Filing for Chapter 13 bankruptcy will not discharge your debt but rather reorganizes your debt into manageable payment plans. Be sure to understand the timeline to avoid unnecessary delays or the risk of dismissal of your case.

Before You File:
Keep in mind, that you will have to have completed an approved counseling course within six months prior to filing.

If your debt was previously discharged under Chapter 7, 11 or 12 bankruptcy within four years prior to filing, you will be ineligible to file until after four years. If you previously filed for Chapter 13 within two years you will still be eligible.

180 Days Prior To Filing
If you had previously filed for bankruptcy within 180 days under any chapter and your case was dismissed because you failed to comply with court orders, you will have to wait for the 180 days to expire before you can file again.

90 Days Prior To Filing
You must be a resident of the state you are filing in for at least 90 days before you can file in that state. If you wish to file in the state of your previous residence, you must have been a residence of that state for at least 180 days to be eligible. If your previous residential status is also less than 180 days, the bankruptcy laws allow you to file your petition in the state where your primary properties and assets are located for more than 180 days.

Immediately after Filing
Once you have filed your bankruptcy papers with the bankruptcy court, the court will enter an Automatic Stay prohibiting further collection attempts or legal action against you by creditors. This is also true for wage garnishments, creditors cannot garnish your wages. The court will send a notice of your case to all creditors in your petition. You are assigned a bankruptcy trustee, a federal employee appointed by the court, to oversee your case and ensure eligibility and completeness of your petition.

15 Days After Filing
You have to file the repayment plan within the first fifteen days after filing your case. Within these 15 days you also must file all of your income, expense and assets schedules. The court will issue a notice of commencement of the case to all creditors and a date for the 341 Meeting of Creditors is set. During this time your creditors will have an opportunity to object, usually within 30 days, to your case.

20-40 Days After Filing
The 341 Meeting of Creditors is held. During the meeting the bankruptcy trustee will review your filing, make adjustments to your payment plan, deal with any objections that have already been filed.

60-90 Days After Filing
Your bankruptcy petition payment plan will be approved and put into place. You will make monthly payments to the bankruptcy trustee for 3 – 5 years. Once your payment plan is completed your ch 13 bankruptcy case will be fully discharged.

In a Chapter 13 filing you typically can keep your assets, but you will need to propose a repayment plan with a three to five year time line as part of your case filing. Your repayment plan is a document that describes in detail how you plan to repay your debts and how much you propose to pay. A bankruptcy judge will review the plan and check for compliance with Chapter 13 bankruptcy laws and its feasibility. Based on these criteria, the bankruptcy court either approves or disapproves the repayment plan.

Important Factors
To determine your payments, several factors are considered. First, your expected monthly household income is crucial. Your gross income is then used as the base number for the “means test,” a test used to establish whether you have enough disposable income left after considering allowable deductions to pay your creditors. Furthermore, you need to compile a schedule of your assets, which then is categorized in exempt assets versus non-exempt ones. This is important, since unsecured creditors are entitled to a minimum of your non-exempt assets’ worth.

Debt Priority
In a Chapter 13 bankruptcy, so called “priority debt” such as back wages owed to employees, child support, alimony, tax debts and student loans must be paid in full. Secured debt like car loans and mortgages including any past due amounts must be covered in your repayment plan. All remaining disposable income will go to paying some of your unsecured debts, after having paid priority and secured debts first. The disposable income is calculated using formula set by the bankruptcy court based on the factors outlined above. Rarely are unsecured debts paid in full. The repayment plan must demonstrate that any disposable income will go towards unsecured debt payment. If you have sizable assets, the amount you have to pay towards unsecured debt could be higher since the assets could be theoretically seized by the trustee were you to file Chapter 7 bankruptcy.

Duration
The duration of your payment plan is largely dependent on your earnings and debt six months prior to bankruptcy filing. Usually a five-year plan proposal is expected for average monthly incomes is higher than the median income for your state. If your income is lower than the median, you may propose a three-year plan.

