Chapter 13 – An opportunity for a fresh start.

Chapter 13 is designed for individuals with regular income, who would like to pay off all (or part of) their debts, in instalments, over a period of time.

WHAT ARE CHAPTER 13 DEBTS?

Simply put, a debt is any liability on a claim. It could be credit card debt, it could be medical bills, car loans, mortgages, or contingent liabilities like a car accident claim. A debt could be any liability someone or some entity claims you have on a claim they believe they possess against you. (i.e. child support or alimony)

NON-DISCHARGEABLE DEBTS

The bankruptcy Code outlines certain debts that are not discharged in a Chapter 13 Bankruptcy. Sometimes, debts are dischargeable unless someone objects and the court sustains the objection. Sometimes, debts are not dischargeable regardless of whether someone objects or not. If the debt is not dischargeable, your liability remains on the debt after receiving a Chapter 13 discharge under Section 1328 of the Bankruptcy Code.

• Common debts not discharged in Chapter 13 Bankruptcy/ no objection needed-
• Alimony, child support, and 941 or sales taxes are not discharged in Chapter 13 Bankruptcy
• Student loans are not discharged in Chapter 13 Bankruptcy. There is an exception to this rule.
• Income taxes are not discharged in Chapter 13 Bankruptcy. There are exceptions to this rule.

DISCHARGEABLE DEBTS

• Credit card debt
• Loans – all types
• Trade payables
• Medical bills
• Deficiencies on any loans
• Utilities
• Disclaimer- Section 366 of the Bankruptcy Code requires debtor to pay a deposit for
• continued usage.
• Joint debts
• Disclaimer- debtor liability goes away but non-filing co-debtor liability remains.

COMMON OBJECTIONS TO DISCHARGE

The above debts are “dischargeable”. In other words, they are discharged unless someone objects and the bankruptcy court sustains the objection.

Section 523 of the Bankruptcy Code lists a variety of reasons why a creditor could object to discharge but the most common is fraud. If debtor uses a credit card without the intent to repay the debt, that is fraud. There are statutory presumptions of fraud where debtor has the burden of overcoming the presumption of fraud. If the statutory presumption of fraud is not triggered, creditor has the burden of proving fraud.

Contact us to schedule a free, no-risk consultation where we will discuss your situation together. Call us at (626) 593-1556.

WHAT ARE PRIORITY DEBTS?

Section 507 of the Bankruptcy Code lists a set of debts that are priorities. Priority debts are the debts that get paid first on a Chapter 13 plan. Priorities include, domestic support obligations (i.e. child support or alimony) and taxes. Student loans are not considered a priority even though they are not dischargeable in Chapter 13 Bankruptcy.

WHAT IS A PREFERENCE?

The idea of a preference is that you “preferred” one creditor over another creditor. The Bankruptcy Code defines when debtor made a preferential payment to general unsecured creditors and “insiders” generally considered family members or business partners.

GENERAL UNSECURED CREDITORS

The Bankruptcy Code says that if debtor paid a general unsecured creditor 600 or more within 90 days prior to debtor filing Chapter 13 Bankruptcy, that is a preference. The code makes a distinction for preferences if debtor’s debts are primarily consumer debts or non-consumer debts.

INSIDERS

The Bankruptcy code defines an insider, generally speaking, as a family member or business partner. If you paid 600 or more to an insider within 1 year prior to filing Chapter 13 bankruptcy, this is deemed to be a preferential payment. The code makes a distinction for preferences if debtor’s debts are primarily consumer debts or non-consumer debts.

DEFENSES TO PREFERENCES

Section 547(c) of the Bankruptcy Code also defines defenses to preferences. Some of the more common defenses are:

• New value defense
• Ordinary course of business
• Security interest

WHAT DOES A CHAPTER 13 TRUSTEE DO WITH A PREFERENCE?

Unlike a Chapter 7 Bankruptcy trustee, a Chapter 13 Bankruptcy trustee does not avoid the preference. If there are no defenses to the preference, the amount of the preference is added to the hurdle debtor has to jump in a Chapter 13 Bankruptcy under what we call the “best interest test” found in Section 1325(a)(4) of the Bankruptcy Code.

WHAT IS A FRAUDULENT TRANSFER?

A fraudulent transfer, generally speaking, is a transfer of an asset to anyone else for less than fair market value.

There are many reasons why Chapter 13 bankruptcy is often more appropriate for a person in debt than Chapter 7.

Whether you have a large volume of property you are concerned with losing, did not qualify under the means test for Chapter 7, or you simply feel better knowing that you are paying off your debts, Chapter 13 is a viable and healthy option for many people.

“Hedtke Law Group“‘s experienced attorneys provide Chapter 13 bankruptcy services. By having someone on your side that you can trust, you will feel confident about moving in the right direction and getting the relief that you deserve.

Under a Chapter 13 bankruptcy, a person in debt will create a repayment plan known as a “wage earners plan”, based on income, expenses, and the debts that are owed. Payments will be made over the life of the plan, which is generally 3 to 5 years. At the end of the repayment term, all remaining debts will be discharged.

It is wise to seek the advice of a Chapter 13 bankruptcy lawyer Ontario as soon as possible. Hiring a qualified bankruptcy lawyer will give you access to detailed knowledge about the best way to protect your assets in a bankruptcy.

Our bankruptcy attorneys Ontario can help families and individuals get the most out of Chapter 13 bankruptcy. We fully evaluate your financial situation, debt, and income, to ensure that Chapter 13 is your best option.

Bankruptcy isn’t about giving up everything. It’s about taking action to rebuild your credit and your financial health. Over the years, we have seen how a well-crafted bankruptcy can dramatically improve our clients ‘lives.

Contact us to schedule a free, no-risk consultation where we will discuss your situation together. Call us at (626) 593-1556.