Are you struggling with overwhelming debt and considering bankruptcy as a way to get a fresh start? If so, you may be wondering what your options are and which type of bankruptcy is right for you. One option to consider is filing Chapter 13 in Florida. In this post, we’ll explore what Chapter 13 bankruptcy in Florida is, how it works, and whether it might be the right choice for you. So, if you’re ready to learn more about this powerful financial tool, keep reading!
Filing for a Chapter 13 in Florida is more advantageous than a Chapter 7 bankruptcy. The Chapter 13 debtor doesn’t have to liquidate their assets as in Chapter 7. Chapter 13 bankruptcy allows debtors to modify and eliminate certain secured debts. Also, Chapter 13 can be used to stop foreclosure on a mortgage and allow the debtor to catch up on any past-due mortgage payments. This chapter also allows the discharge of certain unsecured debts that are not exempted in Chapter 7.
Understanding Chapter 13 Bankruptcy in Florida
Only residents of Florida can file for Chapter 13 bankruptcy. Chapter 13 debtors must have enough income to pay current creditors (mortgages and car loans, among others). All payments, including past due ones, must be made during bankruptcy proceedings. The debtor must pay all income from their family to their unsecured creditors.
The Chapter 13 debtor must pay all income to unsecured creditors up until their creditors are fully paid or for five years, whichever is first. Additionally, the debtor must pay unsecured creditors through bankruptcy at least the same amount as they would receive from non-exempt assets if the debtor had filed a Florida Chapter 7 bankruptcy.
Chapter 13 bankruptcy has a debt limit of $465,000 (2022) for unsecured debt and $1,400,000 (2022) for secured debt. These debt ceilings can be increased at any time. Chapter 13 bankruptcy is not available to anyone with more than these debt limits. Unsecured debts are personal loans, medical bills, and credit cards issued to banks (Visa MasterCard, American Express, or Discover). These cards can be used to buy consumable goods such as clothes, food, vacations, and other necessities. Secured debts are those where the creditor holds a security interest in your property to guarantee.
Chapter 13 Bankruptcy Trustee
The Chapter 13 trustee’s role is different than that of a Chapter 7 trustee. Chapter 7 trustees are responsible for finding and assembling the non-exempt assets of the debtor, which will become part of the Chapter 7 bankruptcy estate. The Chapter 7 trustee is responsible for liquidating the non-exempt assets of the debtor.
The primary function of the Chapter 13 trustee is to evaluate and manage the debtor’s Chapter 13 repayment plan. Chapter 13 trustee collects the debtor’s plan payments and distributes the money to the creditors according to a court-approved Chapter 13 Plan. The Chapter 13 trustee receives 10 percent of monthly plan payments from the debtor. In some cases, the trustee fee can be reduced to make a plan financially viable.
Chapter 13 Plan and Payments
An initial Chapter 13 plan must be filed by the Florida bankruptcy attorney of the debtor. It outlines how the debtor will pay creditors each month via a single monthly payment made to the Chapter 13 trustee. The Chapter 13 bankruptcy schedules and petitions are usually included in the Chapter 13 plan.
Chapter 13 plans include monthly contractual payments for secured debts like mortgages and car payments. Chapter 13 allows debtors to choose to give up collateral, such as a home or car, in order to secure a secured loan. If the Chapter 13 debtor gives up the collateral as loan collateral (such as a house or car), the secured creditor will not pursue him for the amount due under the secured loans.
The debtor must make monthly secured debt payments to your Chapter 13 Plan if they did not surrender a secured property. If the debtor is current on the account and the debt has been paid in this manner for at least six (6) months prior to filing, he or she may be able to pay certain secured debts outside of the plan.
Car loans are different from mortgage loans in that they are not treated the same way. Chapter 13 allows debtors the ability to lower the interest rates on secured car loans to the current market rate. If the claim contains an interest rate that is higher than the market rate, the debtor can object to the claim.
Chapter 13 Administration and Procedures
After the Chapter 13 bankruptcy petition is filed, an automatic bankruptcy stay begins. The Chapter 13 bankruptcy stay acts as a protection between the debtors and creditors. The automatic stay prevents creditors from pursuing judicial proceedings against debtors or collecting other debts. Mortgage foreclosure proceedings will be stopped if the debtor continues to make monthly mortgage payments under their Chapter 13 plan. The lender will typically ask the bankruptcy court for a lifting of the stay if the debtor plans to surrender the mortgaged property.
Section 341 Meeting of Creditors and Trustee
Four weeks after filing Chapter 13 in Florida, the debtor and their attorney must attend a meeting with either the Chapter 13 bankruptcy trustee (or the trustee’s attorney) called the “341 meeting”. The meeting takes place in a conference room, not in a courtroom. Federal bankruptcy judges are prohibited from attending. This meeting typically lasts between five and ten minutes. Creditors are rarely present in these meetings.
