Chapter 13 Bankruptcy FAQs
Bankruptcy and Chapter 13
Chapter 13 Payment Plans
Chapter 13 and Your Home
Bankruptcy and Chapter 13
Q: What is a Chapter 13 plan?
A: A Chapter 13 plan is a customized repayment plan that we develop with you and submit to the court for approval. The plan outlines what debts you have, how we plan to pay your creditors and defines the timeline. » Back to top
Q: Am I eligible to file a Chapter 13?
A: We will determine if you are eligible to file based on your current circumstances. We would make this determination with you at the time of your initial complimentary consultation. » Back to top
Q: I am self-employed, would I still be able to file for Chapter 13?
A: Yes, you are able to file if you meet the requirements and have adequate income to support the necessary payments based on your circumstances. » Back to top
Q: How does a Chapter 13 differ from other debt consolidation programs?
A: Chapter 13 is different than other debt management programs because we are able to use the law to provide you with legal protection from creditor actions (foreclosures, garnishments, harassing phone calls, etc.) and better, more uniform terms than other programs can offer. For instance, all of your unsecured debt (credit card bills, medical bills, etc.) is reduced to 0% interest for the duration of the Chapter 13 program. This avoids the ";snowball"; effect of late charges and high interest rates. The same goes for your mortgage arrearages if you own a house - they are paid back at 0% interest throughout the plan with no additional late penalties. Chapter 13 allows you to focus on reducing your overall debt. » Back to top
Q: Will I have to attend a court hearing if I file for Chapter 13 bankruptcy?
A: Yes, in both cases. For Chapter 13, usually there are two (2) required hearings: the Section 341 First Meeting of Creditors (341 Hearing) and the Confirmation Hearing where the plan is approved. If two people file, both are required to attend the 341 Hearing and must have their driver's license(s) and social security card(s) in order to complete the hearing. The hearing will be conducted within a month or so of filing. As your counsel, we would be at the hearing(s) to advocate for you and advise you on the steps necessary to complete the hearings. » Back to top
Q: Can I get out of the Chapter 13 any time I want?
A: Yes, you have many options. You can re-finance out, voluntarily dismiss your case, convert to 7 - we would help you determine the best direction based on your circumstances and long term financial goals. » Back to top
Q: How long will I be in the Chapter 13 plan?
A: The minimum plan length is proposed at 36 months. The maximum plan length is proposed at 60 months. Your plan length is determined based on your unique circumstances. We can lengthen the plan during the course of your case if necessary. You can also complete the plan early by refinancing out or pre-paying the case. » Back to top
Q: How will filing Chapter 13 affect my credit?
A: The Chapter 13 is intended to help you get back on track with your financial obligations. It is not meant to make your credit worse, but instead the Chapter 13 re-payment plan serves as its own credit source. Your performance in the Chapter 13 creates a new, positive pay history that will aid you in getting new credit (i.e. re-financing your home and completing the plan early, etc.) Also, because your unsecured debt and arrearages are paid back at 0% interest, the plan focuses on paying down principal debt versus just servicing it. » Back to top
Q: I was in forbearance and it didn't work. Could I still file for Chapter 13?
A: Absolutely, the Chapter 13 would set up new repayment terms with your lender. We have found that the terms through the Chapter 13 are often more favorable to the debtor, as we can spread the arrearage payments out over a longer period of time and at 0% interest. The advantage of the Chapter 13 reorganization is that it is a full debt consolidation plan and considers all of your debt obligations, not just your mortgage. We can help to consolidate or eliminate other debts that may be draining your monthly budget and detracting from your ability to get caught up on your mortgage. Your home is legally protected while you are in the plan making payments » Back to top
Q: What are the fees to file for Chapter 13?
A: The court-filing fee is $274.00. You are also required to complete credit counseling before filing that typically requires a $30.00 - $50.00 fee (see above Q&A for further details). We typically include the majority if not all of our Attorney fees into the repayment plan in order to make it easy to get started. » Back to top
Q: How would an Attorney assist me in the process of filing for bankruptcy?
