Chapter 13 Bankruptcy

The Chapter 13 bankruptcy was originally called the "wage earner" bankruptcy, and is often still referred to as such. This chapter of bankruptcy is intended for individuals with a regular income who want to pay their debts or a portion of them. A Chapter 13 repayment plan might allow a person to pay creditors over an extended period of time under bankruptcy court supervision and protection. Under the Chapter 13 Bankruptcy, the petitioner could have a three to five year period to adjust their debts while creditors are prohibited from starting or continuing collection efforts.

For this reason, Chapter 13 Bankruptcy cases are often used to catch up on mortgage payments to avoid foreclosure and remain in the family home. The Chapter 13 Bankruptcy can also be used to restructure a car payment and prevent a vehicle repossession. This type of bankruptcy is also a useful tool for individuals who owe real estate taxes or other types of taxes, such as income tax or employment tax that may be paid off over the next five years.

Any individual is eligible for Chapter 13 relief as long as the individual's unsecured debts and secured debts fall below a certain amount set by statute. Chapter 13 Bankruptcy can also be used by small businesses owned and operated by individuals.

Attorney for Chapter 13 Bankruptcy in Dallas, TX

If you need a Chapter 13 Bankruptcy, then contact Littlefield Law Firm in Dallas, TX. We can represent you during each stage of the case. We can accompany you to any proceedings in the Chapter 13 case including the appearance in court for the bankruptcy plan confirmation hearing. In many cases, hearings that are held before a judge can be handled by us, thus avoiding your required court appearance. 

We represent clients in Chapter 13 bankruptcy proceedings throughout the greater Dallas-Fort Worth area including in the Northern District of Texas at the Earle Cabell Federal Building in Dallas, the Eldon B. Mahon U.S. Courthouse in Fort Worth. We also represent clients in the US Bankruptcy Court for the Eastern District of Texas in Plano, TX.

At Littlefield Law Firm, our bankruptcy attorneys with offices in Dallas, TX, represent clients throughout Dallas County, Collin County, Kaufman County, and Rockwall County. 

Call (972) 812-0900 today.

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Eligibility for a Chapter 13 Bankruptcy

A Chapter 13 case is a reorganization proceeding conducted on a smaller scale and with few formal requirements. Only an individual with regular income that owes unsecured debts of less than $394,725 and secured debts of less than $1,184,200 may qualify to be a Chapter 13 debtor as provided in U.S.C.A. § 109(e).

A Chapter 13 debtor remains in possession of both his or her exempt and nonexempt property. In a Chapter 13 bankruptcy case, the debtor is allowed an opportunity to file a plan of reorganization to restructure its payment obligations. A trustee is appointed in Chapter 13 cases. But in the Chapter 13 case, the trustee's role is primarily limited to serving as a conduit through whom monies are collected from the debtor and paid to the creditors under the terms of the plan.

In a Chapter 13 case, the debtor is essentially required to distribute property to unsecured creditors in an amount at least equal to what they would receive in a Chapter 7 case. Under § 1325’s rule with respect to secured creditors, the secured creditor generally retains any security interest and receives a stream of payments of a present value equivalent to the value of their collateral as of the date of confirmation, with certain exceptions. An attorney in a Chapter 13 bankruptcy can help you understand the rules for confirmation of Chapter 13 plans.

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After Confirmation - The Chapter 13 Cramdown Plan

After confirmation, the appropriate interest rate for the secured Chapter 13 creditor in a Chapter 13 “cramdown” plan is typically the rate of interest that the creditor could have obtained had it foreclosed and reinvested proceeds in loans of equivalent duration and risk. 

A Chapter 13 plan may not modify the rights reflected in the mortgage instrument. Those rights that cannot be modified might include any of the following:

  • the right to repayment of principal in monthly installments over a fixed term at specified interest rate;
  • the right to retain a lien until the debt is paid off;
  • the right upon default to accelerate the loan, foreclose and recover the deficiency.

Under the Bankruptcy Code's goal of balancing protections, any modification to the Chapter 13 plan for a mortgage arrearages after the bankruptcy petition is filed must comply with requirements of default cure provision. The bankruptcy court will inquire as to whether the proposed modification complies with the provision's requirement that a cure is effected within a reasonable time while simultaneously maintaining current payments on any long-term secured loan.

Under rules that took effect on December 1, 2017, individuals filing for bankruptcy under Chapter 13 must now use a new form that presents their payment plan in a more uniform and transparent manner. The new rules also provide creditors with less time to submit a proof of claim.

Conversion from a Chapter 13 to Chapter 7

A debtor’s right to convert a case from Chapter 13 to Chapter 7 pursuant to Bankruptcy Code §1307(a), is accomplished by the filing of a notice of conversion served upon the master mailing list (matrix) as constituted by the Bankruptcy Court in Dallas, TX, on the date of service. A debtor’s motion to convert pursuant to §1208(a) or §1307(a) shall be deemed a notice of conversion.

This article was last updated on Friday, April 6, 2018.

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Linda Littlefield
Linda Littlefield