$1 bill and a calculator
What is bankruptcy?

Before you file, you must also provide a copy of your latest tax return at least seven days before the meeting of creditors. Those filing under Chapter 13 have to be current on tax returns for the previous four years.

Chapter 13 documentation
Like debtors filing for Chapter 7, failure to provide the following documents within 45 days after the petition has been filed results in automatic dismissal of the case. However, debtors can apply for a 45-day extension.

Debtors must provide:
  • A list of creditors
  • Schedules of assets and liabilities
  • Income and expenses
  • Certificate of credit counseling
  • Evidence of payment from employers, if any, received 60 days before filing
  • Statement of monthly net income and any anticipated increase in income of expenses after filing
  • Tax returns or transcripts for the most recent tax year
  • Tax returns filed during the case including tax returns for prior years that had not been filed when the cases began, and;
  • Photo I.D.

Assets harder to hold
To retain a home, filers have to keep making their monthly payments. But the amount that was past due at filing can be included in the bankruptcy debts, and paid over the life of the bankruptcy plan.

Under the new reforms, it will be harder for debtors filing Chapter 13 to keep a vehicle. Those who plan to keep their vehicle have to pay the full loan amount, rather than just its current value as previously allowed. This new rule applies to all car loans less than two and a half years old as of the filing date.

Who gets paid when
Re-payment priorities for people and companies (creditors) that are owed money have also changed. In other words, who's getting their money first is no longer the same: Under the new bankruptcy laws, people who are owed unpaid child support and alimony take priority over any other creditor.

Chapter 13 won't stop or even postpone some debt collections and lawsuits. New bankruptcy laws have dropped the following "automatic stays" of bankruptcy:
Actions to withhold, suspend or restrict a driver's license
Actions to withhold, suspend or restrict a professional or occupational license
Lawsuits to establish paternity, child custody or child support
Divorce proceedings, or
Lawsuits related to domestic violence.

Debtors cannot confirm a bankruptcy plan or obtain a discharge of debts if their domestic support obligations are not paid according to its terms.

More debts not forgiven

Be advised. Debts from the following items will not be discharged under Chapter 13 :
Trust fund taxes
Taxes owed for returns never filed or filed late (within two years of the petition date)
Taxes owed from a fraudulent return or evaded taxes
Fraud and false statements
Domestic support payments
Student loans
Drunk driving injuries
Criminal restitution
Fines and civil restitutions
Damages rewarded for willful or malicious personal actions causing personal injury or death

The repayment plan must be approved by the bankruptcy court and the trustee, and creditors are allowed to object. Sometimes individuals file for Chapter 13 only to find out they must convert it to a Chapter 7.

Show Bankrate's community sharing policy
          Connect with us
Credit cards on a table

Get advice for managing credit cards, building your credit history and improving your credit score. Delivered weekly.

Debt Adviser

Remedy for my big medical bill?

Dear Debt Adviser, I was operated on in an emergency room a couple of years ago for a burst appendix. I was shopping for insurance at the same unfortunate time and had no insurance when I had the operation. The hospital... Read more

Partner Center

Connect with us