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									      Bankruptcy –
       Chapter 13

What you need to know if you are thinking
  of filing a Chapter 13 Bankruptcy.
    You are allowed to keep all of your property when filing a Chapter
    13 Bankruptcy because you are paying your creditors.

    A Chapter 13 plan is most helpful in the following ways:

•   If your house payment is in arrears and you are about to lose your
    home, you can put the arrearage amount in your Chapter 13 plan
    and avoid foreclosure.
•   You can keep your automobile even if your payments are not
    current as long as you are carrying insurance on the vehicle. Many
    times your attorney can arrange payments so that you only pay what
    the car is worth at 100 percent. The remaining balance can
    sometimes be paid at a lesser amount as an unsecured debt.
•   You can make sure your child support obligations are promptly paid
    by putting them in your Chapter 13 plan, and you can pay child
    support arrearages through your Chapter 13 plan thereby avoiding
    problems with the Court which issued the order for child support.
    Topics We Will Cover

   What is a Chapter 13 Bankruptcy?
   Chapter 13 vs. Chapter 7
   Advantages and Disadvantages
   Gathering Paperwork
   Meeting the Requirements
   The Automatic Stay
   The Chapter 13 Trustee
   The Meeting of Creditors
   How Will a Chapter 13 Affect My Credit?
   Resources
 What is a Chapter 13 Bankruptcy?

Under a chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment
plan to the creditors offering to pay off all or part of the debts from the
debtor's future income. You can use Chapter 13 to prevent a house
foreclosure; make up missed car or mortgage payments; pay back taxes;
stop interest from accruing on your tax debt (local, Tennessee state, or
federal); keep valuable non-exempt property (see Tennessee exemptions);
and more. If you can stick to the terms of your repayment agreement, all
your remaining dischargeable debt will be released at the end of the plan
(typically three to five years). The amount to be repaid is determined by
several factors including the debtor's disposable income. In addition, the
total amount paid to creditors under the Chapter 13 plan must also be at
least as much as creditors would have received if the debtor filed a
Tennessee Chapter 7 bankruptcy. To file Chapter 13 bankruptcy you
must have a "regular source of income" and have some disposable income
to apply towards your Chapter 13 payment plan.
Chapter 13 vs. Chapter 7

 There are several situations where a Chapter 13 is preferable to
 a Chapter 7. A Chapter 13 bankruptcy is the only choice if you
 are behind on your mortgage or business payments and you
 want to keep your property, either in Tennessee or another
 state, at the end of the bankruptcy process. A chapter 13
 bankruptcy allows you to make up their overdue payments over
 time and to reinstate the original mortgage agreement. In
 general, if you have valuable property not covered by your
 Tennessee bankruptcy exemptions that you want to keep, a
 chapter 13 filing may be a better option. Also, people file
 Chapter 13 bankruptcy because they have too much income to
 file a Chapter 7 bankruptcy or have the kind of debt that is
 non- dischargeable in a Chapter 7 (e.g. certain taxes).
Advantages to a Chapter 13 Repayment Plan
    If you choose and you can afford the payment plan, you can keep
     all your property, exempt and non-exempt.
    While debts are not canceled as in a Chapter 7 discharge they can
     be reduced under a Chapter 13 payment plan.
    You have immediate protection against creditor's collection
     efforts and wage garnishment.
    More debts are considered to be dischargeable (including debt
     you incurred on the basis of fraud and credit card charges for
     luxury items of $1,150 or more made within 60 days of filing).
    If the Chapter 13 plan provides for full payment, any co-signers
     are immune from the creditor’s efforts.

