Chapter 13 bankruptcy allows you to consolidate your debts and catch up on past-due bills through a court-approved repayment plan. And as soon as you petition for bankruptcy protection, you should stop receiving harassing calls and letters from creditors and collection agencies.
In this article, our Las Vegas bankruptcy attorneys discuss:
- 1. What is chapter 13 bankruptcy in Nevada?
- 2. What are the eligibility requirements?
- 3. What is the process?
- 4. What if I miss a payment?
- 5. What are the court costs?
- 6. Should I do chapter 13 or chapter 7 bankruptcy?
1. What is chapter 13 bankruptcy in Nevada?
If you have a steady income, chapter 13 bankruptcy permits you to “catch up” on your past debts through a repayment plan usually lasting three or five years. During this time, you get to keep your property, and creditors cannot harass you for payment.
Once a chapter 13 plan ends, the court discharges your remaining debts with some exceptions. Examples of debts that do not get discharged once a chapter 13 bankruptcy case ends include:
- home mortgages
- child support
- student loans
- DUI-related personal injury obligations
- criminal case fines and restitution1
2. What are the eligibility requirements?
In order to be eligible for chapter 13 bankruptcy protection in Nevada, your debts must be less than:
- $1,842,200 for secured debts (such as mortgages and auto loans); and
- $394,725 for unsecured debts (such as credit card bills and medical bills).
But even if your debts fall in the eligible range, you may not pursue chapter 13 bankruptcy if either:
- you had a prior bankruptcy petition dismissed in the previous 180 days due to a willful failure to show up to court or comply with court orders;
- you voluntarily dismissed a prior bankruptcy in the previous 180 days after lien-holding creditors sought relief from the bankruptcy court; or
- in the previous 180 days, you had no credit counseling (unless there are not enough credit counseling agencies to provide counseling).
Note that chapter 13 bankruptcy debt relief is not available to partnerships or corporations. But married couples can jointly file for chapter 13.2
3. What is the process?
The Nevada chapter 13 bankruptcy process is:
- You file a chapter 13 bankruptcy petition with the federal bankruptcy court in Nevada. This filing typically includes all your financial information, including assets, bills, leases, liabilities, student loans, wage statements from the last 60 days, anticipated income and expenses, and most recent tax return. The filing should also include a certificate of credit counseling and a debt repayment plan based on your disposable income.
- The bankruptcy clerk informs your creditors of the case. And in most cases, there is an “automatic stay” imposed where creditors – including mortgage lenders – can no longer harangue you by mail or phone for payment.
- Between day 21 and day 50 of filing, your court-appointed bankruptcy trustee holds a creditors meeting. During this meeting, you will be required to answer questions under oath posed by your creditors and the trustee.
- By day 30 after the filing, you must commence making plan payments – even if the court has not confirmed the plan yet. You pay regular fixed amounts to the trustee, who then disburses it to the various creditors. During this time, the creditors should not contact you. Payments are typically on a monthly or biweekly basis for a three- or five-year period of time depending on how your monthly income compares to the state median income.
- By day 45 after the meeting of creditors, the court holds a confirmation hearing to formally adopt the repayment plan if feasible. If the court rejects the plan, you can file a modified one. You may not take on new debt without the trustee’s permission. And if your circumstances change in the future, you can request to modify the plan.
- Once the three- or five-year payment plan is over, the court should discharge your remaining debts (with some exceptions such as a home mortgage) as long as you made all required payments and took an approved financial management course. And creditors that you paid during the plan can not sue you or initiate collections.3
Download bankruptcy forms here.
4. What if I miss a payment?
If you miss a planned payment in your chapter 13 bankruptcy case in Nevada, the court can dissolve the case or convert it to a chapter 7 bankruptcy – where your non-exempt assets are liquidated to pay creditors. Note that the bankruptcy judge can also dissolve your chapter 13 case if you miss any domestic support obligations such as alimony or child support or you fail to pay taxes.
