Chapter 13

Individuals may file a Chapter 7 or a Chapter 13 bankruptcy. Chapter 7 bankruptcy takes less time to complete and is often referred to as "straight bankruptcy". However, Chapter 13 bankruptcy can provide certain benefits and protections for individuals and their property which are not available in Chapter 7 but may be needed in a case. In a Chapter 13 case, we put together a payment plan for you that obtains that certain benefit and also eliminates your unsecured debts.

 

For instance, you may be behind in your mortgage or car payments and be facing a foreclosure or repossession. Or you may have more equity in a house or car (i.e. its value over amounts owed on it) than you are allowed in a Chapter 7 case. A Chapter 7 bankruptcy can not fully stop a foreclosure or repossession, and it may not avoid having to sell or liquidate the property that has too much equity. Chapter 13 can stop this and at the same time eliminate such things as credit card and personal loan debt that you owe.

 

There are several other situations where it may be preferable for an individual to file a Chapter 13 instead of a Chapter 7 case. It may allow you to discharge or reduce the amount you owe on secured debts such as second mortgages, auto loans, business or equipment loans, while also eliminating unsecured debts such as credit cards obligations and personal loans.

 

Other examples: Chapter 13 can allow you to set-up your own plan to pay back taxes or allow you to defer payments due on student loans. Each case must be examined on the basis of its own particular circumstances.

 

There is one instance where you may only be allowed to file a Chapter 13 bankruptcy and not a Chapter 7 bankruptcy, irregardless of any added benefit, and that is a result of the new bankruptcy law which took effect in October, 2005. Under the new law, if your total household income is more than allowed for a household of our size, you may not be allowed to file a Chapter 7 bankruptcy, but be restricted to filing a Chapter 13 bankruptcy that requires you to pay back a certain percentage to your unsecured creditors (e.g. credit cards and personal loans) over a five year period. If your household income is initially over the limit, we must closely calculate your allowed monthly expenses to see if you would still be able to file Chapter 7.

 

If you are not allowed to file Chapter 7 bankruptcy due to excess income, we must also determine if Chapter 13 bankruptcy is the way to go, i.e., does it give you more benefit than other alternatives. In doing so, we must remember that the benefits of bankruptcy are guaranteed by federal law; that cannot be overlooked when weighing the pros and cons of other types of relief.

 

The Plan

When we file a Chapter 13 case for you, we include in it a Plan wherein you pledge to pay the Bankruptcy Court, over the course of three to five years, an amount sufficient to adequately stop a foreclosure, repossession or other problem or qualify for a benefit or protection of property which is not available in Chapter 7. If you have to file Chapter 13 due to excess income, your Plan pledges to pay an certain amount over and above your necessary living expenses.

 

In every case, you will have to appear in Bankruptcy Court to have your plan reviewed and approved.

 

I assemble your bankruptcy petition and make sure it contains all the required information and meets all legal requirements. Then I review it with you and have you sign it in the required places. We then file it with the Court and notice is given to your creditors.

 

The Confirmation Hearing

When your petition is filed, the Bankruptcy Court schedules a meeting to take place within 30 to 50 days of the filing (referred to as the Confirmation Hearing). Both you and I will get a notice in the mail of the time and date. You are required to attend this meeting. This may be the only time you appear at any court function. I will be with you at this meeting.

 

Usually, creditors do not attend this meeting. The primary function of the meeting is to provide the Chapter 13 Trustee an opportunity to question you regarding various aspects of your bankruptcy case, prior to you receiving court confirmation of your case. The actual meeting may take only a few minutes. I will meet you beforehand to review your case.

 

The typical questions you are asked at this hearing are the following (remember: we will review these questions before the meeting):

 

  • Did you list all your property on your petition?
  • Did you list all your debts
  • If you own a home or other real estate:
  • How did you arrive at the value of your home?
  • What are your mortgage/home equity loan balances? - Have you made any significant improvements on this property?
  • If you own a motor vehicle:
  • May I see a copy of your title?
  • What is the balance due on the vehicle?
  • Did you file a tax return last year? 
  • Did you get a refund? 
  • Do you have any personal injury lawsuits pending? 
  • Are you due an inheritance, tax refund or money from anyone?

 

REMEMBER: You must bring the title to all motor vehicles that you own (not the registration) to this hearing.

 

Plan payments

As I noted above, within 30 days of your case being filed, even if you have not had your confirmation hearing, monthly payments are to commence to the trustee. You may either make the payments directly to the Trustee's office or have them deducted from your wages. Please let me know which you prefer.

 

Note: Once we file your Chapter 13 bankruptcy petition with the court, any future payments due on a motor vehicle you own (not lease) will be made through your bankruptcy plan, so stop making these payments directly or stop having them withdrawn from your bank account or paycheck, if applicable.

The confirmation hearing will take place at: 

Bankruptcy Court, (downtown Buffalo)

300 Pearl St., next to the Convention Center (remember to bring your motor vehicle titles).