Chapter 13 is a special part of the Bankruptcy Law. It lets you file a plan that combines your debts and gives you a way to repay all or part of them while protecting you or your co-signer from harassment by creditors. If your financial problems or debts cannot be helped by Consumer Credit Counseling or a Chapter 7 straight liquidation, Chapter 13 is an excellent alternative for you.

To qualify for Chapter 13, you must meet several qualifications. You must be an individual, or husband and wife, or a sole proprietor of a business. You must have a regular income. A partnership or a corporation does not qualify for this type of bankruptcy. Your unsecured debts must be less than $269,250 and your secured debts less than $807,750. A secured debt is one that a creditor has a mortgage or security interest in, such as a house mortgage or automobile lien. The maximum length of a Chapter 13 plan is five years.

There are specific procedures involved in filing a Chapter 13 plan. First, you or your lawyer will need to prepare a financial summary of what and whom you owe, what your assets are, your monthly income and living expenses. You must also prepare your proposed plan for repayment. All of these items must be prepared on forms that have been approved by the court.

You will be required to make your first payment to the trustee within 30 days of the date you filed your plan even if your plan is not confirmed yet.

The law does not require you to have a lawyer. However, bankruptcy law is changing all the time and you may want to talk with a lawyer before filing a Chapter 13 case. After you file, the Bankruptcy Court will set a date for a hearing. This hearing is called the 'Meeting of Creditors.'

You and all of your creditors will be notified of the time, date and place of this meeting, and you will be required to attend and answer questions under oath about your financial matters.

The trustee appointed in your case will conduct the meeting. It is the trustee's job to verify that the financial information you give. The trustee will then determine whether he or she can recommend to the judge that your plan can be confirmed. At the meeting, the trustee and your creditors may question you about your income, expenses, property, past earnings and the schedule of repayment.

The court will also notify you of the date of the confirmation hearing. At the confirmation hearing, the judge will determine whether your plan should be confirmed and allowed to proceed. The creditors may attend this hearing and offer any objections they may have. Your presence at the confirmation hearing is not always required. If your plan is confirmed, your employer may be ordered to make monthly payments to the trustees by taking it out of your wages. However, you may object to this if you have a valid reason.

The following benefits would be available to you if your Chapter 13 plan is filed in good faith, the filing fees are paid, the plan is in the best interest of your creditors, and you can make your proposed payments:

• There is usually no time limit between when you file this plan and any past plan.
• If you pay your unsecured creditors at least 70% of their claims, you will be able to get a discharge in a later straight liquidation bankruptcy case, even if it is within six years of filing the Chapter 13 case.
• If you complete the plan, you can be excused from certain debts. Examples are debts from the commission of a willful and malicious act, false financial statements, and bad checks. The only debts that cannot be excused are for child or spousal support, drunk driving, certain student loans, certain criminal fines included in a criminal conviction and certain tax debts.
• You might be able to stop foreclosure against your property by making the back payments over a period of time. Such an extension is also available on back taxes.
• If your monthly payments on contracts are too large, you may be able to lower the monthly payment and possibly the interest rate. House payments are the exception, and they cannot be changed.
• If necessary, you can pay the unsecured creditors less than 100% of their claims. Some taxes must be paid in full.
• You can stop interest from continuing on unsecured debts in most instances.
• You can take up to three years to repay the claims, and under some circumstances, you may take up to five years.
• You may be able to keep property that would otherwise be distributed to your creditors in a straight bankruptcy.
• You may be able to stop some or all collection activities against a person who co-signed a debt for you.
• You might be able to give a creditor back its security, such as a car, in partial or full satisfaction of the claim.
• You can end further obligations to creditors whose services you have not fully received, such as from spas and health clubs, dance studios, correspondence courses, leases, etc.
• For debts incurred before you filed your bankruptcy petition, no one can bother you, sue you, garnish your wages, or repossess property without court approval.
• You may be able to void certain liens against your household goods and against some other personal items.
• You can sometimes pay extra into the plan to get it paid off sooner.
• You can propose to sell some of your property as part of the monies to be paid through the plan.
• If there is a major change of circumstances, you can propose changes to your plan that would help you complete it. However, so can your creditors! If the change of circumstances is beyond your control and makes it impossible to continue even a modified plan, you can request a 'Hardship Discharge.'
• If circumstances change, and you don't want a hardship discharge, then you have the right to dismiss your plan or convert your plan to a straight liquidation bankruptcy.

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