Chapter 13 bankruptcy allows an individual to repay all or a portion of the debts you owe your creditors. Using Ch 13 bankruptcy, you can propose a repayment plan that gives you more payment flexibility. Plans range in duration from three to five years. In order to file for Chapter 13, you must have a steady income. If your monthly income is less than your state’s median income, the plan will be for three years unless the court finds “just cause” for a period longer than that. Should your monthly income be greater than your state’s median income, the plan must generally be for five years. No plan may exceed the 5-year maximum duration.

The typical person who files for Chapter 13 will have one or more of the following characteristics:
1. Mortgages or other loans they would like to bring current, so they don’t lose their homes or other property.
2. Taxes, child support, or student loans that can’t be eliminated via Chapter 7 bankruptcy.
3. Moral convictions that all debts should be paid no matter how long it takes

With a Chapter 13 bankruptcy, you’ll need a steady, stable income, and disposable income. Disposable income is that which is left over after you pay the bare necessities of life such as food, shelter, and utilities. You cannot have more than $922,975 in secured debt. Secured debt is that which involves property that your creditor can take if you don’t make your payments such as the mortgage on your home. You cannot have more than $307,675 in unsecured debt. These amounts are adjusted periodically to reflect changes in the consumer price index.

The steps in the Chapter 13 Wage Earner Bankruptcy process are as follows:

In the beginning, the Ch 13 Bankruptcy process is quite similar to that of a Chapter 7 bankruptcy proceeding. The petition is filed by the debtor in the federal Bankruptcy Court. The petitioner must also file a “Statement of Financial Affairs.” Additionally, the debtor needs to file a list of creditors, a schedule of assets and liabilities, and a schedule of current income and expenditures.

It is extremely important that all the forms are completed accurately. That’s the diplomatic way of saying – you must be forthright and truthful with your declarations! Any debts not listed will not be discharged at the completion of the proceedings. A willful failure to list assets in an attempt to hide them from creditors may result in serious consequences, including the denial of discharge or charges of bankruptcy fraud. Experts say that this is much easier to detect than tax fraud. Simply put – don’t do it.

Along with the filing of the Chapter 13 bankruptcy petition, one must submit a proposed payment plan that covers a period of three to five years. It must provide for the payment of all “priority claims” in-full. The only exceptions to this are if a particular priority creditor agrees to a different plan or, if the claim is a domestic support obligation, the debtor agrees to contribute all disposable income to a five year plan. “Priority Claims” are given a special status under bankruptcy law. They may include such items as taxes and the costs of the bankruptcy proceeding. There are limitations on the ability to modify the payments due on home mortgage loans under this chapter.

A bankruptcy trustee is appointed by the Bankruptcy Court. They are charged with the review of the proposed plan for accuracy and feasibility. The proposal is distributed to creditors who have the right to object to the plan if they believe it to be unreasonable. If approved, the debtor gets to keep all assets during the period outlined in the plan. Monthly payments are made by the debtor to the bankruptcy trustee. The payments are then distributed to the creditors in accordance with plan. Once the plan is completed as approved, the debtor is discharged from any unpaid debts. Several alternatives are available to the debtor if they fail to complete the approved plan depending upon the reasons for the failure.

The bankruptcy trustee may support a modification in the plan if the noncompliance is due to circumstances such as job loss or a serious illness. If the noncompliance is as a result of circumstances for which the debtor cannot “justly be held accountable,” and if creditors received at least as much as they would have under a Chapter 7 bankruptcy filing, and a modification is not possible – a debtor can apply for a hardship discharge. Keep in mind, though, the hardship discharge will not apply to debts that were not dischargeable under Chapter 7.

Should the debtor fail to keep up payments in accordance with the accepted plan, creditors can apply to the Bankruptcy Court for termination of the Chapter 13 proceeding by dismissing the proceeding in its entirety. If the proceeding is dismissed entirely, creditor collection efforts may resume against the debtor’s assets.