The information presented in this website is intended to be used by persons considering whether they should talk to an attorney about filing bankruptcy. It should not be construed as legal advice.  You should see an attorney to discuss the specific facts of your case.

What is Chapter 13?
Chapter 13 has also been called a “Payment Plan Bankruptcy” or a “Wage Earner Bankruptcy.” It is a way of having some or all of your debts paid back over time out of your wages. Like a Chapter 7, you list all of your property and all of your debts. But unlike Chapter 7, you get to keep all of your property. Instead of selling your property to pay your debts, the court accepts monthly payments from you for 3 to 5 years. Those monthly payments are used to pay your debts. The main reason you may choose to file a Chapter 13 is because you can catch up on mortgage payments and/or car payments on which you are behind as of the date of filing. This means you will not lose your house and/or car in Chapter 13, so long as you keep your payments current after filing bankruptcy. Another benefit is that my attorney fees can generally be paid out of the monthly payments that you make to the court. Chapter 13 also gives you the ability to reduce the amount you must pay to a creditor for your car if you bought the car over two and a half years ago. If you did, you can reduce what you owe to the fair market value of the car and you can reduce the interest rate that you pay on that amount to about 6%. Even if you bought your car within the past two and a half years, you can still reduce the interest rate that you pay on the balance due as of the date you filed bankruptcy to about 6%.

How long does Chapter 13 take?
A Chapter 13 case takes three to five years to complete because you are paying back all or a portion of your debt by equal monthly payments, usually out of your wages, for a minimum of 36 months and a maximum of 60 months.

How much will my plan payment be and how long will they last?
The amount of your plan payment and the length of your plan depends on a number of factors. One factor is how much disposable income you have left over every month after you pay your living expenses. A second factor is how much you are behind on your secured debts (e.g., mortgage, car payment, etc.). A third factor is how much money your creditors would get if you filed a Chapter 7 instead of a Chapter 13. How these factors, and others, work together depends on the facts of your case, so the best thing to do is to talk with an attorney experienced in crafting Chapter 13 plans.

What is the standard procedure after filing a Chapter 13 case?
The case is filed with the court. The court appoints a trustee and sends a notice to all of your creditors that you have filed bankruptcy. The notice also informs the creditors that they cannot take any action against you (i.e. call, write, file suit, etc.) unless they have the court’s approval. Enclosed with the notice is a proof of claim form that each creditor must fill out and file with the court in order to get paid. About 30 days after filing you must attend a meeting of creditors. The meeting of creditors last approximately one hour. During that hour the trustee will give a speech to all debtors in the courtroom about how to be successful in a Chapter 13. He will also ask you to come forward and answer questions under oath about what you own, who you owe, and what you’ve done with your money and property over the past couple of years. The trustee may also ask your lawyer about the contents of your petition and plan. Any of your creditors can also ask you questions about your assets, income and debts at the meeting, but few if any ever show up. The questions take about 10 minutes. About 30 days after the meeting of creditors, there is a confirmation hearing. That is when the Judge decides if your proposed plan meets all of the requirements of the bankruptcy code and can be confirmed. You do not typically need to be at that hearing unless instructed to be present by your lawyer. After your plan is confirmed, you simply need to continue making your plan payments to the trustee. Once you have made all of your plan payments, the trustee will certify to the court that you have successfully completed your plan, the court will order that your remaining debts be discharged, and your case will be closed.

Can bankruptcy stop a foreclosure?
Yes. You can stop a foreclosure sale of your house by filing bankruptcy. You must file the bankruptcy before the date and time of the foreclosure sale. If you want to keep the house, you will most likely have to file a Chapter 13 to catch up on the mortgage payments on which you are behind as of the date of filing bankruptcy.

Can bankruptcy stop a repossession?
Yes. You can stop a repossession by filing bankruptcy. If you want to keep the property, you will most likely have to file a Chapter 13 in order to catch up on the missed payments.

Can I get my repossessed property back in bankruptcy?
Yes, if you file bankruptcy before the property is sold by the creditor. You can file a Chapter 7 and refinance the car to pay the creditor 100% of what is owed. Or, you can file a Chapter 13 and pay the creditor back through the plan payments that you make to the court.

Can creditors take any action against me after I file bankruptcy?
Not without court approval. If a creditor contacts you or takes any action against you or your property without first getting an order from the court, they are likely violating the bankruptcy laws. If this happens, take notes of what happened and provide them to your lawyer along with any documents you received regarding the potential violation.

Can a creditor take any action against me after my debts are discharged in bankruptcy?
No. The creditor cannot take any action after discharge, unless the debt is one that can’t be discharged in bankruptcy (e.g., child support, spousal support, student loans, and most taxes). If the debt was discharged they cannot call you, write you, or sue you. If they do, it is a potential violation of the bankruptcy laws. In addition, if your credit report shows that a balance is due on a discharged debt, that is taking action against you and is another potential violation of the bankruptcy laws. If any of these things happen after your discharge, take notes of what happened and provide them to your lawyer along with any documents you received regarding the potential violation.

