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Chapter 13 Bankruptcy in Colorado enables individuals with regular income to develop a debt repayment plan. Debtors propose monthly payments to the Chapter 13 Bankruptcy Trustee who distributes the payments to creditors. Generally, individual’s whose income is greater than the median income for their same household size must complete a five-year repayment plan. Chapter 13 Bankruptcy plans range from three years to five years for individuals whose income is less than the applicable income median. Individuals whose income is higher than the median income generally have to file a five-year plan. To be eligible for a Chapter 13 Bankruptcy, an individual’s unsecured debt must be less than $360,475 and secured debts are less than $1,081,400 (these figures may be close but not exact as they change periodically).
Most individual’s file Chapter 13 Bankruptcy because their income is too high to file for Chapter 7 Bankruptcy protection. However, some people choose to file Chapter 13 Bankruptcy because it offers certain advantages over a Chapter 7 Bankruptcy. For instance, Chapter 13 Bankruptcy allows some individuals to save their homes from foreclosures. The filing of a Chapter 13 Bankruptcy can stop foreclosure sales and individuals can catch-up on mortgage delinquencies through their Chapter 13 Bankruptcy Plan. Chapter 13 Bankruptcy also offers certain protection to co-borrowers that a Chapter 7 Bankrupty does not.
In addition to the proposed repayment plan, Chapter 13 Bankruptcy debtor must file Petitions and Schedules listing their debts, assets, income and expenditures, and other financial information. The debtor must also file, evidence payments from employers received in the 60 days prior to filing, a certificate of credit counseling from an approved non-profit budget and credit counseling agency.
Spouses may file together or individually. However, even when filing individually, debtors must provide information regarding their spouse’s income and expenses for analysis by the Chapter 13 Bankruptcy Trustee.
When an individual files a Chapter 13 Bankruptcy, an automatic stay goes into effect. The automatic stay prevents most collection efforts against a Chapter 13 Bankruptcy debtor including the initiation or continuation of lawsuits and wage garnishments. The Chapter 13 Bankruptcy automatic stay also protects co-signers in certain circumstances. Unless authorized by the Bankruptcy Court, a creditor may not make collection efforts against co-signers for consumer debt.
Approximately 30-45 days after filing of the Chapter 13 Bankruptcy case, the debtor must appear at the Chapter 13 Bankruptcy Meeting of Creditors. At the Meeting of Creditors, the Trustee will ask the debtor about the information listed in their schedules and the proposed terms of their Chapter 13 Bankruptcy Plan. Creditors are also given an opportunity to question the debtor, although, creditors rarely attend these meetings. A hearing with the Bankruptcy Judge assigned to your case will be scheduled for roughly three weeks after the Meeting of Creditors. If the debtor and Trustee have not agreed to the terms of the Chapter 13 Bankruptcy Plan then the parties must update the Judge on the status of the case. Although debtors may attend, it is common for attorneys to represent debtors at these hearings without the debtor being present.
Once the terms of the Chapter 13 Bankruptcy Plan are accepted by the Trustee and creditors, the Bankruptcy Judge should approve the plan. When a debtor and the Trustee cannot agree on the terms of the plan, a hearing must be held and the Judge will settle the dispute.
The provisions of a confirmed Chapter 13 Bankruptcy Plan are binding on debtors and creditors. The debtor must make monthly payment in accordance with the plan and must notify the Chapter 13 Bankruptcy Trustee before incurring new debt during the repayment period. If a debtor fails to make the monthly payments, the Court may dismiss their case or convert it to a liquidation under Chapter 7 Bankruptcy.