it back from the trustee by paying the value of the non-exempt asset (most trustees will allow the debtor to make monthly payments for up to a year with no interest).
A Chapter 13 debtor can also “strip down” or “cram down” certain under-secured claims, i.e., retain property securing the debt (collateral) by paying off only its value through the plan. Claims that are completely unsecured can be eliminated or “stripped off” in Chapter 13. See Modification of Secured Debts in Chapter 13. Neither the strip down, nor strip off is available in Chapter 7. In Chapter 7, the debtor can only keep property securing the debt by reaffirming the debt (which typically results in payment of the total debt) or redeeming the property by paying off its value in one lump sum payment (no payments are allowed).
The debtor’s rights under Chapter 13 to modify secured claims, cure, or waive defaults and reverse acceleration permit the debtor to prevent foreclosure or repossession, extend the time for payments, reduce the amount of the payments, and re-structure their secured debts. In Chapter 7, these remedies are not available. Instead, if the debtor wants to modify any debt, creditors must agree to the terms of the reaffirmation. See Reaffirmation and Redemption in Chapter 7.
Chapter 13 debtors are allowed to pay unsecured priority claims, such as non-dischargeable domestic support obligations and certain taxes, in full over the life of the Chapter 13 plan, in preference to other unsecured creditors. Chapter 13 debtors may also be able to pay other debts that are non-dischargeable in Chapter 13, such as student loans, in full under the plan in preference to other unsecured claims. See How Do Creditors Get Paid in Bankruptcy? These remedies are not available in Chapter 7. After discharge, a Chapter 7 debtor will owe all outstanding non-dischargeable priority debts.
Chapter 13 also offers the benefit of a co-debtor stay to individuals co-signed for consumer debts. See Automatic Stay. In Chapter 7, the automatic stay protects only the debtor. Creditors are free to go after co-debtors.
Chapter 13 debtors can receive a discharge of certain debts that are non-dischargeable in Chapter 7, such as divorce decree debts, civil fines and penalties, debts incurred to pay non-dischargeable federal, state or local taxes, debts that could not be discharged in a previous bankruptcy, welfare repayment obligations, debts for willful and malicious injury to property.
The Keys to Chapter 13 Success
Chapter 13 is a long-term commitment of debt re-payment. It is very important that the debtor understands the requirements of Chapter 13 to successfully complete the case. The keys to success in Chapter 13 are simple:
How can we help?
If you have secured debts that need attention, either because you are struggling to make monthly payments or behind on payments and risk foreclosure or repossession of the collateral, we can help you evaluate your options with respect to such debts if you want to keep the property and guide you through the necessary process to restructure your obligations and repay them over 3-5 years.
At Anna Handy Law Firm, P.A., we are acutely aware of the financial strain of our clients. We do not charge you for the initial phone consultation. We do not push you to file bankruptcy to get a retainer. We don’t judge – we find solutions. We give you honest advice about your options and rights, including the “doing nothing” approach. As such, we offer very affordable bankruptcy fees. We make our fees competitive and in certain cases, we offer payment plans to address each case individually as each case has a different set of circumstances.
If you are overburdened by your debts, being sued or harassed by creditors, or subject to wage garnishment, do not hesitate to call us now for a free initial phone consultation. The attorney’s direct business cell phone number is (386) 248-3000. You may also email us at [email protected].