In a Chapter 7, the discharge is going to be issued relatively quickly within six months. In a Chapter 13, the discharge is not going to be issued until the end of the plan because to the extent, the creditors are going to get paid; they’re going to get paid while the person’s in the plan making the payment. So, that discharge isn’t going to be issued until 3 or 5 years after the filing of a case. If, at any point, the case gets dismissed, you miss a plan payment and the trustee moves for dismissal, then the automatic stay will stop upon dismissal, you don’t have a discharge. The creditors can then come back and resume their collection activities.
The Automatic Stay
The automatic stay lasts for what we call the pending fee of the bankruptcy, meaning that it lasts as long as the bankruptcy is pending. So, as long as your chapter 13 is ongoing, that automatic stay is in place and it’s ongoing as well. The discharge of the bankruptcy converts the automatic stay into a permanent injunction against the collection of the debt. So, it basically turns the preliminary injunction and the automatic stay into a permanent injunction of the discharge.
How does Chapter 13 protect me? Could I still be sued or my wages garnished while the plan is in effect?
When you file the bankruptcy, there is what’s called an automatic stay, which stops all legal action against you and suing your property. The automatic stay acts like a preliminary injunction against the collection of a debt. So, if you are facing a wage garnishment, that wage garnishment will stop as of the filing of the bankruptcy. If you are facing debt collection activities, those debt collection activities will stop. We need to file a Chapter 13 and recover re-possessed vehicles. The person got their vehicle taken and they came to us, we file their bankruptcy and they actually got the vehicle back. They cannot foreclose, they cannot sue you. If they are suing you, they have to stop suing you.
It doesn’t really matter where the income comes from.
As a matter of fact, the income can come from somebody else, you can have what we call Contribution Income where, let’s say, you know, mom and dad are living in the house and the son has a really good job, so the son actually will contribute some of his income to mom and dad. We can use his income to fund the plan, you know, you can get very creative at how you do this but the bottom line is that whatever plan you propose, that payment has to be made.