While Chapter 7 is a much quicker process, Chapter 13 bankruptcy is a reorganization of a person’s finances that allows them to make payments to creditors over a 3-5 year period based on their income that also factors in family size. You can file Chapter 13 bankruptcy in Florida only if you are a Florida resident with proper income to allow a successful Chapter 13 plan, which has debt limits for unsecured and secured debts. When you file a Chapter 13 bankruptcy, you create a payment plan that calculates disposable income that you will pay to a trustee in order to set up a monthly payment plan to creditors to satisfy their debts.
What exactly is considered disposable income? When you are dealing with a bankruptcy filing in Central Florida, disposable income means what you have left over after subtracting allowed expenses from your gross earnings. Certain expenses will be determined by your out-of-pocket costs and others will be calculated by standards as calculated by the IRS. The lower disposable income, the lower the percentage of unsecured debts you pay back to creditors as you proceed through the stages of your Chapter 13 plan. Assuming you are able to finish the Chapter 13 plan that is approved by the courts, the debts that remain outstanding upon completion of the plan are discharged.
As you put together your budget to determine your disposable income, you should look at things like repairs for your home and vehicle, reasonable personal expenses, reasonable school expenses for your children and even consider items for your pets. The budget your put together should be as thought through and as accurate as possible since the amount of your net monthly income determines your payments you will make to your Chapter 13 trustee for your bankruptcy plan. o qualify under Chapter 13 bankruptcy law in Florida, you must have sufficient income to make payments to your secured creditors. You are required to pay all of your disposable family income into the plan until your creditors are paid in full or for five years, whichever comes first, and you must pay your unsecured creditors at least as much as they would receive from your non‑exempt property if you filed a Florida Chapter 7
Typically, an initial Chapter 13 plan must be filed within 14 days after filing a Chapter 13 petition and it would include a structured plan to pay your creditors on a monthly basis. The payments are made from your single monthly payment you send to your Chapter 13 trustee, with the first payment due within 30 days after you file with the bankruptcy court.
For a Chapter 13 filing, the automatic stay starts immediately upon the filing of the Chapter 13 bankruptcy petition and will stop all collection efforts. The stay protects you from your creditors during the Chapter 13 bankruptcy and prevents a creditor from starting or continuing judicial proceeding against you. Totally unsecured second mortgage liens can be eliminated through a successful Chapter 13 and will allow for a discharge of some unsecured debts not dischargeable in a Chapter 7. Chapter 13 will stop property foreclosures so that you can catch up on past due mortgage and homeowner’s and condominium association payments. If you are going to surrender a property, the lender will usually have the stay lifted so it can proceed with foreclosure.
Your trustee may require you to liquidate certain items unless your plan provides for the repayment in full of all creditors, both secured and unsecured. All secured debts will be paid through your Chapter 13 Plan unless you surrender the secured asset. In Chapter 13, you may surrender collateral (such as a house or car) securing a secured loan. You may be able to pay some secured debts outside the plan if (a) the account is current and (b) the debt is paid by automatic deduction initiated by the creditor (not through bill pay) and has been paid that way for at least six (6) months prior to filing. You may be able to lower the interest rate on a car loan to the current market rate.
Unsecured debts include medical bills and credit cards issued by banks (like a standard Visa or MasterCard) and other credit cards for places like WalMart and Target. Secured debts include those debts where there is a security interest in your property to guarantee payment such as your mortgage being secured by your home and your car loan behind secured by your car or truck.
About four weeks after you file your Chapter 13 case, you are required to attend a meeting with the Chapter 13 bankruptcy trustee (also called the “341 meeting” or “creditors meeting”) The meeting is normally pretty quick and is not held in a courtroom and the federal bankruptcy judge is prohibited by law from being there.
Your creditors have a limited amount of time to submit a claims and to be part of your Chapter 13 plan. Secured creditors almost always file a claim because they are secured and even if they don’t, you would probably want to file one for them. The creditor’s claim indicates the total amount of debt and the “cure” amount should include past due interest, costs, and attorneys fees to date of filing. Unsecured creditors may also file claims but not as often as secured creditors will.
If you fail to make plan payments to the trustee as they become due, the trustee will file a a motion to dismiss your case. If that happens, you will only have 21 days to make the overdue payment plus the next payment due or object to the motion. If a Chapter 13 case is dismissed for non-payment, you many not be able to file another Chapter 13 case for up to 6 months. If there is a valid excuse for non-payment, such as unemployment or sickness, the trustee may agree to modify your plan possibly allowing you to miss up to three payments. Over the entire span of your Chapter 13 plan, you can only miss three payments and if they are missed your Chapter 13 plan will be modified and the missed payments will be worked back into the plan. Failure to make any payments during the your time you are making up payments will result in your case can be dismissed.
As you can see, there are substantial differences between Chapter 7 and Chapter 13 bankruptcy filings. Contact us and we can help you walk through what would be the best solution for you.