Chapter 13 of the United States Bankruptcy Code
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| Chapter 13 of the United States Bankruptcy Code | |
|---|---|
| Name | Chapter 13 |
| Type | Bankruptcy provision |
| Jurisdiction | United States |
| Statute | 11 U.S.C. § 1301 et seq. |
| Enacted | 1978 Bankruptcy Reform Act |
| Amended | 2005 Bankruptcy Abuse Prevention and Consumer Protection Act |
Chapter 13 of the United States Bankruptcy Code Chapter 13 provides a court-supervised debt adjustment mechanism allowing individuals with regular income to repay creditors under a plan. It operates within the statutory framework of 11 U.S.C., interacts with federal courts such as the United States District Court for the Southern District of New York, and was shaped by legislative acts including the Bankruptcy Reform Act of 1978 and the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Chapter 13 cases involve trustees, secured lenders like JPMorgan Chase, and large creditor constituencies including American Bankers Association members.
Overview
Chapter 13 permits an individual debtor to propose a repayment plan to make installment payments to creditors over three to five years. It contrasts with Chapter 7 liquidation and parallels business reorganizations under Chapter 11, while drawing doctrinal lineage from early statutes such as the Bankruptcy Act of 1898. The automatic stay provision stems from 11 U.S.C. § 362 and bears on actions by entities like Wells Fargo and Bank of America. Statutory criteria and judicial interpretation have been shaped by decisions in courts including the United States Court of Appeals for the Ninth Circuit and the Supreme Court of the United States.
Eligibility and Filing Requirements
Eligibility limits include debtor categories such as "individuals with regular income" and debt ceilings established after legislative changes influenced by policy debates involving policymakers like Senator Orrin Hatch and Representative Henry Hyde. Chapter 13 is unavailable to corporations and partnerships, unlike Chapter 11 reorganizations for entities such as General Motors. Filers must submit documents including schedules, statements of financial affairs, and a Chapter 13 plan to the local United States Bankruptcy Court—for example, filings in the United States Bankruptcy Court for the District of Delaware often involve corporate affiliates. Means test considerations echo analyses used by panels like the United States Trustee Program and have been litigated before appellate courts including the United States Court of Appeals for the Second Circuit.
Chapter 13 Repayment Plans
Repayment plans must categorize claims—priority claims (e.g., taxes owed to the Internal Revenue Service), secured claims by mortgagees such as Fannie Mae or Freddie Mac, and unsecured claims held by creditors like American Express or Discover Financial Services. Plans propose treatment of arrearages, cramdown of certain secured debts as affected by rulings from the United States Court of Appeals for the Third Circuit, and modification of mortgages in light of precedents from the Supreme Court of the United States. Duration is typically three or five years depending on income, with debtor counsel often drawn from organizations like the National Association of Consumer Bankruptcy Attorneys. Trustee fees, priority tax claims involving the Internal Revenue Service, and student loan debts tied to entities such as the Department of Education shape plan feasibility.
Trustee, Creditor Rights, and Confirmation
A Chapter 13 trustee—appointed under the supervision of the United States Trustee Program—collects plan payments and monitors compliance; trustees often appear in districts like the Southern District of Texas. Creditors, including secured creditors like Chase Bank and unsecured committees sometimes represented by firms that have litigated before the Eleventh Circuit, may object to confirmation. Court confirmation follows standards codified in 11 U.S.C. § 1325 and has been interpreted by circuits including the Fourth Circuit and the Tenth Circuit. Rights of secured creditors regarding relief from stay, adequate protection, and valuation are litigated against the backdrop of statutes such as the Fair Debt Collection Practices Act and cases from the United States Court of Appeals for the Seventh Circuit.
Discharge, Conversion, and Dismissal
Discharge under Chapter 13 extinguishes certain debts upon completion of plan payments, subject to exceptions for obligations like some tax liabilities collected by the Internal Revenue Service and student loans tied to the Department of Education unless undue hardship is proven in adversary proceedings influenced by precedents from the Ninth Circuit. Debtors may convert to Chapter 7 liquidation or face dismissal for nonpayment; conversions implicate priorities and trustee duties discussed in appellate rulings such as those from the Second Circuit. Motions to dismiss or convert are frequently filed by secured lenders including Bank of America or by trustees acting under oversight from the United States Trustee Program.
Impact and Policy Considerations
Chapter 13 intersects with broader policy debates involving housing markets influenced by entities like Fannie Mae and Freddie Mac, creditor protections advocated by organizations such as the American Bankers Association, and consumer advocacy groups like National Consumer Law Center. Legislative reforms—championed by lawmakers including Senator Charles Grassley—and judicial interpretations by the Supreme Court of the United States continue to shape access, fairness, and outcomes. Empirical studies by scholars at institutions such as Harvard Law School and Yale Law School evaluate Chapter 13's effects on mortgage retention, debt discharge rates, and bankruptcy filings in circuits including the First Circuit and Sixth Circuit.