The 2005 reform legislation has made Chapter 13 the most common type of bankruptcy. Essentially, Chapter 13 is a Court-supervised and Court-monitored repayment plan where
the debtor provides the Court with a listing of all of their debts and a budget for their monthly needs. Any extra money left over each month is applied to pay the arrears owed on the debts. One of the benefits of a Chapter 13 repayment program is that a lot of the expensive late fees, interest rates, and other charges can no longer apply to these sorts of debts.
The usual repayment program usually lasts between 48 and 60 months. The typical Chapter 13 plan sends the debtor’s wages to the Court appointed trustee who pays all of the creditors, according to a plan presented by the debtor and agreed to by the creditors.
After the bankruptcy reform act of 2005, Chapter 13 repayment plans now also include partial repayments in what used to be a complete discharge. Chapter 13 bankruptcies can be filed again within a shorter period of time after the last plan either failed or terminated. To prevent abuse, if the Court, due to the debtor’s noncompliance, dismisses a Chapter 13 plan, the debtor cannot file a new Chapter 13 for at least one year.
Several new rules also exist about automatic stays and refiling. They include:
1. Automatic stay is terminated 30 days after petition in cases filed by an individual under Chapters 7, 11, or 13 if the case is pending within 1 year preceding was dismissed other than that refiled under dismissal under 7078; may be continued if Court finds refiling in good faith.
2. No automatic stay is in effect in cases filed by an individual under Chapters 7, 11, or 13 if two or more cases pending in 1 year preceding were dismissed other than that refiled under dismissal under 70; Court may impose stay is established later if filing in good faith.
3. Stay automatically terminates 60 days after sec. 362(d) motion filed in cases filed by an individual under 7, 11, or 13 unless there is a final decision or extension reached.
Many times, people will not include their house payment in the Chapter 13 plan. This is frequently the result of individual preferences of the attorneys that they hire to represent them, as well as the characteristics of the trustees appointed by the probate Court to administer Chapter 13 plans. Even if a house is not included in any Chapter 13 bankruptcy, the bankruptcy does protect the house by filing a stay on the foreclosure action, meaning the stay remains in effect as long as the homeowner gets, and remains, current on their house payments.
Unfortunately, the vast majority of Chapter 13 repayment plans falters and eventually fails. Plans can falter even when the debtor gets a “grace period” from the Court for additional time to try and catch up for missed payments to the trustee.