What are My Responsibilities in Chapter 13? - Chapter 13 (2024)

FAQs

What can I not do during Chapter 13? ›

Also do not not incur debt, use credit, credit cards, or enter into leases while in Chapter 13 without Bankruptcy Court approval, except in the case of an emergency for the protection and preservation of life, health or property. Contact your attorney if you need to sell property or incur debt.

An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, 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 ...

The trustee can ask you about anything related to your financial situation, and most questions will involve your debts, assets, income, expenses, and, importantly, prior transactions. The trustee will be looking for information that could increase recovery for your creditors.

Ending Your Chapter 13 Plan Early

There are only two ways to pay off a Chapter 13 bankruptcy early: pay 100% of what you owe, or. qualify for a hardship discharge.

A Chapter 13 petition for bankruptcy will likely necessitate a $500 to $600 monthly payment, especially for debtors paying at least one automobile through the payment plan. However, since the bankruptcy court will consider a large number of factors, this estimate could vary greatly.

Since a trustee's focus is to review your assets and administer the plan to repay your creditors, yes, he or she will need access to your bank accounts and other financial information.

The Trustee Will Look for Suspicious Banking Activity

For instance, suppose you claim you spend $1,200 monthly on groceries, but your bank statements show $400 monthly. The trustee could claim you have $800 monthly to pay creditors through a Chapter 13 plan.

Your answers must be brief and direct. The Trustees are respectful but are not your “friend.” Their job is to administer your bankrupt estate, find assets to liquidate and pay your creditors. They work for the benefit of the unsecured creditors and the Government, not you.

In most cases, failure is due to one of several reasons: Life circ*mstances. Not having the guidance of an experienced bankruptcy attorney. Over-ambition.

What gets paid first in Chapter 13? ›

How Do Creditors Get Chapter 13 Trustee Payments? The first payments will likely be limited to your attorney's fees and secured claims—such as your mortgage and car loan—until the court confirms your plan.

Typically, you'd file a modification motion with the court and serve it on the bankruptcy trustee and your creditors. In most cases, you'll obtain a hearing date, provide a written declaration as to why your plan payment should be reduced, and propose an amended Chapter 13 plan.

Another way to differentiate Chapter 13 from Chapter 7 is that in a Chapter 13 bankruptcy, you keep everything – all your property – under a court-approved debt reorganization plan that lasts three to five years. If you stick to the plan and regularly make the payments, you keep control of your possessions.

You Don't Get to Keep Assets If You Fail

The idea of keeping your home and car and personal belongings is an attractive part of Chapter 13. But if the case fails or is dismissed, protection for those assets disappears.

Any credit purchase you make without Court approval could be prohibited, what was purchased might have to be returned and you very likely would lose any payment you made.

Keeping cash when filing for bankruptcy does change somewhat between Chapter 7 and Chapter 13 bankruptcies. Under Chapter 13, you also have the $550 cash exemption along with a wildcard exemption up to $1,475, allowing you to keep $2,025 in cash under Chapter 13.