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Chapter 13- This consumer bankruptcy proceeding is for the adjustment of debts of an individual with regular income. It is also an option for a debtor who does not qualify for Chapter 7 relief due to the results of the "means test". It allows a debtor with regular income to propose a "Plan" to the Court to provide for the payment of all of their priority and secured debts and a portion of their unsecured debts over a period of 3 to 5 years out of their "disposable income". The Court will hold a hearing to "confirm" or reject the plan. The typical reason for filing a Chapter 13 is to permit the debtor to retain property that might otherwise be lost, i.e. through foreclosure or repossession. The debtor does not receive a discharge until all plan payments have been made. The discharge includes all of the debts included in the bankruptcy petition except most domestic support obligations, student loans, drunk driving debts for causing death or serious injury, certain criminal fines, and long term debts where the final payment is not due until long after the completion of the Plan, i.e., mortgage. During the administration of the case the debtor is protected from lawsuits, garnishments and other collection activity. A Chapter 13 Trustee is appointed by the United States Trustee to oversee and administer the case. See 11 U.S.C. § 13. Chapter 13 Plan- The debtor must prepare and submit a plan for the complete payment of priority and secured debts and the partial payment of unsecured debts for the court's approval. The debtor must begin making plan payments to the Trustee 30 days after the plan is filed or the entry of an Order of Relief, whichever is earlier. The debtor's income must be sufficient to fund the plan. All of the debtor's projected disposable income must be committed to the plan for the applicable time period, which can be from 3 to 5 years. A discharge is granted only after the debtor makes all of the plan payments. See 11 U.S.C. § 1325-26. Confirmation- After a Confirmation Hearing, the Bankruptcy Court will issue a Confirmation Order binding the debtor and creditors to the terms of the debtor's Chapter 13 Plan. The Confirmation Order restores title to all property of the estate to the debtor clear of creditor claims, except as provided in the Plan. After Confirmation, the Plan can only be modified after notice and hearing. Failure to make Plan payments can lead to dismissal of the Chapter 13 case, unless the debtor receives a hardship discharge or converts the Chapter 13 case to Chapter 7. See 11 U.S.C. §1324-27. Creditor- Any entity that has a claim against the debtor before the bankruptcy petition was filed, including liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured debts. See 11 U.S.C. §101(5). |
Bankruptcy Glossary of Terms
Part 2 of 9