Chapter 13 Bankruptcy- An Overview
Chapter 13 bankruptcy is a type of bankruptcy filed solely by individuals. It is a type of bankruptcy filing where the individual is paying some of his creditors back something. A Chapter 13 sets forth a “plan” which specifies who will be paid what per month and over what period of time. A Chapter 13 plan may last as little as three (3) years but many not exceed five (5) years in length.
A Chapter 13 can be used by an individual to pay back mortgage arrears, automobile arrears and even past due taxes. In fact, all of these and more can be taken care of within one’s Chapter 13 plan. While you are in a Chapter 13 bankruptcy no interest, fees or penalties will accrue. Assuming one were to pay their mortgage arrears in their plan, the individual would resume paying their customary mortgage payment on the first day of the month following their actual month of filing.
A Chapter 13 Standing Trustee is appointed to the case shortly following the time of the bankruptcy filing. It is the trustee’s jobs to both collect and disburse the monies paid into his office to the respective creditors pursuant to the terms of the plan. One would begin making their trustee payment on the first day of the month which follows their month of filing. Accordingly, if one filed on April 15th the first trustee payment would be due on May 1st. There are three (3) trustees in New Jersey and one (1) Chapter 13 Trustee is assigned to each of the 3 vicinages in New Jersey. The three (3) vicinages are Trenton, Camden and Newark. Trustee payments can be made either online or by mail. If you decide to pay by mail you must be aware the Chapter 13 Trustee will not accept personal checks or cash payments. Payments must be made in the form of either a money order, bank check or with certified funds.
Some people who meet with me wish to file a Chapter 13 to repay mortgage arrears and the like while others can be forced to file this more timely and costly bankruptcy. This would be someone who on paper shows surplus income when comparing their petition schedules “I” and ”J”. If one is found to have extra money left in their budget (budget calculation does not include payments to unsecured debts such as with credit cards, etc.) this surplus amount must be paid to creditors. Also, under the bankruptcy code revisions which took effect on October 17, 2005, the median income now can play a factor with a Chapter 13 case. The median income means the average that people in your state with your family size earn yearly. If you are above this income amount you will have to file a Chapter 13 plan for five (5) years unless you can pay all debts off in a shorter amount of time.
I have filed Chapter 13 plans which have paid thousands per month for five (5) years. I have also filed Chapter 13 plans which paid $100.00 per month for three (3) years. It is important you speak with a law firm that is willing to take the time to carefully and personally go through your income and expenses and formulate the best possible plan which will ultimately meet with success. At Reinheimer & Reinheimer we take the necessary time to form the best plan for you and your household.
