Bankruptcy > Special Chapters

Chapter 13

Chapter 13 provides debt restructuring relief for individuals with regular income who want to pay their debts, have adequate income to pay such debts, and have a plan for payment of same that is acceptable to their creditors. There are monetary limits on secured and unsecured debts under this plan, so as to keep certain debtors (i.e., sole proprietors) from filing Chapter 13 when they should, in fact, file Chapter 11. The proceeding may be commenced only by the filing of a voluntary petition, and the restructuring plan must be approved by the court. In some cases, an involuntary petition may be filed by creditors, however the case will not proceed until the debtor has consented to same.


A trustee will always be appointed, either by the court or via election by creditors. The trustee, therefore, has power over the property of the estate until an acceptable plan is confirmed. Estate property, under Chapter 13, consists of all property which would be within the jurisdiction of the courts under a Chapter 7 case plus all earnings acquired by the debtor after commencement of the case, up to the date the case is closed, dismissed, or converted to a Chapter 7 case.


Note: A Chapter 13 case may be converted to a Chapter 7 case at any time, or may be dismissed by the court upon request by debtor.


A Chapter 13 case requires the debtor to file a reorganization plan and obtain appropriate creditor approval. Generally, the plan may not extend beyond five years. Secured creditors (i.e., creditors with liens on estate property) must either accept or reject the plan and cannot be bound by a plan they have not consented to. Unsecured creditors, however, can be bound to the plan without consent provided such plan is confirmed by the court. In order for the court to confirm a Chapter 13 plan, the court must determine that the value of the estate property available to unsecured creditors is equal to or greater than that which would be available to them under a Chapter 7 case; that all secured creditors have accepted the plan, and that the debtor is able to comply with the plan. As with Chapter 11 cases, an Order of Confirmation may be revoked, after notice and hearing, if it is found to have been procured by fraud.


Once all payments due under the plan have been paid, the court may file an Order of Discharge which effectively relieves the debtor of all unsecured debts provided for in the plan or which were disallowed by trustee except for debts owed to a spouse, former spouse, or child for alimony, support, or maintenance in connection with a separation or divorce agreement or property settlement agreement. Within one year of discharge, an interested party may request revocation of discharge which, following due notice and hearing, may be granted by the court provided it was obtained by fraud or knowledge of the fraud came to the requesting party after the discharge was granted.

Chapter 13: Underwriting Guidelines

Provided an examination of the case file shows that a) there has been no denial of the debtor’s authority to convey or transfer title to subject property by the plan or by court order; b) the conveyance or transfer of such title is specifically provided for in the plan; and c) the court order confirming the plan has become final and a certified copy of same has been recorded in the public records in the county where the subject property is located, such conveyance or transfer may be insured. In the event circumstances other than those shown above arise, you should obtain Agents National Title counsel approval prior to insuring the transaction.


Documents necessary to convey title under Chapter 13


1.  Order confirming Chapter 13 (wage earner plan); and

2.  Deed from Debtor.