According To U.S. Courts' Administration Office, There Are Less Chapter 13 Bankruptcy Filings In 2006
Just a little over one year after the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) went into effect, the number of Chapter 13 Bankruptcy filings has decreased.
For example, According to statistics released by the Administrative Office of the U.S. Courts, Chapter 13 filings fell 19.5 percent to 355,756 in March 2006 from 441,838 in March 2005.
According to the National Foundation of Credit Counseling, however, this does not mean that people are handling their financial affairs better. In fact, there was actually a rush of people who filed for Chapter 7 bankruptcy prior to the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act because there was a possibility that they would not meet the new requirements for filing for Chapter 7 protection.
Initiatives of the BAPCPA include:
•Implementing the new “means test” to determine whether a debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan).
•Supervising random audits and targeted audits to determine whether a chapter 7 debtor’s bankruptcy documents are accurate.
•Certifying entities to provide the credit counseling that an individual must receive before filing bankruptcy.
•Certifying entities to provide the financial education that an individual must receive before discharging debts.
•Conducting enhanced oversight in small business chapter 11 reorganization cases.
Chapter 13 bankruptcy allows a debtor to file for bankruptcy protection while they carry out a repayment plan to pay their debts. Unlike Chapter 7 where a person’s assets are liquidated to pay off as many debts as possible, Chapter 13 filers must commit to paying their debts.
Many people who qualified for Chapter 7 bankruptcy previous to the new law now must file for Chapter 13 bankruptcy instead. However, in order to qualify for Chapter 13 protection, you must prove that you make enough money to pay your debts. Also, your secured debts cannot exceed $922,975, and your unsecured debts cannot be higher than $307,675.
Previous to filing under Chapter 13, you must now take a credit counseling class. You then present your certification stating that you’ve completed the class to the court, along with your court forms and repayment plan. In general, a debtor must start their debt payment schedule within 30 days of filing for bankruptcy.
Nolo.com says that under Chapter 13 bankruptcy, some creditors are entitled to receive 100% of what you owe them, while others may receive a much smaller percentage (or nothing at all).
Typically, Chapter 13 bankruptcy plans must provide that:
Administrative claims will be paid 100%. These include:
· Your filing fee ($274),
· the trustee's commission (3% to 10% of each monthly payment), and
· attorney's fees.
Priority debts will be paid 100%. These include:
· back alimony and child support,
· most tax debts (including state and federal income taxes),
· wages, salaries, or commissions you owe to employees, and
· contributions you owe to an employee benefit fund.
Mortgage defaults will be paid 100% if you want to keep your house.
Other secured debt defaults will be paid 100% if you want to keep the property. Missed car payments fall into this category.
Unsecured debts will be paid anywhere from 0% to 100% of what you owe. The exact amount depends on:
· The total value of your nonexempt property.
· The amount of disposable income you have each month to put toward your debts.
· How long your plan lasts.
Your plan must commit to paying any leftover disposable income (your income less certain allowed expenses and payments on secured loans, such as a mortgage or car loan) towards your unsecured debts, such as credit card debts and medical bills.
Sagaria Law, P.C., represents clients in Monterey County, Alameda County, and Santa Clara County in all bankruptcy-related matters, including Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 bankruptcy. Contact Sagaria Law, P.C. for a free consultation.
Bankruptcy Law Effects Still Unclear, Contra Costa Times, November 13, 2006
Bankruptcy Case Filings, U.S. Courts.gov, May 26, 2006
Chapter 13 Bankruptcy, Nolo.com
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, U.S. DOJ.gov
Related Web Resource:
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
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