Chapter 13 Bankruptcy Rules
How to file a Chapter 13 bankruptcy
As stated by Chapter 13 bankruptcy rules, it is a mandatory requirement for all debtors to attend credit counseling before filing a bankruptcy case. Upon completion of the credit counseling, you have to pay a court filing fee and provide paperwork to the court about information describing your current financial situation. Once the Court receives all of your documents, a bankruptcy trustee will review your case. The trustee is responsible for requesting any additional documents for your case, communicating with your creditors and scheduling your 341 creditors meeting. In addition to paying the court filing fee and submitting your financial documents, you are also responsible to propose a Chapter 13 bankruptcy payment plan to the court. Your Chapter 13 bankruptcy is complete once the court approves your payment plan.
Does a Chapter 13 bankruptcy stop creditors from collecting debt?
According to Chapter 13 bankruptcy rules, a creditor may no longer engage in any collection activities when a debtor files bankruptcy. As soon as debtor files a Chapter 13 bankruptcy, the Automatic Stay prohibits creditors from seeking relief on debt. Any lawsuit proceedings must be stopped, and a creditor may not report outstanding debt to any credit reporting agencies. However, there are some debt that must still be paid, and these include child and spousal support, certain tax debt, and pension loans.
How is credit card debt treated in a Chapter 13 bankruptcy?
Chapter 13 bankruptcy rules dictate that in order for a debtor to file a Chapter 13, all secured creditors and priority debts must be paid in full. Unsecured debt may be paid in part. Secured debt refers to those debts that have collateral – like a home with a mortgage. Unsecured debt is money owed on a credit card.
When you file a Chapter 13 bankruptcy, your debt is placed into a repayment plan. A bankruptcy court will only approve the plan if the arrangement allows for all priority and secured debts to be paid in full. Unsecured creditors must be paid in an amount equal to the value of the filer’s non-exempt property. The trustee is responsible for distributing the debtor’s monthly payment to creditors.
Can my student loans be discharged in a Chapter 13 bankruptcy?
Chapter 13 bankruptcy rules require that student loan debt be treated just like a priority debt, similar to child support and taxes. Student loan debt is only discharged if the debtor can prove undue hardship.
Generally, it is very difficult to prove undue hardship. Some factors that may influence the Court to discharge student loan debt include the inability to pay back the debt as a result of a physical disability, as well as a debtor’s good faith effort. Furthermore, discharging student loan debt requires the debtor to file a separate action with the bankruptcy court referred to as a Complaint to Determine Dischargeability of a Debt.
What happens if I miss a scheduled payment under my Chapter 13 bankruptcy payment plan?
Chapter 13 bankruptcy rules indicate that if you miss a payment, the trustee can proceed with an action for dismissal with the bankruptcy court. The dismissal may be prevented if the debtor can establish their ability to pay back the debt under the existing plan or by proposing a new plan.
Once the bankruptcy court dismisses a Chapter 13 bankruptcy case, creditors may proceed with collection activities.