The creditors’ meeting will see the Chapter 13 trustee and their attorney ask questions of the debtor, but they won’t threaten, interrogate, or cross-examine them. The trustee might give the debtor payment envelopes containing the trustee’s postal address. This will allow the trustee to make plan payments. The first payment is usually due before the creditors’ meeting. The trustee can suggest modifications to the initial Chapter 13 plan of the debtor. Most creditors will request that debtors file one or more amended Chapter 13 plans as they file claims.
The bankruptcy court will schedule creditors’ meetings. A meeting time or date cannot be requested by the bankruptcy attorney. If the debtor and their attorney are unable to attend the 341 meeting, the Chapter 13 trustee will set up a continuation meeting within two weeks. If the debtor does not attend a rescheduled creditors meeting, the court will dismiss the bankruptcy case and lift the automatic stay.
The trustee can file a Motion for Dismissal for Failure to Maintain Timely Payments if a Chapter 13 debtor fails to make their monthly plan payments on time. The debtor will then have 21 days to pay the overdue and the next Chapter 13 plan payment. If the debtor fails to pay the required payments or objects to the Motion To Dismiss within 21 calendar days, the Chapter 13 bankruptcy case will be dismissed without a hearing or additional notice.
If the debtor has a valid reason for non-payment (illness or loss of employment), it may be possible to agree to modify the Chapter 13 plan. The trustee might agree to modify Chapter 13 plans in lieu of dismissal. The Chapter 13 plan will change and the plan payments will increase for the next twelve months to allow the debtor to make up any missed payments.
Wage Deduction Orders
Many debtors prefer that their payments be made via voluntary wage deduction. The Chapter 13 trustee receives the amount deducted from the paycheck of the debtor’s employer. This makes it easy for debtors to keep current with their Chapter 13 plan. It also eliminates the need for cashier’s checks or purchasing money orders. Wage deductions are a good way to increase Chapter 13 success.
The debtor is still responsible for making sure that all payments are made. If the employer fails to make a payment deduction under the plan, the bankruptcy debtor must inform their attorney. The trustee must be notified immediately by the debtor.
Creditors’ Evidence of Claim
Creditors have a short window of opportunity to file claims after filing Chapter 13 bankruptcy in Florida. This is known as the “Claims Bar Date”. Secured creditors almost always file claims (the debtor can file a claim for the secured creditor). The proof of claim filing by the secured creditor indicates the total amount due, as well as delinquency and past due payments.
The “cure” amount, also known as the delinquency amount, can include past-due costs and interest. Creditors may also file fees up to the date of filing. Unsecured creditors may also file claims.
Income Taxes During Chapter 13 Bankruptcy
Chapter 13 debtors must promptly file all federal income tax returns that are due prior to and after bankruptcy filing. Refusal to file any tax return can lead to dismissal. A debtor can apply for a prolongation of time starting from the bankruptcy date and ending on the due date for the tax return.
The Chapter 13 trustee must receive income tax refunds as assets. A Chapter 13 trustee can allow a debtor to keep a tax refund if the debtor has a need such as a medical procedure, payment of property taxes, or unexpected repairs to a home or vehicle.
Chapter 13 bankruptcy allows income taxes owed to the IRS to be paid through the bankruptcy process without additional penalties or interest that would otherwise accrue outside of bankruptcy. Chapter 13 bankruptcy in Florida allows for the discharge of some federal income taxes. If income taxes are not exempted from Chapter 13, they are considered priority debts. They must be paid during Chapter 13 bankruptcy.
Court Confirmation of Chapter 13 Plan
Once a Chapter 13 payment plan has been approved by the Chapter 13 trustee, a debtor can submit it to the court for confirmation. The judge will set up a confirmation hearing where the payment plan will be reviewed and, if accepted, confirmed by the court. To modify the plan payment, the Florida bankruptcy attorney should be contacted if the debtor’s financial situation changes significantly after the plan confirmation.
Plan modification may be necessary if the debtor’s ability or willingness to pay decreases. If the debtor has a substantial increase in family income, the Chapter 13 trustee can file a Motion To Modify Plan Payments.
Choose Bruner Wright P.A. for Your Chapter 13 Bankruptcy Needs
Are you ready to take control of your financial future and explore the option of filing Chapter 13 bankruptcy in Florida? If so, we encourage you to reach out to the experienced attorneys at Bruner Wright P.A. for guidance and support. With a team of dedicated bankruptcy attorneys, we have the knowledge and expertise to help you navigate the Chapter 13 process, and create a personalized repayment plan that works for you.
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- Chapter 7 Bankruptcy
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- Tallahassee, FL
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Don’t let overwhelming debt hold you back any longer. Contact Bruner Wright P.A. today and take the first step towards financial freedom.