There are times when individuals, married couples or small business owners accumulate a significant amount of debt and find it difficult to pay it off or otherwise manage it. One powerful tool to resolve the debt problem is filing a bankruptcy. Please do not be hard on yourself and fall for the archaic belief that a bankruptcy is a personal failing; in these times of government driven high inflation more and more good people are falling behind on their bills. Bankruptcy may be your very best method to deal with the stress and financial impact of overwhelming debt!
Typically most consumer (individuals or couples) debtors, or small business debtors, will consider either a Chapter 7 or Chapter 13 filing. For more in depth information about a Chapter 7 bankruptcy, please see my website tab specifically detailing the Chapter 7 process.
This discussion relates to filing a Chapter 13 bankruptcy. Please know that from start to finish, I will walk you through the process no matter what chapter you chose to file, so that you understand all the nuances, are familiar with the process, and are able to make informed decisions about your financial future. Contact me on my cell today via phone or text at 214-288-1917 to schedule a free consultation.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a type of bankruptcy that allows Debtors restructure their debt and pay back some (or all) of those debts. Like most other types of bankruptcies, the court assigns a trustee to oversee the bankruptcy. In Chapter 13 bankruptcies, however, trustees have two critical additional tasks:
- Receiving payments from the debtor; and
- Making payments to the creditors owed money in accordance with the Chapter 13 plan approved by the bankruptcy Judge.
Thus, in a Chapter 13 bankruptcy, debt is not immediately discharged, but a three- to five-year repayment plan is set up. After completion of the plan, any remaining debt is discharged unless some disqualifying circumstance exists.
Chapter 13 aims to help people get caught up on arrears for secured loans (like mortgages) and resolve most debts. This type of bankruptcy carries certain benefits not available through Chapter 7 bankruptcy and is often referred to as “wage earners' bankruptcy because you must have a regular income to qualify.
Eligibility for Chapter 13 Bankruptcy
The criteria to qualify for Chapter 13 bankruptcy include:
- Regular Income. You do have to have regular income, even if self-employed or operating an unincorporated business.
- Individual or Married Couple. You are filing as an individual or married couple, even if you own a business. This allows a Chapter 13 to be of use to small business people, even if the business is incorporated.
- Can prior bankruptcy cases impact filing a Chapter 13? A prior bankruptcy petition - dismissed or completed and discharged - can impact your ability to file another Chapter 13 case. We will discuss this complex situation during our free consultation.
- Is a Credit Counseling class required? Yes, thanks to Congress you must take an approximately hour long on-line credit counseling class. These usually cost from $19 to $35.
What are the Reasons You Should File a Chapter 13 Bankruptcy?
You should consider Chapter 13 bankruptcy if:
- You are behind mortgage payments, risk foreclosure, and do not want to lose your home
- You are behind on loan payments for vehicles (like cars, motorcycles, or boats), risk repossession, and want to keep the vehicle
- You are behind on utility payments, risk having utilities shut off, and to keep on the electricity, gas, and/or water
- You owe significant tax debts; a Chapter 13 bankruptcy is a very effective way to pay back non-dischargeable tax debts. It is also often possible to discharge certain tax debts after paying little, or nothing back, depending on several complicated qualifying factors.
- You need to protect your finances after a creditor has filed a lawsuit, garnished your wages, or implemented a bank freeze
- You have a sole proprietorship and are behind on payments to third parties or have accumulated too much debt––you can file Chapter 13 under your name but benefit from the advantages of a Chapter 13 for your business.
- You have student loans, which are typically non-dischargeable debt. However under recent Department of Justice guidelines you may be able to discharge certain student loan debts by filing what is known as an Adversary Proceeding. We will discuss this possibility at our free meeting.
How Much Does It Cost to File for Chapter 13 Bankruptcy in Texas?
The cost to file Chapter 13 bankruptcy is set by the Court. The filing fee is $313. Each district sets their allowed fees that an attorney can charge in a typical case. Like most bankruptcy attorneys, I put the majority of my legal fees in the Chapter 13 plan, and I am paid over time as you pay the Chapter 13 plan payments.
What Documents Do I Need to file a Chapter 13 Bankruptcy?
There are several documents and information you need when you file for Chapter 13 bankruptcy in Texas. Here's a list of what you may need to begin the process.
- Last two years tax returns (personal and if applicable, business tax returns)
- Proof of all income for 2022, and 2023
- Divorce decrees entered in the last 8 years
- Any lawsuits filed against you, or that you filed against anyone else or any business
- Information on any tax debts owed and corresponding collection letters from the IRS
- If you are married, both spouses must provide the above information, even if only one spouse files for Chapter 13 bankruptcy. The bankruptcy court needs to understand the entire household financial situation.
- I always run the credit report through the bankruptcy software; it saves us both time as it puts the data into the bankruptcy software, and allows me to analyze your bankruptcy options during our meeting efficiently.
- There may be other documents I need to request after we meet and I fully understand your situation; but we will discuss those during our free consultation.
What Happens When I File for Chapter 13 Bankruptcy in Texas?
After you file for bankruptcy, you are given a case number and a Notice of Bankruptcy Case Filing, which you can use to prove to any creditor that you are under the protection of an Automatic Stay. Also the Court mails all creditors notice of the case and information about the upcoming Meeting of Creditors. A Chapter 13 bankruptcy lasts for a minimum of 3 years, and a maximum of 5 years. How long you are in the case depends on several factors including your income, and how much time you may need to pay the relevant debts, and what comprises an affordable Chapter 13 plan payment.
There are several important steps that happen after you file the case. Three main obligations include:
- 341 Meeting of Creditors. You must attend the Meeting of the Creditors. I will be present and guide you through the process. The meetings are generally very routine, and I will fully prepare you how to testify.
- Financial Management Course. This course must be completed before the end of the bankruptcy. Your bankruptcy will last for three to five years. You must take the course, and I will file the certificate with the court before the completion of the bankruptcy.
- Payment Plan. You have a payment plan, and you must make timely payments to avoid problems. Your first payment is typically due the first of the month after bankruptcy is filed, but so long as it is received within the month, problems will not materialize. If you fail to timely make payments, bankruptcy could fail, and you may start receiving calls from creditors, have your wages garnished, or experience a freeze on your bank account. You also risk losing your home to foreclosure or having a vehicle repossessed if the case gets dismissed.
Making sure you uphold your end of the Chapter 13 Bankruptcy is key to successfully completing it. Any dischargeable debt that remains at the end of your bankruptcy will be discharged. A Chapter 13 is a very powerful tool to restructure your debts and protect your income and property from your creditors.
Contact Me to File a Bankruptcy in the Dallas Fort Worth Metroplex Today
At the Law Office of Len L. Nary, I know how significantly debt can impact an individual or married couple, or a small businessperson. If you have difficulty paying bills and want to save your home and vehicle, or restructure unmanageable debts, please reach out to me to file in Dallas, Fort Worth, Plano, Frisco, Flower Mound, Farmers Branch, Carrollton, and all surrounding locales in the Dallas Fort Worth Metroplex. Please either file out my online form, call me at 214-288-1917, or email me at [email protected] I will schedule a free consultation, and we will spend some time together to ensure you get the answers you need to all your bankruptcy questions.