                      Continued on Next Page
Advantages to a Chapter 13 Repayment Plan
   You have protection against foreclosure on your home by your
    lender as long as you meet the terms of the plan.
   You have more time to pay debts that can't be discharged by
    either chapter (like taxes or back child support).
   You can file a Chapter 13 at any time.
   You can file repeatedly.
   You can separate your creditors by class where different classes
    of creditors receive different percentages of payment. This
    enables you to treat debts where there is a co-debtor involved
    on a different basis than debts incurred on your own.
    Disadvantages to a Chapter 13 Repayment Plan
     You create a payment plan where you use your post bankruptcy
      income. This ties up your cash over the Chapter 13 plan period.
     Legal fees are higher since a Chapter 13 filing is more complex.
     Your debt must be under $1,000,000 (e.g., unsecured debts are less
      than $250,000 and secured debts less than $750,000).
     Your plan and therefore your debt will last for 3 to five years.
     You are involved in the bankruptcy court process for the term of
      the 3-5 year plan.
The Process of Filing Chapter 13
Gathering Paperwork
 To begin the bankruptcy process you must itemize your
 current income sources; major financial transactions for
 the last two years; monthly living expenses; debts (secured
 and unsecured); and property (all assets and possessions,
 not just real estate). You should also collect your tax
 returns for the last two years, deeds to any real estate you
 own, your car(s) titles, and the documents for any loans
 you may have.
The Process of Filing Chapter 13
Meeting the Requirements
 If you are filing a Chapter 13 bankruptcy, a proposed repayment plan
 must also be submitted. After reasonable monthly expenses have been
 paid, how much money will you have left over to put toward your
 outstanding bills? And how will this money be divvied up among those
 you owe? Priority claims (such as taxes and back child support) must be
 paid in full; unsecured debts (like credit card debt and medical bills) are
 usually paid in part. Depending upon the judgments of those involved
 with your case, unsecured debts can be paid off for as little as 10 cents
 on the dollar.
The Process of Filing Chapter 13
Meeting the Requirements
   In addition to the general requirements listed above, the repayment
    plan must pass three tests:
    1) It must be delivered in good faith.
    2) Unsecured creditors must be paid at least as much as if a Chapter 7
    bankruptcy had been filed. Generally, this is the value of all the
    nonexempt property you own (see Tennessee bankruptcy exemptions).
    3) All disposable income must be paid into the plan for at least three
    years (you may use up to five years in order to meet the second test
    that you pay at least as much as in a Chapter 7).
   If you have filed Chapter 13, you must begin making your plan
    payments. Generally these payments will be withdrawn directly from
    your wages and you or your attorney should arrange with the court
    for these payments to be deducted from your wages.
The Process of Filing Chapter 13
The Automatic Stay

 Once you have filed your     This will stop any
 paperwork with the           foreclosure proceedings. If
 bankruptcy court, an         you have filed Chapter 13,
 automatic stay immediately   you must begin making
 goes into effect. This       your plan payments.
 provision prevents           Generally these payments
 creditors from making        will be withdrawn directly
 direct contact with you or   from your wages and you
 staking a claim on any of    or your attorney should
 your property from the day   arrange for these payments
 of filing forward.           to be deducted from your
  The Process of Filing Chapter 13
  The Bankruptcy Trustee
Upon filing, the court will assume legal control of your debts and
property not covered by your Tennessee exemptions. A trustee will be
appointed to your case by the court. The job of the trustee is to see that
your creditors are paid as much as possible. This person will
thoroughly review your paperwork, particularly the assets you have in
your possession and the exemptions you wish to claim, and can
challenge any element of your case. If your proposed repayment plan
complies with all the criteria for filing Chapter 13, the Chapter 13
Trustee will approve it, and the plan will be “confirmed.”

It is the Chapter 13 Trustee’s duty to make sure that your creditors
 receive the payment each month which has been proposed in your
 Chapter 13 repayment plan.
The Process of Filing Chapter 13
The Meeting of Creditors

Approximately a month after filing, the trustee will call a first
meeting of creditors, which the debtor must attend. This
proceeding is also referred to as the § 341 meeting, named after
the corresponding section of the bankruptcy code. Creditors
rarely attend a Chapter 7 bankruptcy meeting; one or two
creditors may attend a Chapter 13 meeting, especially if there is
a question as to the legitimacy of some aspect of the plan.
Objections are typically resolved by negotiation between the
debtor or the debtor's counsel and the creditor. If a compromise
can not be reached, a judge will intervene.
 The Process of Filing Chapter 13
 The Meeting of Creditors

The meeting of creditors typically lasts about five minutes. You will
receive notice of the location of the meeting but you may contact the
court to confirm the address and time. (see Tennessee Bankruptcy
Court Directory)

The Chapter 13 Trustee will review your proposed repayment plan
 which your attorney has prepared.
He may ask you questions about the information you have submitted.

How your Meeting of Creditors goes depends mostly on you. Once
you file your Chapter 13 petition, you must begin making payments
to the Chapter 13 Trustee. If you go to Court without ever having
made a payment into your plan, your case will be dismissed.
How Will A Chapter 13 Affect My Credit?

There is no clear answer to this question. Unfortunately, if you are
 behind on your bills, your credit may already be bad. Bankruptcy will
 probably not make things any worse. The fact that you've filed a
 bankruptcy can appear on your credit record for ten years.

It is possible to purchase a new home or automobile while you are in
 your Chapter 13, however, you must have permission from the
 Bankruptcy Court to do this. This could be accomplished by having
 your attorney file a Motion to Incur Debt with the Court. These
 motions are usually granted if you have made payments into your plan
 on a regular basis, and the Court feels that you can afford the debt you
 are incurring.
   Tennessee Bankruptcy Law
   The Office of the Chapter 13 Trustee – Henry E.
    Hildebrand, III
   United States Bankruptcy Court for the Middle District of

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