10TH EDITION “An excellent book that can guide you through the process.” FORBES Chapter 13 Bankruptcy • Save your home and car • Pay pennies for every dollar owed • Cancel debts Attorney Stephen Elias & Robin Leonard, J.D. Keep Your Property & Repay Debts Over Time Free Legal Updates at Nolo.com NOLO ® AVOID FORECLOSURE  e Story Dear friends, Founded in 1971, and based in an old clock factory in Berkeley, California, Nolo has always strived to off er clear legal information and solutions. Today we are proud to off er a full range of plain- English law books, legal forms, software and an award-winning website. Everything we publish is relentlessly researched and tested by a dedicated group of in-house legal editors, who together have more than 150 years’ experience. And when legal changes occur after publication, we promptly post free updates at Nolo.com. Tens of millions of Americans have looked to Nolo to help solve their legal and business problems. 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Tenth Edition MAY 2010 Editor LISA GUERIN Book Design TERRI HEARSH Proofreading SUSAN CARLSON GREENE Index ELLEN SHERRON Printing DELTA PRINTING SOLUTIONS, INC. Elias, Stephen. Chapter 13 bankruptcy : keep your property & repay debts over time / by Stephen Elias & Robin Leonard. 10th ed. p. cm. Includes index. ISBN-13: 978-1-4133-1069-6 (pbk.) ISBN-10: 1-4133-1069-9 (pbk.) 1. Bankruptcy United States Popular works. I. Leonard, Robin. II. Title. KF1524.85.E39 2010 346.7307’8 dc22 2009021416 Copyright © 1995, 1996, 1998, 1999, 2001, 2003, 2005, 2006, 2008, and 2010 by Nolo. All rights reserved. The NOLO trademark is registered in the U.S. Patent and Trademark Office. Printed in the U.S.A. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without prior written permission. Reproduction prohibitions do not apply to the forms contained in this product when reproduced for personal use. For information on bulk purchases or corporate premium sales, please contact the Special Sales Department. Call 800- 955-4775 or write to Nolo, 950 Parker Street, Berkeley, California 94710. Please note We believe accurate, plain-English legal information should help you solve many of your own legal problems. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professional—and we’ll always point out situations in which we think that’s a good idea—consult an attorney licensed to practice in your state. Acknowledgments Robin Leonard gratefully acknowledges the following people: Joan and Bob Leonard. Mom and Dad let me live in their house for nearly a month, 3,000 miles from my own home, away from telephone calls, meetings, and the stress of day-to-day work life so I could actually write this book. Mary Randolph, senior legal editor at Nolo. Mary is the perfect editor. Her ability to take a good, but disorganized, submission and turn it into a great and easy-to-use guide made writing the second, third, and fourth drafts pleasurable. Steve Elias would like to thank: Lisa Guerin for her unparalleled editing skills. The Nolo production and marketing staff for their creative skills and hard work in producing and distributing this book. The National Association of Consumer Bankruptcy Attorneys for their wonderful conferences that helped me understand how Chapter 13 works under the new bankruptcy laws. CHAP- TER Table of Contents Part 1: Is Chapter 13 Right for You? 1 How Chapter 13 Works 3 An Overview of Chapter 13 Bankruptcy 4 Which Debts Are Discharged in Chapter 13 Bankruptcy 9 Is Chapter 13 Right for You? 9 Alternatives to Bankruptcy 11 2 e Automatic Stay 17 How Long the Stay Lasts 18 How the Stay Affects Common Collection Actions 18 How the Stay Affects Actions Against Codebtors 20 When the Stay Doesn’t Apply 21 Evictions 22 3 Are You Eligible to Use Chapter 13? 25 Prior Bankruptcy Discharges May Preclude a Chapter 13 Discharge 26 Business Entities Can’t File for Chapter 13 Bankruptcy 26 Your Debts Must Not Be Too High 26 You Must Stay Current on Your Income Tax Filings 26 You Must Keep Making Your Child Support and Alimony Payments 27 You Must File Annual Income and Expense Reports 27 Your Proposed Repayment Plan Must Pay All Required Debts 27 Your Unsecured Creditors Must Get at Least as Much as ey Would Have Received in a Chapter 7 Bankruptcy 29 You Must Participate in an Approved Personal Financial Management Course 29 4 Do You Have to Use Chapter 13? 31 Can You Pass the Means Test? 32 Forced Conversion to Chapter 13 44 5 Can You Propose a Plan the Judge Will Approve? 45 If Your Current Monthly Income Is Less an Your State’s Median Income 46 If Your Current Monthly Income Is More an Your State’s Median Income 54 Understanding Property Exemptions 67 6 Making the Decision 73 Part II: Filing for Chapter 13 Bankruptcy 7 Complete Your Bankruptcy Forms 83 Get Some Information From the Court 85 Required Forms 86 For Married Filers 88 Form 1—Voluntary Petition 89 Form 6—Schedules 97 Form 7—Statement of Financial Affairs 133 Form 21—Statement of Social Security Number 148 Form 22C—Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income 148 Form 201A—Notice to Individual Consumer Debtor Under § 342(b) of the Bankruptcy Code 149 Mailing Matrix 149 Income Deduction Order 149 8 Drafting Your Plan 153 Chapter 13 Plan Formats 154 What You Must Pay 154 Repayment of Unsecured Debts: Allowed Claims 156 A Model Plan Format 157 Sample Plan 168 [...]