what is chapter 13 bankruptcy confirmation
Bankruptcy confirmation is a requirement of the U.S. Bankruptcy code that applies to debtors involved in Chapter 13. Often referred to as 'reorganization bankruptcy' Chapter 13 requires debtors to remit payments via the Trustee in effort to pay off delinquent debts.
The purpose of bankruptcy confirmation is to ensure Chapter 13 payments comply with new laws set forth in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Once personal bankruptcy petitions are filed through the court, debtors are required to submit their proposed payment plan to the court for approval.
Petitioners attend a 341 creditor meeting which provides opportunity to meet face-to-face with creditors. Creditors can elect to reduce outstanding balances, remove penalties or late fees, or lower interest rates. Once debtors and creditors agree upon owed debt amounts they appear in court to present the debt refinance plan.
Once filed, debtors must begin remitting payments to the Trustee within 30 days. This must occur whether the payment plan is approved or not. Payments are remitted to the court on a monthly or bi-monthly schedule. Trustees distribute payments to creditors based on priority status.
Information provided to creditors during the 341 meeting is given under oath. If petitioners provide falsified information they can be subjected to criminal charges and have their bankruptcy petition dismissed.
One stipulation of BAPCPA is debtors must enter into credit counseling through an agency authorized through the U.S. Trustee. The cost of counseling is the responsibility of the Petitioner. In some instances, credit counseling allows debtors to avoid bankruptcy.
Credit counseling agencies are well-connected within the credit industry. Counselors can sometimes help debtors arrange suitable refinance plans without the need to file petition. Debtors are allowed to obtain counseling up to 180 days prior to filing their petition.
Those who find it necessary to move forward with personal bankruptcy must obtain a certificate of completion which is presented to the court before approval is granted.
While individuals are allowed to file bankruptcy without legal counsel, few can comply with BAPCPA guidelines without a lawyer. BAPCPA requires attorneys to provide a letter of certification which declares all information provided is truthful and that bankruptcy is required in order for Petitioners' to obtain debt relief.
Due to this stipulation, lawyers verify information provided as they could be faced with fines if it is later discovered a Petitioner was untruthful. This has led to increased legal fees and made it more challenging to locate bankruptcy attorneys.
Under BAPCPA, debtors are required to repay a portion of their debt under Chapter 13 unless they earn less income than their states' median income level. Debtors undergo the 'means' test to determine how much outstanding debt will be repaid.
When income is greater than state median income a debt reorganization plan is developed and confirmed under Chapter 13. When income is less than state levels, debtors might be allowed to file Chapter 7 and have outstanding debts discharged.
Chapter 13 payment plans cannot exceed 5 years in duration. During the repayment phase, debtors are not allowed to incur new debt unless they obtain court approval. When debtors do not comply with payment plans, creditors can request the petition be dismissed. If this occurs, debtors fail out of bankruptcy and no longer have court protection against creditors.
Bankruptcy confirmation can be beneficial in certain situations. However, debtors should seek out bankruptcy alternatives such as debt consolidation or debt settlement before filing a petition. Alternatives can oftentimes provide the same result without the long-term financial consequences associated with Chapters 7 and 13.
About the Author
Simon Volkov is a real estate investor who specializes in buying real estate to help property owners avoid foreclosure and bankruptcy. He has written extensively on personal bankruptcy, bankruptcy confirmation, and bankruptcy alternatives at www.SimonVolkov.com.
(saran). Submitted on Thu, 31 May 2012 Time: 9:48 PM
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