Chapter 13 Bankruptcy Rules

Income Required for Chapter 13 Plan

One of the Chapter 13 rules is that to qualify for Chapter 13 you have to have income.  The reason is because you are going to set up a Chapter 13 repayment plan, and you have to have income to “fund” the payment plan.  Another Chapter 13 rule is that you cannot abuse the Bankruptcy system by being a repetitive filer.  This is where somebody with no income will file Chapter 13 to stop a foreclosure, only to have the case dismissed a few weeks later (because they have no income).  Then they will do it again, and again, with the sole purpose to delay creditors.  Most courts have set up rules and waiting periods to prevent repetitive filers.

The Chapter 13 Plan

The Chapter 13 Plan is filed with the court either during or after your initial Chapter 13 Bankruptcy Petition has been filed.  The Chapter 13 Plan then has to be “confirmed” by the court in a confirmation hearing.  The Plan details which creditors will be paid, how much they will be paid, and when they will be paid.  The Bankruptcy Law requires that the Chapter 13 Plan pay unsecured creditors as much as they would have received under a Chapter 7 Liquidation (sometimes nothing).  It also usually requires the debtor to pay all of their disposable income into the Chapter 13 Plan.

Chapter 13 Bankruptcy Attorney – Get a Good One

It is so important to get a good lawyer for your Chapter 13… even more so than in a Chapter 7.  Why?  Because in a Chapter 13 you are married to your Chapter 13 Attorney for the entire course of your payment plan, usually 5 years.  If you pick a bad lawyer, it can be worse than a bad marriage.  When you hire a lawyer to do your Chapter 13 Bankruptcy, most of the lawyer’s fees are wrapped up in the debt repayment plan.  However, once the lawyer gets his payments (which are usually front-loaded at the beginning of your plan), the lawyer’s incentive to be there for you gradually goes down.  So a bad Chapter 13 lawyer will be there for you when you are filing your case in the beginning, but they will not even return your phone calls later down the road.  To avoid this, make sure you get a Chapter 13 Lawyer that has a good reputation, and make sure you do your research online.