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Reliable Legal Resources in Columbus, OH

At Zellar & Zellar, Attorneys at Law, Inc., we understand contacting a lawyer for legal recourse may seem like a big step, so we’re happy to provide you with several frequently asked questions and responses for some very common legal issues our clients face. We specialize in elder care law, estate planning, bankruptcy law, real estate law and more. Feel free to contact us today at one of our four locations in Columbus, Lancaster, Newark & Zanesville, to schedule a free initial consultation for more information.

Bankruptcy Chapter 13 Q&A

What is a chapter 13 bankruptcy case and how does it work?

A chapter 13 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under chapte 13 of the Bankruptcy Code. Chapter 13 is the chapter of the Bankruptcy Code which allows a person to repay all or a portion of his or her debts under the supervision and protection of the bankruptcy court. The Bankruptcy Code is

the federal law that deals with bankruptcy. A person who files a chapter 13 case is called a debtor. In a chapter 13 case, the debtor must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan

must be approved by the court to become effective. If the court approves the debtor’s plan, most creditors will be prohibited from collecting their claims from the debtor. The debtor must make regular payments to a person called

the chapter 13 trustee, who collects the money paid by the debtor and disburses it to creditors in the manner called for in the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the remainder of his or her dischargeable debts.
How does a chapter 13 case differ from a chapter 7 case?

The basic difference between a chapter 7 case and a chapter 13 case is that in a chapter 7 case the debtor’s nonexempt property (if any exists) is liquidated to pay as much as possible of the debtor’s debts, while in chapter 13 cases a portion of the debtor’s future income is used to pay as much of the debtor’s debts as is feasible under

the debtor’s circumstances. As a practical matter, in a chapter 7 case the debtor loses all or most of his or her nonexempt property and receives a chapter 7 discharge, which releases the debtor from liability for most debts.

In a chapter 13 case, the debtor usually retains his or her nonexempt property, but must pay off as much of his or her debts as the court deems feasible and receives a chapter 13 discharge, which is slightly broader than a chapter 7 discharge and releases the debtor from liability for a few types of debts that are not dischargeable under chapter

7. However, a chapter 13 case normally lasts much longer than a chapter 7 case and is usually more expensive for the debtor.
When is a chapter 13 case preferable to a chapter 7 case?

Chapter 13 is usually preferable for a person who - (1) wishes to repay all or most of his or her unsecured debts and has the income with which to do so within a reasonable time, (2) has valuable nonexempt property or has valuable exempt property securing debts, either of which would be lost in a chapter 7 case, (3) is not eligible under means testing to maintain a chapter 7 case, (4) is not eligible for a chapter 7 discharge, (5) has one or more substantial debts that are dischargeable under chapter 13 but not under chapter 7, or (6) has sufficient assets with which to repay most of his or her debts, but needs temporary relief from creditors in order to do so.
How does a chapter 13 case differ from a private debt consolidation service?

In a chapter 13 case, the bankruptcy court can provide relief to the debtor that a private debt consolidation service cannot provide. For example, the court has the authority to prohibit creditors from attaching or foreclosing on the debtor’s property, to force unsecured creditors to accept a chapter 13 plan that pays only a portion of their claims, and to discharge a debtor from unpaid portions of debts. Private debt consolidation services have none of these powers.
What is a chapter 13 discharge?

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering creditors not to collect them from the debtor. A debt that is discharged is one that the debtor is released from and does not have to pay. There are two types of chapter 13 discharges: (1) a full or successful plan discharge, which is granted to a debtor who completes all payments called for in the plan, and (2) a partial or unsuccessful plan discharge, which is granted to a debtor who is unable to complete the payments called for in the plan due to circumstances for which the debtor should not be held accountable. A full chapter 13 discharge discharges a few more debts than a chapter 7 discharge, while a partial chapter 13 discharge is similar to a chapter 7 discharge.

What types of debts are not dischargeable in chapter 13 cases?

A full chapter 13 discharge granted upon the completion of all payments required in the plan discharges a debtor from all debts except:

(1) debts that were paid outside of the plan and not covered in the plan,

(2) debts for domestic support obligations, which includes debts for child support and alimony,

(3) debts for death or personal injury caused by the debtor’s operation of a motor vehicle, vessel or aircraft while intoxicated,

(4) most tax debts,

(5) debts for restitution or criminal fines included in a sentence imposed on the debtor for conviction of a crime,

(6) debts for fraud, embezzlement or larceny,

(7) debts for student loans or educational obligations unless a court rules that not discharging the debt would impose an undue hardship on the debtor and his or her dependents,

(8) debts for damages caused by willful or malicious conduct by the debtor,

(9) installment debts whose last payment is due after the completion of the plan,

(10) debts incurred while the plan was in effect that were not paid under the plan,

(11) debts owed to creditors who did not receive notice of the chapter 13 case, and

(12)long-term debts upon which payments were made under the plan.