What documents do I need to file a Chapter 13?
Please see these documents.

Is there a minimum amount of debt I must have in order to file bankruptcy?
No. There is no minimum amount of debt you need to have to file bankruptcy, but if the amount of the debt is small enough in relation to your income you may decide to try to pay it off outside of bankruptcy by yourself or with the help of one of the credit counseling agencies approved by the Bankruptcy Court for the Western District of Virginia.

Is there a maximum amount of debt that I can have to file bankruptcy?
In Chapter 13 cases you cannot have over $300,000 (approximately) in unsecured debt (e.g., credit cards, medical bills, payday loans, etc.) or over $1,000,000 (approximately) in secured debts (e.g., mortgages, car loans, boat loans, etc.).

What is Chapter 11?
Chapter 11 is a reorganization bankruptcy for persons with more debt than is allowed in Chapter 13 cases (see Is there a maximum amount of debt that I can have to file bankruptcy?), or for businesses that want to reorganize their business. It is typically more expensive, in terms of court fees and attorney fees, than a Chapter 13 bankruptcy and for that reason is generally used only by businesses.

What is Chapter 12?
Chapter 12 is a reorganization bankruptcy for farmers. It gives the debtor more ways of saving the farm business than does a Chapter 13.

What if my income goes down while I am in a Chapter 13?
If your income goes down due to loss of overtime, cut hours or job loss, the court can and usually will reduce your monthly plan payment to an amount you can make if the reduced income is to continue for some time. Your attorney will need to file an amended plan and provide the trustee with documents supporting your decrease in income (e.g., current paystubs showing lower income, letter from employer re reduced hours, proof of job loss).

What if I lose my job while in Chapter 13?
If you lose your job while in Chapter 13, the court will grant you a two month suspension of plan payments to find another job without a hearing. If you end up needing more than two months to find another job, you will need to have a hearing before the judge to explain the steps you have taken to find a job and how much additional time you think you will need to find a job. If you cannot find work within the time allowed by the judge, you should talk with your lawyer about reducing your plan payments (see What if my income goes down while I am in a Chapter 13?), or converting your case to a Chapter 7 (see Can I convert my case from Chapter 13 to Chapter 7?).

What if my income goes up while I am in a Chapter 13?
If your income goes up due to normal annual increases(e.g., cost of living increases or annual pay raise), you do not need to report that increase to the court, the trustee or your lawyer. If, on the other hand, you get a windfall during your Chapter 13 (e.g., inheritance, lottery winnings, property settlement, etc.) you must inform your lawyer and he will let you know if you need to inform the trustee or the court. In most cases, your lawyer will have to inform the trustee and court and all or a portion of that money will need to be used to pay your debts. Therefore, do not spend the money until you talk with your lawyer.

What if I want to sell something while I am in Chapter 13?
You cannot sell anything you own without court approval. So if you want to sell your house, car, boat, jewelry, stocks, bonds or anything else of value, you must talk with your lawyer and he will have to file a motion with the court and have a hearing before the judge. Typically, the trustee will not have any objection if the proceeds of the sale are to be used to pay towards the plan or to replace the item being sold (i.e., buy another car or house).

What if I need to borrow some money while I am in Chapter 13?
You cannot borrow money while you are in Chapter 13 without court approval. If you want to borrow any money while in Chapter 13 you need to talk with your lawyer who will have to file a motion with the court and have a hearing before the judge. Typically, the court will grant the motion if you need to borrow the money to purchase an item that is necessary for the success of your plan (e.g., a car to get to and from work).

Can I use credit cards while in Chapter 13?
No. You cannot use credit cards while in Chapter 13.

Can I borrow money from payday lenders while in Chapter 13?
No. You cannot borrow money from payday lender while in Chapter 13.

What should I do if I receive a windfall of money while in Chapter 13?
If you get a windfall during your Chapter 13 (e.g., inheritance, lottery winnings, property settlement, etc.) you must inform your lawyer and he will let you know if you need to inform the trustee or the court. In most cases, your lawyer will have to inform the trustee and court and all or a portion of that money will need to be used to pay your debts. Therefore, do not spend the money until you talk with your lawyer.

Can I keep my house in Chapter 13?
Yes. You can keep your house in Chapter 13 if you want to keep it, you stay current on your mortgage after you file, and you catch up on any payments you missed before filing through the Chapter 13 plan.

Can I convert my Chapter 7 to a Chapter 13 during my bankruptcy case?
Yes. If, after you file a Chapter 7, you decide that you would prefer to be in a Chapter 13, you can convert your case at any time prior to the court entering an order discharging your debts and closing of your bankruptcy case.

