What Happens In A Chapter 13 Bankruptcy
A Chapter 13
Bankruptcy proceeding, often called a wage-earner plan, is initiated by filing a petition. As in Chapter 7
cases, the filing of the petition automatically stays (stops) creditors from trying to collect on most of their
debts. 11 USC §362. There is also a special automatic stay provision in Chapter 13 that protects co-debtors. A
creditor generally may not seek to collect "consumer debts" from any individual who is liable along with the
debtor. 11 USC §1301(a).
Along with the
petition, the debtor must also file a schedule of assets and liabilities, a schedule of current income and
expenditures, a schedule of executory contracts and unexpired leases and a statement of financial
The debtor must also
file a certificate of credit counseling; evidence of any payments made by an employer received 60 days before
filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a
record of any interest in federal or state qualified education or tuition accounts. 11 USC
After filing the
petition, a trustee is appointed to manage the case. 11 USC §1302. Within 20 to 50 days after the debtor files
the petition, the trustee holds a meeting of creditors. The debtor must attend this meeting and answer questions
regarding financial issues and the proposed plan terms. 11 USC §343.
The judge must hold
a confirmation hearing within 45 days of the meeting of creditors, at which time he or she will decide whether
the plan is feasible and meets the Bankruptcy Code's standards for confirmation. 11 USC §1324, 1325. Creditors
may ask questions about and object to the plan. If the court approves the plan, however, the creditors can take
no action outside the plan's scope to collect their debts.
Within fifteen days
after the debtor's filing of the petition, the debtor must file a plan that sets forth the details of how he or
she intends to pay off creditors in the next three years(or, with the court's permission, five years).
Fed.R.Bankr.P. 3015. The plan must provide for fixed payments to the trustee on a regular basis and it will be
submitted to the court for approval. If approved, the trustee will distribute funds to the creditors according
to the plan's terms. Within 30 days of filing, the debtor must start making payments under the plan to the
trustee, even if the court has not yet approved the plan. 11 USC §1326(a)(1).
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