A: Our office will be with you from beginning to end. Initially, we will evaluate your circumstances to determine the best course of action based on your circumstances (i.e. which Chapter is right for you, should you file jointly, what debts your should include, what type of payments you could expect in the case of a Chapter 13, etc.). We will prepare and file all of the necessary paperwork required by law. We will develop a budget and proposed repayment plan in the case of a Chapter 13 filing. We will negotiate with your creditors and determine the steps necessary to protect your interests based on your law. We will attend and advocate for you at your court appearance(s). We will review and analyze all paperwork from your creditors (i.e. proof of claims, objections, etc.) to ensure that your case stays on-track. Overall, we are there to help you overcome any hurtles or obstacles that may arise during the course of your case and get you to a discharge and a fresh financial future. » Back to top
Q: What is expected of me?
A: We expect you to be truthful and honest in describing and disclosing your circumstances - we are on your side! We expect you to assist us in provided paperwork or additional documents that might be required. We expect you to communicate with us - let us know if you have a change in circumstances that may affect your case. We expect you to attend the required court hearing and provide truthful testimony. In the case of a Chapter 13, we expect you to make the necessary plan payments that we mutually agree on to the Trustee in time and in full. We expect you to help us help you through the process! » Back to top
Chapter 13 Payment Plans
Q: What is a Chapter 13 plan?
A: A Chapter 13 plan is a customized repayment plan that we develop with you and submit to the court for approval. The plan outlines what debts you have, how we plan to pay your creditors and defines the timeline. » Back to top
Q: How are my creditors handled under the Chapter 13 program?
A: All of your listed creditors receive a copy of your proposed repayment plan. They are each required to file a Proof of Claim verifying the amount that you owe and supporting documentation. Any creditor that doesn't file a claim does not get included in the approved repayment plan that debt is discharged at the completion of the plan. Creditors are handled differently based on their status: secured, unsecured, priority, etc. We will create a strategy for handling each of your creditors at the time of the initial complementary consultation. » Back to top
Q: Do I pay all of my debts off during the Chapter 13?
A: If you complete the Chapter 13, you will receive a full discharge from unsecured debt regardless if you paid the debt in full. Chapter 13 requires that you pay your best efforts. Often we will eliminate a portion of your total debt in the Chapter 13. » Back to top
Q: What is a Chapter 13 Trustee and what role do they play in the process?
A: A Chapter 13 Trustee is appointed by the court and is responsible for administering your case. They are the party that receives your payments into the plan and they in turn make payments to your creditors according to the approved plan. Like us, they are with you through the entire process. They essentially serve as a neutral third party between you and your creditors. » Back to top
Q: Do I pay all of my debts off during the Chapter 13?
A: If you complete the Chapter 13, you will receive a full discharge from unsecured debt regardless if you paid the debt in full. Chapter 13 requires that you pay your best efforts. Often we will eliminate debt in the Chapter 13. » Back to top
Q: What types of debts may be paid under the Chapter 13 plan?
A: Any debt can be included into the plan. Even if the debt is ultimately non-dischargeable (i.e. student loans, child support, alimony, certain tax debts, etc.), you can still set up repayment terms under the Chapter 13 plan. » Back to top
Q: Will the Chapter 13 take all of my income? How much will I be required to pay in each month?
A: No, the Chapter 13 plan will not require all of your income. We will work with you to develop a budget based on your income, monthly expenses and outstanding debt. We will reserve money to cover your ongoing monthly expenses (i.e. utilities, groceries, etc.) plus any items that you are not including in the plan (i.e. vehicle). Your plan payment is based on your available income, monthly living expense and outstanding debts. Since the Chapter 13 is a customized program, the payment is based on the individual's circumstances. At the time of your initial complimentary consultation, we will be able to estimate your plan payment and terms. » Back to top
Q: When will I need to start making payments into the Chapter 13 plan?