A partial chapter 13 discharge, which is granted when a debtor is unable to complete the payments under a plan due to circumstances for which he or she should not be held accountable, discharges the debtor from all debts except:

(1) secured debts (i.e., debts secured by mortgages or liens),

(2) debts that were paid outside of the plan and not covered in the plan,

(3) installment debts whose last payment is due after the completion of the plan,

(4) debts incurred while the plan was in effect that were not paid under the plan,

(5) debts owed to creditors who did not receive notice of the chapter 13 case,

(6) debts that are not dischargeable in a chapter 7 case, and

(7) long-term debts upon which payments were made under the plan.

What is a chapter 13 plan?

It is a written plan presented to the bankruptcy court by a debtor that states how much money or property the debtor will pay to the chapter 13 trustee, how long the debtor’s payments to the chapter 13 trustee will continue, how much will be paid to each of the debtor’s creditors, and certain other matters.
What is a chapter 13 trustee?

A chapter 13 trustee is a person appointed by the United States trustee to collect payments from the debtor, make payments to creditors in the manner set forth in the debtor’s plan, and administer the debtor’s chapter 13 case until it is closed. In some cases the chapter 13 trustee is required to perform certain other duties. The debtor is required to cooperate with the chapter 13 trustee.
What debts may be paid under a chapter 13 plan?

Any debts whatsoever, whether they are secured or unsecured. Even debts that are nondischargeable, such as debts for student loans or child support, may be paid under a chapter 13 plan.
Must all debts be paid in full under a chapter 13 plan?

No. While priority debts, such as debts for domestic support obligations and taxes, and fully secured debts must be paid in full under a chapter 13 plan, only an amount that the debtor can reasonably afford must be paid on most debts. The unpaid balances of most debts that are not paid in full under a chapter 13 plan are discharged upon the completion or termination of the plan.

Bankruptcy Chapter 7 Q&A

What is a Chapter 7 bankruptcy case and how does it work?

A Chapter 7 bankruptcy case is a proceeding under federal law in which the debtor seeks relief under Chapter 7 of the Bankruptcy Code. Chapter 7 is that part (or chapter) of the Bankruptcy Code that deals with liquidation.

The Bankruptcy Code is a federal law that deals with bankruptcy. A person who files a Chapter 7 case is calleda debtor. In a Chapter 7 case, the debtor must turn his or her nonexempt property, if any exists, over to a trustee, who then converts the property to cash and pays the debtor’s creditors. In return, the debtor receives a Chapter 7 discharge, if he or she pays the filing fee, is eligible for the discharge, and obeys the orders and rules of the bankruptcy court.
What is a Chapter 7 discharge?

It is a court order releasing a debtor from all of his or her dischargeable debts and ordering the creditors not to attempt to collect them from the debtor. A debt that is discharged is a debt that the debtor is released from and does not have to pay.
How does a person obtain a Chapter 7 discharge?

A Chapter 7 discharge is obtained by filing and maintaining a Chapter 7 bankruptcy case and being eligible for a Chapter 7 discharge. However, not all debts are discharged by a Chapter 7 discharge. Certain types of debts are by law not dischargeable under Chapter 7 and debts of this type will not be discharged even if the debtor receives a Chapter 7 discharge.
Who is permitted to file and maintain a Chapter 7 case?

Any person who resides in, does business in, or has property in the United States is permitted to file a Chapter 7 bankruptcy case except a person who has intentionally dismissed a prior bankruptcy case within the last 180 days. To be permitted to maintain a Chapter 7 bankruptcy case a person must qualify for Chapter 7 relief

under a process called means testing.
What is means testing?

Means testing is a method of determining a person’s eligibility to maintain a Chapter 7 case. Under means testing a person whose current monthly income from all sources multiplied by 12 exceeds the median annual income, as reported by the U.S. Census Bureau, for the person’s state and family size, must show that he or she

has a disposable monthly income of less than $124.58*. If disposable monthly income is greater than $207.92*, there is a presumption of abuse in filing a Chapter 7 case. If monthly disposable income is between those two numbers, then you must determine whether the debtor could repay at least 25% of unsecured debt over the course of a 60-month period. If a debtor is deemed to be able to pay, their case will be dismissed or converted to Chapter 13 unless special circumstances exist.
How is means testing carried out?

Every person who files a Chapter 7 case must file a Chapter 7 Statement of Your Current Monthly Income (Official Form 122A-1) and a Chapter 7 Means Test Calculation (Official Form 122A-2). These forms, when completed and filed, show the person’s current monthly income and the current monthly expenses that the person

is allowed to claim. The person may also be questioned about his or her income and expenses at the meeting of creditors. From these sources a person’s current monthly disposable income is calculated. This figure is then used to determine the amount of the monthly payment that the person can afford to make to his or her unsecured

creditors. If the person’s monthly disposable income is greater than $207.92*, the person will almost always be disqualified from maintaining a Chapter 7 case and the case will be dismissed or, with the person’s consent, converted to Chapter 13. * Subject to adjustment on April 1, 2016.