There are different chapters of bankruptcy laid out in the Bankruptcy Code and it is important to determine which chapter most closely applies to your situation. Chapter 13 provides any individual relief, even if self-employed or operating an unincorporated business, as long as the individual’s unsecured debts are less than $360,475. A business or individual cannot file for bankruptcy under Chapter 13, or any other chapter, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
A Chapter 13 bankruptcy begins with the filing of a petition with the bankruptcy court. Other documents that are filed are a schedule of assets and liabilities, schedule of current income and expenditures, a schedule of executor contracts and unexpired leases, and a statement of financial affairs. The debtor must also provide the trustee with a copy of the tax returns or transcripts for the most recent tax year, as well ask tax returns filed during the case. The courts charge a $235 case filing fee and a $46 miscellaneous administrative fee.
Filing the petition automatically stops most collection actions against the debtor or the debtor’s property. Chapter 13 also contains a special automatic stay provision that protects co-debtors.
Individuals may use Chapter 13 to save their home from foreclosure. The automatic stay stops the foreclosure proceedings as soon as the individual files the petition. The individual may then bring the past-due payments current over a reasonable period of time. However, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition.
A short period of time after the petition is filed, the trustee will hold a meeting of creditors. Here the debtor will be brought under oath and asked questions regarding their financial affairs and proposed terms of the plan. After the meeting of creditors, the debtor and the trustee will then present the repayment plan to the court for approval.