Chapter 13 is a type of bankruptcy protection that requires the debtor to make monthly payments to a trustee for a set number of months. The bankruptcy debtor must make all the payments required under the payment plan before the case will be successfully discharged. To review their Chapter 13 payment history, debtors can call the trustee's office or they may be able to access the information online.
What Is Chapter 13 Bankruptcy?
An individual can seek several types of bankruptcy protection by filing a petition with the bankruptcy court to start a bankruptcy case. These types include Chapter 7, Chapter 11, Chapter 12 and Chapter 13, so named for the sections of the U.S. Bankruptcy Code that govern them. Chapter 13 bankruptcy is the only type of bankruptcy that is available to individuals but not to businesses; a corporate entity cannot file a Chapter 13 bankruptcy case.
Chapter 13 is a reorganization for a person or a married couple. The debtors who file for Chapter 13 bankruptcy must propose a Chapter 13 plan, whereby they agree to pay a certain amount every month to a trustee, who distributes the funds according to the requirements of the bankruptcy code. Only debtors who have regular income and who have debts under certain limits can file Chapter 13 bankruptcy cases. These debt limits change every few years, but as of 2019, debtors can file a Chapter 13 case if they have less than $394,725 in unsecured debt, such as credit card debt and unpaid income taxes, and less than $1,184,200 in secured debt like mortgages and car loans.
Read More: Chapter 13 Bankruptcy Explained
How Chapter 13 Bankruptcy Cases Are Administered
After filing a Chapter 13 case, a debtor must file a Chapter 13 plan. The plan, sometimes called a wage earner plan, must propose to pay all of the debtor's disposable income into the plan for a period of 36 or 60 months – the payment period is based upon a calculation of gross income for the six months prior to filing. Debtors whose average income during that period is below the median for their household size in their state may propose a 36-month plan; debtors who have above the median income cannot have a plan for less than 60 months unless they propose to pay everyone in full.
Chapter 13 cases are administered by a Chapter 13 trustee, who collects all the payments made under the plan and uses the money to pay creditors. The trustee reviews every case to make sure the debtors are following the law. Payments typically begin as soon as the plan is filed, even if it isn't approved yet.
The Chapter 13 plan must comply with the U.S. Bankruptcy Code. It must be sent out to all creditors, who will have a chance to object to the plan. The Chapter 13 trustee may also object to the plan. If all objections are resolved or if the court overrules them, the plan will be confirmed, which means it is approved.
Benefits of a Chapter 13 Bankruptcy Case
Every bankruptcy case creates an automatic stay against collection activity. Once the case is filed, most creditors cannot take any action to collect their debts unless the court orders otherwise. This means they cannot file lawsuits, repossess collateral or sell houses at a foreclosure sale. So, if a foreclosure sale is scheduled, a bankruptcy filed the day before will stop the sale.
The Chapter 13 payment plan can help debtors to stop a foreclosure and catch up on their house payments or to stop the repossession of a vehicle and pay for the car over time. In some cases, a Chapter 13 can even help reduce the amount owed on a vehicle or strip off second or third mortgages. Certain types of creditors, like credit cards and medical bills, might receive pennies on the dollar, if anything. If the debtors make all their payments and complete their case successfully, at the end of the 36- or 60-month period, the court will enter a discharge order.
Chapter 13 Bankruptcy Requirements
Debtors in Chapter 13 are required to do many things, including, but not limited to:
- Propose a feasible bankruptcy plan in good faith.
- Attend the meeting of creditors scheduled by the court or the trustee.
- Turn over financial information to the trustee and cooperate with the trustee's requests.
- File a complete list of all creditors with the bankruptcy court clerk, even if the claim is small.
- Make all payments required under the proposed plan before confirmation and the payments required under the confirmed plan after confirmation.
All of a debtor's duties under a Chapter 13 case are important, but making plan payments is the most important task.
Importance of Good Chapter 13 Payment History
If debtors fail to make their plan payments, the court can dismiss the bankruptcy case, regardless of how cooperative they are otherwise. If the case is dismissed, the bankruptcy protections are lost, there is no discharge of debts and debtors are back where they started. Chapter 13 trustees have sophisticated systems for tracking and applying payments, but mistakes can happen.
Even debtors who make every payment faithfully may need to check the trustee's records from time to time. Debtors who are unsure as to whether their payments are current or whether the trustee is receiving and applying the payments correctly have several options for finding out.
Contacting the Trustee's Office
Most Chapter 13 trustees have websites with their contact information, including a directory of whom to call or email for various purposes. The trustee should have a staff person who handles payment inquiries, and debtors can call or email that person to request a payment history. Contacting the trustee's office directly is an option for every debtor, even those without internet access or whose trustee has no online portal.
The trustee's staff cannot give debtors legal advice, but they can and will tell debtors if their payments are current or if any are missing, and they may mail or email a payment history as well as disbursement information upon request. Debtors may also contact their bankruptcy attorneys and ask that they obtain a payment history, although the attorney may charge fees for the task.
Using the Trustee's Online Portal
Many trustees have accessible online portals that debtors and their attorneys can use to review payment history. Some Chapter 13 trustees use the Chapter 13 Trustee Online Case System; others use the BSS 13Network. Some may have their own portals. A debtor in a bankruptcy case can use these portals for free to access information about their own cases and review every payment received by the trustee and every disbursement made, as well as the remaining balance due on each claim.
Using the National Data Center
If a trustee doesn't have a specific online portal, the payment history for most Chapter 13 cases nationwide can be reviewed at the National Data Center's (NDC) website. Debtors and their attorneys may use the service for free; creditors and their attorneys can use it on a paid subscription basis. Over 200 trustees report their information to the NDC.
Rebecca K. McDowell is a creditors' rights attorney with a special focus on bankruptcy and insolvency. She has a B.A. in English from Albion College and a J.D. from Wayne State University Law School. She has written legal articles for Nolo and the Bankruptcy Site.