... types of bankruptcy relief and options for dealing with your debts outside of bankruptcy An Overview of Chapter 13 Bankruptcy Chapter 13 can be a good solution for people who need time to pay off certain debts and who have enough income to meet the Chapter 13 requirements In Chapter 13, you get to keep all of your property, regardless of its value However, you will have to pay your unsecured debtors (those... them all off during your repayment plan Is Chapter 13 Right for You? Some of you won’t have a choice between Chapter 7 and Chapter 13 bankruptcy—if you want to file for bankruptcy, you will have to use Chapter 13 and repay some of your debt (See Ch 4 to find out whether you’ll be limited to Chapter 13. ) Likewise, if you don’t have a steady income, your only bankruptcy choice is Chapter 7 Many people... whether Chapter 7 or Chapter 13 bankruptcy is the better remedy for your debt problems, in “Is Chapter 13 Right for You?” below.) This book explains every step in the Chapter 13 process, including who can use Chapter 13, how to file the necessary papers, and how to come up with a workable repayment plan To help you get started, this chapter provides an overview of Chapter 13 bankruptcy—how it works and. .. (typically, a very hard sell) Which Debts Are Discharged in Chapter 13 Bankruptcy Not all debts are discharged in Chapter 13 bankruptcy Of course, if you will repay all of your unsecured debts in full over the life of your plan, no discharge is necessary But if your plan provides for less than full repayment of your unsecured debts, whatever you still owe may or may not be discharged Debts That Are Discharged... your debts over time, under the supervision of the bankruptcy court Chapter 13 allows you to keep your property while using your income to repay some or all of your debts In contrast, Chapter 7 bankruptcy allows you to immediately wipe out many debts, but in exchange, you must give up any property you own that isn’t protected by state or federal exemption laws (You’ll find more information on Chapter. .. effective—to file for Chapter 7 than to keep up with a long-term payment plan under Chapter 13 And if you do file for Chapter 13 and don’t keep up with your repayment plan, you will likely get no benefit from having engaged in the Chapter 13 process if you later convert to a Chapter 7 (unless the court lets you off the hook early for hardship reasons) Example: Frank files for Chapter 13 bankruptcy His... foreclosure on your home or your car is being repossessed, and you want to keep your property Using Chapter 13, you can make up the missed payments over time and reinstate the original agreement You generally cannot do this in Chapter 7 bankruptcy—instead, you’ll ultimately lose the property • You owe more on real estate that you own as a vacation or investment property than that property is worth, and you... card debts, medical debts, and most court judgments, for example) the value of the property you would lose if you filed for Chapter 7 bankruptcy If you are facing foreclosure on your home, Chapter 13 provides a powerful remedy You can keep your home by proposing a feasible repayment plan that includes your missed payments, as long as you stay current on your mortgage Here is a brief overview of the Chapter. .. bankruptcy to Chapter 7 (if that makes sense) or perhaps obtain a “hardship” Chapter 13 discharge from the court In many cases, Chapter 13 bankruptcies that don’t work out are dismissed entirely If your case is dismissed, you’ll owe your creditors the balances on your debts from before you filed your Chapter 13 case, less the payments you made, plus the interest that accrued while your Chapter 13 case was... use Chapter 7 • You have significant doubts about your ability to complete a Chapter 13 repayment plan • None of the pressing reasons to use Chapter 13 are present in your case (see below) For many people, the overriding reason to choose Chapter 7 is that they can do it themselves for little or no money (other than the filing fee), and they don’t feel that they can handle their own Chapter 13 case—and . Elias, Stephen. Chapter 13 bankruptcy : keep your property & repay debts over time / by Stephen Elias & Robin Leonard. 10th ed. p. cm. Includes index. ISBN -13: 978-1- 4133 -1069-6 (pbk.) . control of your finances. Chapter 13 bankruptcy could be the best way to resolve your debt problems. When you file for Chapter 13, you agree to repay all or a portion of your debts over time, under. court. Chapter 13 allows you to keep your property while using your income to repay some or all of your debts. In contrast, Chapter 7 bankruptcy allows you to immediately wipe out many debts,