Chapter 13 Bankruptcy Overview

Spokane Bankruptcy Lawyers

Our Spokane bankruptcy lawyers are determined to help you fight creditors and get you a second chance. Bankruptcy can have very long lasting effects in your life. Having good legal representation during bankruptcy can minimize the damage and help you get back on your feet!

Chapter 13 Bankruptcy Overview

Please contact one of our Spokane bankruptcy lawyers for more information regarding chapter 13 filings.

Chapter 13 Bankruptcy

Every chapter 13 bankruptcy filing requires an “acceptable plan.” This plan must satisfy the following requirements:

-The debtor keeps all assets regardless of whether the assets exceed exemption levels, but the debtor agrees to turn over a portion of all future income for a minimum of three years.

-The trustee takes a percentage of the debtor’s income for each pay period, deducts a percentage to cover administrative expenses, and then distributes the remainder to the creditors according to a court-approved plan.

-When the debtor has completed the agreed payout, the debtor’s remaining obligations are discharged.

-The debtor remains in possession of the property of the estate

Chapter 13 Trustee – § 1302 Duties and Responsibilities of the Trustie:

-Objects to improper credit claims.

-Ensures that the debtor gives up the required amount of income, and asserts any objections to the debtor’s discharge.

-Assists the debtor in the performance of the debtor’s duties – § 1302(b)(1), (4).

-Ensures that payments are commenced within 30 days after the plan is filed and that the payments are properly distributed to creditors – §§ 1302(b)(5), 1326.

-Ordinarily, the plan provides that debtors will have the responsibility of making a lump-sum monthly payment to the trustee and the trustee will then distribute the funds to the creditors; when a debtor misses a payment or two, trustees often seek wage attachment orders, which are routinely granted.

-Does not have the function of collecting, preserving, and selling the property of the estate – § 1302(b)(1).

§ 362 automatic stay applies to Chapter 13

§ 1306 – future income becomes property of the estate.

-The debtor writes the payment plan.

-The plan must be filed within 15 days of the petition.

-The plan must extend over 3-5 years, depending on the income of the debtor. If the income is less than the state median, the plan should not extend beyond 3 years.

Minimal requirements as articulated in § 1322.

Secured creditors – A secured creditor must be paid its allowed secured claim in full and it must be paid interest on that claim – § 1325(a)(5).

Valuation – Value can be determined by: 1) foreclosure value: the wholesale price if the collateral is repossessed and sold; 2) replacement value: the amount it would cost for the debtor to replace the collateral; 3) midpoint value: the value between foreclosure value and replacement value; 4) the amendments require the courts to look to the retail value – § 506(a)(2).

Contact one of our Spokane bankruptcy lawyers for more information regarding the valuation of real estate.

Under-secured claims – “Cram down”, treatment of under-secured claim can be imposed over the secured creditor’s objection; if the debtors fail to complete the plan, they will lose the benefits of cram-down. The debt will not be discharged and following bankruptcy the secured creditor will once again be able to enforce its security interest with regard to all the unpaid debt – § 1325(a)(5)(B)(i).

“Cram down “ is a term used to refer to the chapter 13 provision that allows debtors to retain collateral as long as they offer repayment of the “secured portion” or fair market value of the collateral in their repayment plan

EXCEPTION: If the debtor bought your car within 910 days of filing for bankruptcy, then you may not cram down – § 1325(a)(9):

-Plan must provide for lien protection and repayment of the present value of the secured portion of the claim—essentially, a plan only has to pay the present value of a secured claim, the rest of the under-secured debt is considered an unsecured claim which only has to be paid at the rate that the plan provides.

-The amount of interest is generally determined through the formula rate: prime rate+ 2%.

-A debtor may modify the rights of secured creditors in a Chapter 13 – § 1322(b)

(2). However, this does not apply to home mortgages for a debtor’s principal residence.