FAQs ABOUT CHAPTER 13 BANKRUPTCY

(Note: the following answers to frequently asked questions about Chapter 13
Bankruptcy provide generalized comment on Bankruptcy law and procedure in
Colorado and may not apply in all fact situations. They are not a substitute for
consultation with an experienced attorney.)

1. Who can file a Chapter 13 plan?

    Only individuals or a married couples (not corporations or partnerships)
can file a Chapter 13, if their secured debts don't exceed approximately
$1,010,650 and their unsecured debts don't exceed approximately
$336,900. Those with larger debts must use Chapter 11 if they want to
avoid Chapter 7.

2. Can my creditors stop me from filing a Chapter 13 plan?

    No, creditors cannot stop you from exercising your right to file under
Chapter 13. The key issue is whether your Chapter 13 plan meets the
requirements of the law and experienced legal counsel is invaluable to
help you in this regard.

3. After having my car repossessed, a house foreclosure or other legal
problems, can I still file Chapter 13 and stop these actions?

    Yes, Chapter 13 stops almost all types of court actions until you have a
chance to decide what you want to do with the item.

4. How does Chapter 13 basically work?

A Chapter 13 plan permits persons with a regular source of income to pay
part or all of their debts under the protection and control of the
bankruptcy court. Commencing 30 days after filing your petition and plan
of repayment with the court, you generally will pay the court a fixed sum
of money per month on your old debts, and pay your current monthly
expenses directly to your creditors.

The bankruptcy law requires that the payments you make through the
plan to unsecured creditors have a value of at least what the creditors
would have received if you had chosen to file a Chapter 7 case. It also
requires that you make a "best effort" which generally means pay all of
your disposable income (Income minus living expenses) to the Court for
three years to five years. The length of the plan is determined by a
calculation required by the law. As you can see, preparation and
justification of your budget is very important in making a plan that will be
accepted.

5. For what kinds of situations is Chapter 13 best suited?

Generally, Chapter 13 can be preferable where:
- Mortgages and car loans need to be caught up
- Large tax debts exist
- Equity in property is substantial
- Co-signers need protection from your debt
- Child support arrearages need to be caught up
- Non-dischargeable Chapter 7 debt such as fraud, willful injury
- You have a strong desire to repay debt

In a typical case with these problems, the plan would provide that one
would make all future payments on the secured loans to the creditors on
time and pay a fixed amount to the court each month which the court
would use to pay the trustee, attorney, taxes and secured loan arrearages,
with any excess to go to the unsecured creditors. In addition, if one owed
more on a secured debt than the property is worth (except real estate),
then the plan can provide for payment of only the value of the property to
the creditor to satisfy the lien, and treat the rest of the debt as an
unsecured debt.

6.    Must you be employed to use a Chapter 13 plan?

    No, but you must have a steady source of income, such as self
employment or a sole proprietorship, a pension, unemployment
insurance, disability insurance, Social Security, trust income, spousal
maintenance or child support.

7. What about new debt after the Chapter 13 is filed?

    Chapter 13 mainly deals with your old bills. Your usual living expenses
for rent or mortgage, food, clothing, insurance and utilities will come out
of your remaining income after your Chapter 13 plan is paid. You will
need special permission of the Court to incur substantial new debt beyond
what is on your budget, such as a new car loan or mortgage loan during
the Plan.

8. Are my co-signers on consumer debts also protected?

    Yes. If someone cosigned for you on a loan or purchase, he will be
insulated from the creditor as long as your Chapter 13 plan stays in effect
and pays 100% percent of the cosigned debt, including interest and late
charges. Keep in mind that you can choose to pay 100% percent of a
co-signed debt, yet only pay a small portion of your other debts.

9. How long does a Chapter 13 plan last?

    The usual time frame is 36 months to 60 months, depending on certain
calculations. More ofter than not, the 60 month duration will be required.

10. Can I consolidate all my bills?

    Yes, except your post-petition mortgage, car loan and other secured
payments. Unless special circumstances exist, your post-petition secured
loan payments will be paid on your own, outside the Chapter 13 plan. Any
secured loan payments that you missed prior to filing your plan
(pre-petition payments) will be included in the plan.

11. If I filed bankruptcy in the past eight years, can I still file a Chapter
13 plan now?

    You can file a Chapter 13 to reorganize and pay debt any time, but
cannot obtain a discharge of debt in a Chapter 13 if you received a
discharge in a Chapter 7 in the four (4) years prior, or a discharge in a
Chapter 13 case in the two (2) years prior.

12. How does Chapter 13 affect taxes that I owe?

    This is one of the benefits of Chapter 13. Usually, your taxes will be one
of the first creditors paid by the plan, and interest and penalties will not
accrue during the plan. Some older taxes may be treated similar to
general unsecured debts, and even though not paid in full, will be
discharged at the end of the plan.

13. How does Chapter 13 affect my general unsecured creditors?

    So long as your plan is in effect, and you pay your ongoing expenses,
all creditors are prevented from pursuing you or your property in legal
actions. Also, no new interest or penalties accrue on the unsecured debts
unless your plan is dismissed for your failure to comply with its terms.

14. Do I need a cosigner to file Chapter 13?

No.

15. What if I run into additional financial difficulty during the Plan?

    If the difficulty is temporary, we can usually work out a "catch-up" deal
with the Chapter 13 Trustee or your mortgage company. If you are unable
to catch up, but can still make plan payments, with good cause we can
move the Court to modify your plan to change the length of the plan or
the amount of the payments. The key is to keep in touch with your
attorney as soon as difficulty in making plan payments occurs, rather than
let the plan fall into default.

16.    What happens at the end of my Chapter 13 Plan?

If you have made all of your plan payments, the plan ends and any
remaining dischargeable debts are discharged.

For further information regarding the bankrupcy process, click on any
of the links on this page. Or contact us to arrange a free consultation
with an experienced attorney, without cost or obligation on your part.

We provide bankruptcy evaluation and representation serving the entire
south Denver, Colorado (CO) Metropolitan area, including Littleton,
Englewood, Centennial & Aurora in Arapahoe County, Highlands Ranch and
Castle Rock in Douglas County, Denver and south Jefferson County,
Colorado. Evening and weekend appointments are available upon request.

Chapter 13 FAQs