Chapter Nineteen The Chapter 13 Case Reorganization for

Chapter Nineteen: The Chapter 13 Case: Reorganization for an Individual with Regular Income—Filing the Case A Chapter 13 bankruptcy case is not a liquidation proceeding like Chapter 7. It is a reorganization proceeding designed for an individual with regular income (see § 109(e)). In a Chapter 13 case, the debtor proposes a plan, which requires the debtor to use future income to pay all or some of his debts in exchange for which the debtor will be able to keep all or most of his nonexempt assets. The plan may call for the modification of debt obligations to enable the debtor to repay what is owed on more favorable terms.

Wage Earner Plan Wage earner plan: informal and inaccurate name for a Chapter 13 plan.

Eligibility to File a Chapter 13 Case Chapter 13 is limited to debtors with relatively small amounts of debt. Section 109(e) places strict dollar limits on how much debt a prospective Chapter 13 debtor can have. The dollar limits are subject to adjustment every third year, as mandated by § 104.

Prepetition Credit Counseling Prepetition credit counseling: counseling that an individual debtor must receive from an approved credit counseling agency as a qualification for filing for bankruptcy relief.

Petition Petition: document filed to initiate a bankruptcy case under the Code.

Disposable Income Disposable income: income a bankruptcy debtor has available to pay creditors after deducting income necessary for the support or maintenance of the debtor and his dependents.

Standing Trustee Standing trustee: a person appointed by the U. S. Trustee to serve as trustee in all Chapter 12 and 13 cases filed in the district. Cf. trustee panel.

Limited Duties of the Chapter 13 Standing Trustee To evaluate the case to make sure it is filed in good faith and in compliance with all Code requirements To ensure that the debtor begins making payments under the plan as required by the Code (which often occurs before plan confirmation) To review the debtor’s proposed plan for feasibility and good faith and to be heard in support or opposition to its confirmation To review any proposed modifications of the debtor’s plan after confirmation or to propose such modification and to be heard in support or opposition to any proposed modification Upon approval of the plan, to collect the payments made by the debtor under the plan and to distribute those payments to pursuant to the plan To assist the debtor in complying with a confirmed plan, other than by giving legal advice If any claim for a domestic support obligation is made in the case, to advise the holder of the claim of their rights including the right to utilize the state child support enforcement agency to collect the amount owed

Order for Relief, Automatic Stay, and Co-Debtor Order for relief: the formal beginning of a bankruptcy case. Automatic stay: the prohibition on creditors continuing collection efforts against a debtor that arises automatically upon the debtor’s filing of a bankruptcy petition. Co-debtor stay: a Chapter 13 provision extending the automatic stay to co-debtors of the Chapter 13 debtor.

Property of the Estate Just as in a Chapter 7, all of the Chapter 13 debtor’s nonexempt property becomes property of the estate upon filing of the petition and, as such, is subject to the control of the court, per §§ 1306(a) and 541(a). However, the standing trustee will not take possession of and sell the property of the estate unless the debtor’s plan contemplates an abandonment and sale of property. Instead the debtor will retain possession of the property, subject to the terms of his plan per § 1306(b).