A Chapter 13 bankruptcy is often referred to as a wage earner’s plan. If you have a regular income it enables you to develop a plan to repay all or part of your debts. Under this Chapter, you will propose a repayment plan to creditors, with payment to be made in installments over three to five years. The length of time depends on your monthly income as it relates to the state median income. During this time the law forbids creditors from any collection efforts.

Chapter 13 offers you several advantages over liquidation under Chapter 7. One of the most important advantages is the fact that you can stop foreclosure proceedings and may eventually resolve delinquent mortgage payments. (Of course, you will be required to make any mortgage payments at the time they are due during the Chapter 13 plan.) This Chapter also allows you to reschedule your secured debts (not including the mortgage for your primary residence) and extend them over the life of the repayment plan.  Under Chapter 13 you may make plan payments to a Chapter 13 trustee who will distribute them to your creditors. Thus while under Chapter 13 protection you will not have direct contact with creditors.

The next question is whether you are eligible to file a Chapter 13 bankruptcy. If you are self-employed, or operate an unincorporated business, and have less than $336,900 of unsecured debt and less than $1,010,650 of secured debts you are eligible. These amounts are adjusted periodically so they may vary over time. (NOTE: A corporation or partnership may not file Chapter 13 bankruptcy.) Be aware that if you have filed for bankruptcy under any Chapter during the past 180 days, and your petition was dismissed you will not be permitted to file.

As was the case with the other Chapters I have discussed, a Chapter 13 case begins by filing a petition with the bankruptcy court in your area. You must also file the following items with the court:

• Schedules of assets and liabilities
• A schedule of current income and expenditures
• A schedule of executory contracts and unexpired leases
• A statement of financial affairs
• A certificate of credit counseling
• A copy of any debt repayment plan developed through credit counseling
• Evidence of payment from employers, if any, received 60 days before filing
• Any anticipated increase in income or expenses after filing
• A record of any interest you have in federal or state qualified education or tuition accounts

You must also supply the Chapter 13 case trustee a copy of the tax return or transcripts from your most recent tax year as well as returns filed during the case.

A case filing fee and a miscellaneous administrative fee are required by the court. You must pay the fees to the clerk of the court upon filing or, with the court’s permission, you may pay in at most four installments within 120 days of filing. If you file a joint petition, only one filing fee and one administrative fee are charged. Be aware that failure to pay these fees may result in dismissal of your case.

 In order for you to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, you should gather the following information:

• A list of your creditors and the amounts and nature of their claims
• The source, amount, and frequency of your income
• A list of all of your property
• A detailed list of your monthly living expenses

If you are married you must gather this information for your spouse regardless of whether you are filing a joint petition, separate individual petitions, or even if only you are filing. In a situation where only you are filing, the income and expenses of your spouse is required so that the court, the trustee and creditors can evaluate your household’s financial position.

Part 2 of my discussion of Chapter 13 bankruptcy will appear in my next blog. If you are from the Denver, Aurora, Arvada, Wheat Ridge, Littleton, Englewood, Northglenn, Westminster, Broomfield, Lakewood, Brighton or Golden, Colorado area, and have any questions at this time, please feel free to contact me at: 303-955-7570, help@cobankruptcyhelp.com, or fill out the free consultation form.