Can I convert my Chapter 13 to a Chapter 7 during my bankruptcy case?
Yes. If, after you file a Chapter 13, you decide that you would prefer to be in a Chapter 7, you can convert your case at any time prior to the court entering an order discharging your debts and closing of your bankruptcy case.

Can I dismiss my Chapter 13 at any time?
Yes. You have the right to dismiss your Chapter 13 at any time during the case and you will be outside the protection of the bankruptcy court. If you dismiss the case prior to the court entering an order confirming your plan, then any money you have paid to the trustee will be refunded to you, minus the trustee’s fee and any attorney fees approved by the court. If you dismiss your Chapter 13 after the court entered an order confirming your plan, then the money you have paid to the trustee has already been distributed to creditors and will not be refunded to you. But the payments made by the trustee should be reflected on the outstanding balances owed to your creditors.

Can I keep my vehicle in Chapter 13 if I am still paying for it?
Yes. You can keep your vehicle if you are current on the payments when you file, and stay current on the payments thereafter. In addition, you can keep the car even if you are behind on the payments when you file, so long as you catch up on the delinquent payments through the plan and stay current as of the date of filing. Finally, in some situations, you can reduce the total amount you owe on your vehicle to the vehicle’s fair market value if you pay the full amount of the fair market value through your plan.

Do I have to list everyone to whom I owe money?
Yes, you cannot pick and choose who you include in your bankruptcy. You must include everyone to whom you owe money, including your family and employer.

Can I keep credit cards that have a zero balance when I file bankruptcy?
Yes. But if you are in a Chapter 13 you cannot use any credit cards during your case. In addition, some credit card companies search the bankruptcy filings and cancel the card of any cardholder that filed bankruptcy.

Can my employer fire me for filing bankruptcy?
The United States government is prohibited by law from discriminating against its employees who filed for bankruptcy. However, private employees are not prohibited by law from doing so. In my experience, very few employers will fire a good employee for filing bankruptcy. The only exception are for persons who have a security clearance or handle large amounts of cash for their employer.

What debts are not dischargeable in bankruptcy?
1. Certain types of tax debts, including income tax debt;
2. Any debt incurred through fraud;
3. Undisclosed debt;
4. Debt owed for fraud or deflection while acting in a fiduciary capacity;
5. Debt owed to spouse, former spouse or child;
6. Debt owed for willful and malicious injury to another or property of another;
7. Government fine, penalty or forfeiture;
8. Debt owed for death or personal injury due to operating of a vehicle while intoxicated;
9. Debt that could have been discharged in another prior case of the debtor, or was denied discharge in a prior bankruptcy case of debtor;
10. Debt owed for fraud or defalcation while acting in a fiduciary capacity, associated with a depository;
11. Debt owed for malicious or reckless failure to fulfill any commitment owed to a federal depository institution;
12. Criminal restitution;
13. Any debt owed that was incurred in order to pay tax debts;
14. Debt related to court costs; and
15. Student loan debt.

Can a hospital refuse to treat me if I included their debt in my bankruptcy?
A hospital supported by public funds (e.g. UVA Medical Center) cannot deny treatment because the patient is in bankruptcy or has discharged a debt owed to that hospital in the past. Private hospitals, on the other hand, can deny treatment, but will usually treat the patient if he or she has health insurance.

Is my bankruptcy a public record?
Yes, but few individuals take the time to look. Some newspapers in the publish the names of persons who file bankruptcy, so you should look in your local newspapers to check.

How will the bankruptcy affect my ability to get credit in the future?
Bankruptcy will make it more difficult to get credit for 2-3 years, but will generally improve your credit score. Most lenders look at the last 2-3 years credit history when making a loan. Consequently, most debtors who do a good job rebuilding their credit after filing bankruptcy are able to get a car or home loan within 2-3 years after their bankruptcy.

Can I modify my mortgage?
As of this time, the bankruptcy laws do not allow bankruptcy courts to modify mortgages. There is legislation pending before Congress to allow bankruptcy courts to modify mortgages, but it has not yet been passed by the Senate. If it does pass the Senate, President Obama has said he will sign it.

Can I turn my second mortgage or equity line of credit into an unsecured debt in bankruptcy?
Yes, but only in a Chapter 13. The bankruptcy court can turn a second mortgage or equity line of credit into an unsecured debt (like a credit card) in a Chapter 13 if the fair market value of the home is less than or equal to the payoff amount of the first mortgage.

Can I modify my vehicle loan in bankruptcy?
Yes, but only in a Chapter 13. The bankruptcy court can reduce the interest rate being paid on the vehicle loan, and in some situation reduce the outstanding balance owed to the lender on the vehicle loan. If you took out the loan when you purchased the vehicle, the outstanding balance can be reduced by the court to the vehicle’s fair market value if you took out the loan more than two and half years before filing bankruptcy. If you have refinanced the loan on your vehicle since you bought the vehicle or took out a vehicle title loan, the outstanding balance can be reduced by the court to the vehicle’s fair market value, no matter when you bought the vehicle.