A: The first payment is due within thirty (30) days of the date of filing. We encourage our clients to mail it within twenty-one (21) days of the filing in order to allow time for mailing and processing at the Trustee's office. » Back to top
Q: How often will I be required to make a payment?
A: This varies based on individual circumstances. It usually coincides with your income stream. We will define the payment frequency in the plan (i.e. weekly, bi-weekly, semi-monthly, bi-monthly, monthly, etc.) » Back to top
Q: What if the court does not approve my Chapter 13 plan?
A: If the initial plan that we submit is not approved, we are allowed to amend the plan in order to comply with the necessary changes. » Back to top
Q: Do my creditors have to approve my Chapter 13 Plan?
A: No. The court, not your creditors, approves your Chapter 13 plan. However, creditors have the opportunity to file written objections that must be dealt with in order for a case to be confirmed. As your bankruptcy attorneys we will work to resolve objections and negotiate with your creditors to assure that you receive the best possible terms. » Back to top
Chapter 13 and Your Home
Q: Can I refinance my home while I am in a Chapter 13?
A: Yes, with the court's approval. When you are ready to re-finance, we will help you through the process. » Back to top
Q: Can I sell my house while I am in a Chapter 13?
A: Yes. » Back to top
Q: Will I qualify to refinance since I am in a bankruptcy?
A: Your Chapter 13 will serve as its own credit source. This means that a new lender will look at your performance in the Chapter 13 to qualify you for a new loan. If you have been making your payments on time and in full, a lender will evaluate you on this basis versus perhaps a poor pay history prior to your Chapter 13 filing. Lenders typically like to see at least 12 months of positive payment history in the Chapter 13 before qualifying you for a new loan. Obviously there are other factors for the lender to consider including how much equity you have in your home, other debts that you may have, etc. » Back to top
Q: What if I can work out an agreement with the mortgage company to stop my foreclosure - do I still need to file for Chapter 13?
A: If the mortgage company agrees to stop the sale and offer you repayment terms, you would not necessarily need to file for Chapter 13. Make sure you get the agreement in writing PRIOR to the sale date to protect your rights. It is important to understand your rights under Chapter 13 before you enter into an agreement with the mortgage company, as you may find that you are better off accepting the terms of the Chapter 13 than what the mortgage company is willing to accept outside of the court process. Often, the terms are more beneficial to the debtor under the Chapter 13 with a longer time to pay back the missed payments and no additional late penalties or interest charges on the arrearage portion.
Unlike a direct payment arrangement with the mortgage company, the Chapter 13 offers a full debt consolidation program to manage all of your debts and provides optimal repayment terms. Sometimes other debts, such a credit card bills, medical bills, etc. drain a budget of necessary money to stay current on the mortgage. The Chapter 13 program allows us to prioritize the mortgage and focus your efforts. » Back to top
Q: Does the chapter 13 affect my mortgage in the long run?
A: The Chapter 13 does NOT change your contractual relationship with your mortgage company. You still remain the homeowner and the plan does not buy or sell your mortgage unless you choose to re-finance out early. At the end of the plan, you would be caught up on the mortgage and would simply resume making payments directly your mortgage company. » Back to top
Contact Us
At Acclaim Legal Services, our attorneys will review your financial affairs and advise you on whether Chapter 7 or Chapter 13 bankruptcy is an option for you. Contact Acclaim Legal Services today. Your initial consultation with a bankruptcy lawyer is free. Call 866-261-8282.
Acclaim Legal Services is a debt relief agency serving people in Wayne, Oakland, Macomb, Livingston, St. Clair, Genesee, Jackson County, Lenawee County, Monroe County, Sanilac County, Lapeer County, Shiawassee County and Washtenaw Counties including Detroit, Livonia, Flint, Southfield, Pontiac, Mt. Clemens, Warren, Royal Oak, West Bloomfield, Troy, Ann Arbor, Dearborn, Sterling Heights, Ypsilanti, and Farmington Hills. We help people file for bankruptcy relief under the Bankruptcy Code.
