Introduction

This Alpha Chapter 13 Bankruptcy Kit is published in accordance with Title 11, Chapter 13 of the Federal Bankruptcy Code, as amended 1986, and the Federal Rules of Bankruptcy Procedure, as amended 1991, 1992, 1993, 1994, 1995, 1996, and 1997.

Chapter 13 is, of course, only one of the several chapters under the Federal Bankruptcy Code that provide relief for debtors burdened with an unmanageable debt load. The three most commonly publicized bankruptcy actions are, for example, Chapter 7 (debt liquidation), Chapter 11 (debt reorganization or liquidation), and Chapter 13 (monthly debt repayment). There are, however, other chapters under the Bankruptcy Code that are not frequently publicized; they are: Chapter 9 (municipal reorganization) and Chapter 12 (family farmer debt adjustment). And since these latter two chapters have no importance in this action, there will be no discussion here as to their applicability.

It will, however, be mentioned that since Chapters 7, 11 and 13 are fairly well known, a distinction will be made here to better clarify the scope of relief available under each of these Chapters. For example, under Chapter 7, the unsecured debts are discharged (unless there are legal exceptions); whereas, under Chapter 11, the debtor can either be engaged or not engaged in business and the action can seek to adjust, modify or liquidate both secured and unsecured debts. On the other hand, Chapter 13 bears a resemblance to Chapter 11 in that it allows a debt adjustment of both secured and unsecured debts by either an individual (or husband and wife) engaged in business or not engaged in business.

Chapter 13 does, however, contain certain debt restrictions that are not present in Chapter 11, and they are: the unsecured debts can not exceed $250,000 and the secured debts can not exceed $750,000. Chapter 13 can, therefore, be referred to as the "small business Chapter 11." While Chapter 13 has in the past been referred to as the "Wage Earner Plan," the 1979 revisions to the Bankruptcy Code substantially expanded not only the scope of relief available under Chapter 13, but also expanded its utilization from wage earners to any individual with identifiable regular income.

There are several provisions under Chapter 13 that did not exist prior to the 1979 revisions, namely:

1. It is not required that the unsecured debts be repaid in full (100%) under the proposed Chapter 13 Plan, and if they are not so paid in full, the balances will be discharged the same as in a Chapter 7 action when the Plan is completed.)

2. The secured debts only have to be repaid in an amount equal to the market or appraised value of the property securing the lien (assuming such value is less than the creditor's lien).

3. The secured creditor's lien on household furniture and goods can be avoided (removed) and treated as an unsecured debt if the debt does not represent either the balance of a contract to purchase the property or is a possessory lien (e.g., Furniture Movers Lien, Landlord Lien, etc.).

4. The past-due payments on a home mortgage, or any secured contract whose expiration date is beyond the completion date of the Chapter 13 Plan, may be included in the action, thus stopping mortgage foreclosures, Trustee Sales, Repossessions, and other Official execution sales.

The Court can also take into consideration the value of the debtor's non-exempt property and determine whether or not the creditors will benefit more from the Chapter 13 action than from a liquidation under Chapter 7.

This Chapter 13 Kit includes a Plan Analysis (Form ABK-8002) which must be used to show the creditors' benefits under both Chapters 7 and 13. In other words, if the debtor owns non-exempt property whose liquidation value (that is, the amount left over after payment to priority creditors) exceeds in value the amount proposed to be paid under the Chapter 13 Plan, and the repayment to the unsecured creditors is an amount less than the liquidation value of the non-exempt property; then a Chapter 7 liquidation will be shown to provide greater benefits to the unsecured creditors than a Chapter 13 action.

Under Chapter 13, real and/or personal property is generally left untouched and not subject to be seized or sold by the Trustee, but all such property exempt under either the Federal Property Exemptions on Page 17, or the applicable State Exemption Laws in Appendix B, starting on Page 73, must be claimed by the debtor -on the Property Exemption Schedule (Schedule C).

As a final note, keep in mind that even though this kit includes all of the Official Bankruptcy Forms approved by the United States Judicial Conference and adopted by the United States Supreme Court, the local Bankruptcy Courts can make local rules that require other forms in addition to these Official Forms.

And in the case of the Chapter 13 Plan included in this Kit, it is not An Official Bankruptcy Code Form, since no Official Chapter 13 Plan Form was adopted by the Bankruptcy Judicial Conference, but it has been approved and accepted by all of the Bankruptcy Courts, especially since the 1995 amendment to the Bankruptcy Code included provisions that prohibit the Bankruptcy Courts from not accepting otherwise valid non-official forms.