Many chapter 13 filers make their plan payments through deductions from their payroll. Automating the plan payment process like this reduces the chances of missing a payment.
If circumstances arise beyond your control that prevent you from making payment – such as getting injured or getting sick – you can ask the court for a “hardship discharge.” But the court usually grants it only if modification is not possible and creditors have already recovered as much as they would have had the case been a chapter 7 bankruptcy instead of a chapter 13.4
5. What are the court costs?
Filing for chapter 13 bankruptcy in Nevada carries the following court costs:
- $75 administrative fee; and
- $235 filing fee.
If you cannot pay these fees at the time of filing, the court can grant you a plan where you pay in up to four installments over 120 days (or 180 days at most for good cause shown).5
6. Should I do chapter 13 or chapter 7 bankruptcy?
It depends on your situation.
Chapter 7 bankruptcy in Nevada allows you to keep various “exempt assets” while your non-exempt assets get liquidated to pay creditors. In some cases, filers have no non-exempt assets, and their creditors have to eat their losses while your debt is completely discharged in bankruptcy. But many chapter 7 filers end up losing their home to foreclosure if they lack the funds to make future mortgage payments.
In contrast, the chapter 13 form of bankruptcy is about structuring a payment plan that may allow you to pay off some if not all your debts over time. Chapter 13 can stop foreclosure proceedings, potentially allowing you to save your homes as long as you continue making payments.
Also, certain debts that can be discharged in chapter 13 bankruptcy – such as debts from divorce property settlements – cannot be discharged through chapter 7 bankruptcy. And whereas chapter 7 cases stay on your credit report for 10 years, chapter 13 cases stay for only seven years.
If you file for chapter 13 but then realize chapter 7 would be a better type of bankruptcy for you (or vice versa), the Bankruptcy Code allows you to switch the filing mid-case for a $25 fee.6
- 11 U.S.C. § 1301(a). 11 U.S.C. § 101(8). 11 U.S.C. § 1328. 11 U.S.C. § 1322(d). See, for example: HSBC Bank USA, N.A. v. Blendheim (In re Blendheim), (United States Court of Appeals for the Ninth Circuit, 2015) 803 F.3d 477; d
- 11 U.S.C. § 109(e). 11 U.S.C. §§ 109(g), 362(d) and (e). 11 U.S.C. §§ 109, 111.
- Fed. R. Bankr. P. 3015. U.S.C. § 1322(a). 11 U.S.C. § 1325. 11 U.S.C. § 1325(b). 11 U.S.C. § 1326(a)(1). 11 U.S.C. §§ 1324, 1325. 11 U.S.C. § 1326(a)(2). 11 U.S.C. § 1323. 11 U.S.C. § 1326(a)(2). 11 U.S.C. §§ 1323, 1329. 11 U.S.C. § 1329(a). Fed. R. Bankr. P. 1007(b). 11 U.S.C. § 521. 11 U.S.C. § 302(a). 11 U.S.C. § 362. 11 U.S.C. § 1322(c). 11 U.S.C. § 1302. 28 U.S.C. § 586(b). 11 U.S.C. § 1302(b). Fed. R. Bankr. P. 2003(a). 11 U.S.C. § 343. 11 U.S.C. § 341(c). Fed. R. Bankr. P. 3002(c). 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327. 11 U.S.C. § 1328. 11 U.S.C. § 1328(h).
- 11 U.S.C. § 1327. 11 U.S.C. § 1307(c) and (e), 1308, 521. 11 U.S.C. § 1328(b). 11 U.S.C. § 523. See also In re Escarcega (United States Bankruptcy Appellate Panel for the Ninth Circuit, 2017) 573 B.R. 219.
- 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Fed. R. Bankr. P. 1006(b). 11 U.S.C. § 1307(c)(2).
- 11 U.S.C. 1307(a). 11 U.S.C. § 1328(a).