According to recent data from the United States Bankruptcy Court for the Eastern District of Tennessee, about 5,000 people file for Chapter 13 bankruptcy in the state each year. Many types of relief have run out for families impacted by catastrophic incidents such as job loss or illness, and families are searching for financial help. Filing for Chapter 13 bankruptcy may bring the debt relief that people need to turn their lives around. An experienced bankruptcy attorney may be able to help stop foreclosure or vehicle repossession.
I have been helping families in the Kingsport, Tennessee area for more than 30 years. Dealing with mountains of debt can be overwhelming, and Chapter 13 bankruptcy can eliminate debt simply and easily. Families in the Church Hill, Johnson City, Bristol, and northeastern Tennessee area need help with navigating the legalities of bankruptcy law, and I’m ready to lead the way.
If you need help dealing with your debt and you’re considering filing for Chapter 13 bankruptcy, contact me — Steven C. Frazier, Attorney at Law — today.
The two major chapters of bankruptcy for individuals and families both eliminate debt, but in very different ways. In Chapter 7, a liquidation plan is created to get rid of most or all of an individual's debt. In Chapter 13 bankruptcy, an individual’s debts are restructured, and debts are then paid off through a manageable payment plan. To qualify for bankruptcy, people must first complete an authorized credit counseling course.
Bankruptcy often carries a stigma with it. Most people fear even having their names associated with the word. To make things worse, people also fear that bankruptcy means losing everything and having to start over from scratch — which is not true. People don’t have to lose everything. Bankruptcy allows for exemptions so people can often keep their homes, household furnishings, clothes, cars, and other possessions, along with retirement savings and other benefits.
When a person’s debt load becomes completely unmanageable for whatever reason — the loss of a job, an unexpected medical emergency or accident, or any other reason — then bankruptcy truly is an option that can get debt under control or even eliminate it — in part or in whole.
Chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this type of bankruptcy, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. During this time, the law forbids creditors from continuing collection efforts.
When a person qualifies and files for Chapter 13 bankruptcy, all debts are subject to consolidation into one (usually reduced) sum that is paid monthly for three to five years. The bankruptcy is discharged after the plan is completed. Under this plan, people generally get to keep all of their assets. If someone is behind on payments for their house or car, the amount that is in arrears can be factored into the consolidated debt obligation. During this time, individuals must make regular monthly payments on their mortgage or vehicle and may be able to renegotiate payments.
The bankruptcy court will assign a trustee who will compute all disposable income and devise a payment plan to honor all debt obligations, even if it means reducing debt by 25-50% or more. Any new debt taken on during the repayment period must be approved by the bankruptcy court.
Once a person files for either Chapter 7 or Chapter 13, they get what is called an “automatic stay” on bill collection efforts and even foreclosure proceedings. Their creditors can no longer contact them and must work through the trustee for their claims. Note, however, that the trustee will hold a meeting of creditors, which the filer is required to attend. Though foreclosures and repossessions may be temporarily stopped, the credit-holders can petition the court to proceed with seizure if the individual doesn’t work out another arrangement with them.
Any individual — even if self-employed or operating an unincorporated business — is eligible for Chapter 13 relief as long as their unsecured debts are less than $394,725 and their secured debts are less than $1,184,200. These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a Chapter 13 debtor.
An individual cannot file for Chapter 13 or any other type of bankruptcy during the preceding 180 days, if a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, no individual may be a debtor under Chapter 13 or any chapter of the Bankruptcy Code unless they have, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing.
There are exceptions in emergency situations in which the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
Unless the court grants an extension, the debtor must file a repayment plan within 14 days after the petition is filed. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.
There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by bankruptcy law, such as most taxes and the costs of the bankruptcy proceedings. Secured claims are those for which the creditor has the right to take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim, or (in the case of a domestic support obligation) the debtor contributes all "disposable income" — discussed below — to a five-year plan.
No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. Creditors will receive 28 days' notice of the hearing and may object to confirmation.
While a variety of objections may be made, the most common ones are that payments offered under the plan are less than creditors would receive if the debtor's assets were liquidated or that the debtor's plan does not commit all of the debtor's projected disposable income for the three- or five-year period.
The provisions of a confirmed plan bind the debtor and each creditor. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustments to living on a fixed budget for a prolonged period.
Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting with the trustee, because additional debt may compromise the debtor's ability to complete the plan. A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan.
Individuals should consult competent legal counsel prior to filing. Families struggling with a heavy debt load and juggling or missing payments should seek advice on bankruptcy options. The best option in or around Kingsport, Tennessee, or nearby in Church Hill, Johnson City, Bristol, or elsewhere in Northeastern Tennessee, is to contact me — Steven C. Frazier, Attorney at Law today.