The Who and the What of Chapter 13

Man working

Chapter 13 bankruptcy filings are available to individual people, with debt, who earn a regular wage. For this reason, Chapter 13 bankruptcies are often called the “wage earner’s” plan. Chapter 13 allows a restructuring of debt in accordance with a feasible plan.

A Chapter 13 debtor must propose a plan that devotes all disposable income to debt repayment over a period of up to five years.

Like Chapter 7 bankruptcy filings, the bankruptcy trustee plays a very large role in the process.

Who May File a Chapter 13 Bankruptcy Petition?

A person who has filed a bankruptcy petition within the past one hundred eighty days, and had that prior petition dismissed for failure to obey a court order is not permitted to file a Chapter 13 permission.

A person who has secured debt exceeding $1,081,400 is not permitted to file a Chapter 13 bankruptcy. A person who has unsecured debt exceeding $360,475 is not permitted to file a Chapter 13 bankruptcy. These amounts will be adjusted every three years on April 1st, however, so be careful to ensure that you have up to date figures if you are analyzing your debts in relation to these amounts. These amounts are contained in the United States Bankruptcy Code at 11 U.S.C. section 109(e).

Like Chapter 7 bankruptcy petitions, a person may not file a Chapter 13 bankruptcy petition unless the person has undergone credit counseling within one hundred eighty days prior to filing.

The Chapter 13 Bankruptcy Trustee

In Chapter 13 bankruptcy, the United States Trustee supervises the private trustees who administer Chapter 13 cases.

In this chapter, the trustee does not liquidate the debtor’s assets, but instead evaluates the debtor’s financial affairs and makes recommendations to the court regarding the debtor’s proposed repayment plan.

Most Chapter 13 cases are administered by “standing trustees” appointed by the United States Trustee to administer all cases filed in a particular geographic area.

As with Chapter 7 panel trustees, the United States Trustee supervises the Chapter 13 standing trustees’ administration of individual bankruptcy estates; monitors the trustees’ financial record-keeping; and imposes other requirements to ensure that the trustees carry out their fiduciary duties. The United States Trustee’s supervisory actions include:

  • Periodically reviewing the trustees’ case reports, budget reports, bank account information, management skills, court performance, and similar information.
  • Ensuring that trustees are bonded.
  • Ensuring that trustees are independently audited.
  • Determining trustees’ maximum annual compensation and actual necessary expenses.
  • Providing training for trustees.
  • Monitoring trust account funds.

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