Qualifying for Chapter 13 Bankruptcy
Before filing for bankruptcy under Chapter 13 of the Bankruptcy Code, you should be certain that you do not qualify for a Chapter 7 bankruptcy. Under Chapter 7 you are able to eliminate more debt, and need not create a three- to five-year payment plan as you do under Chapter 13.
Do You Qualify for Chapter 7 Bankruptcy
There are certain financial requirements that must be met in order to file for Chapter 7 bankruptcy relief. If you do not meet these requirements, you will need to file under Chapter 13 instead. This is commonly referred to as a means test.
Basically, you will not be allowed to file under Chapter 7 if either:
- your income is above the median income for people in your state; and
- you have sufficient income to pay at least a certain amount of your debt, as determined by the bankruptcy court
Getting the Forms
You can download the forms and other paperwork you need to file a bankruptcy proceeding at US courts website, www.uscourts.gov. The forms include specific instructions for how to fill them out, sign them, and what additional paperwork such as financial statements, you will need to file with the court.
You must pay the filing fee for a Chapter 13 bankruptcy when you file your case. The fee is $310 as of 2015. If you do not have the money to pay the fee at that time, you can ask to pay the fee in installments.
Filing with the Court Clerk and Notifying Creditors
Once all of your papers have been prepared, you are ready to file them with the court clerk. This is not difficult but things will go smoother if you know what to expect.
- Find the clerk’s office. Search online for the bankruptcy court closest to you. Bankruptcy is part of the federal court system, and only a few cities in some states have federal courts.
- What to bring. Bring your completed paperwork, copies of your financial records, and personal identification.
- Filing. Although it is possible to file by mail, filing in person is recommended. It is easier to establish a friendly relationship in person, and the more time you spend at the courthouse the more comfortable you will be with the process. When you enter the office look for signs pointing you to the clerk’s office or to the bankruptcy area.
The clerk will take your papers and check them to make sure everything is correct. If the clerk approves your paperwork, they will ask you to pay the filing fee and explain how you can pay. After you pay, you will be given a receipt, case number, and your papers will be stamped. Your papers are now filed.
If the clerk determines something is not correct, you will be told what is wrong. Clerks cannot give legal advice but they will usually tell you what is wrong with your paperwork and how to fix it. The clerk will identify problems with forms, such as if you forgot to sign something, fill in a space, or if you need another type of form, or to submit an extra copy.
You will receive a notice of the date, time, and place of the meeting of creditors, which you must attend. Creditors are concerned about getting the most out of your proposed payment plan. They will ask questions about the reasonableness of your payment plan and the likelihood that you will be able to carry it out. The trustee will also ask some questions.
If the creditors and the trustee approve of your plan, it will be accepted by the court. If they do not, you may either negotiate changes in the plan to make it acceptable, stick to your plan and let the judge review it, or convert your case to a Chapter 7 bankruptcy.
Once your plan is approved, the trustee will probably order that the payments be deducted directly from your paycheck by your employer. These amounts will be sent to the trustee, who will make the required payments to the individual creditors.
Until the paycheck deduction becomes effective, you are responsible for making sure that the payments are made. Payments will generally be due thirty days after you file your plan with the court. This may be before the creditors' meeting. If your plan is not approved, the creditors will be required to refund any payments you have made.
Court Hearing and Approval Plan
Depending upon the procedures in your bankruptcy court, you may or may not have to appear before the judge. If the trustee determines that everything is in order, you may receive a discharge without having to attend a hearing.
In a Chapter 13 case, you will be entitled to a discharge once you have completed all of the payments required by your payment plan. This will likely require a brief court hearing with the judge.
At the hearing, the judge will probably:
- talk to you about the effects of the bankruptcy discharge
- caution you to avoid getting in debt again
- ask a few questions to assure the court that everything has been done properly
- ensure you understand the meaning of the discharge