With recent changes in bankruptcy law, more and more people are finding themselves ineligible for traditional Chapter 7 bankruptcy, or liquidation; as a result, the trend is toward more Chapter 13 bankruptcy filings. By filing Chapter 13 bankruptcy, you are essentially entering into a repayment plan that permits you to repay all or a portion of your debts over a certain time period. Furthermore, filing Chapter 13 bankruptcy generally permits you to keep your assets, which does not always occur in a Chapter 7 bankruptcy. Therefore, if you are a person who has substantial assets, as well as a regular income sufficient to repay all or most of your debts, filing Chapter 13 bankruptcy may be the right step for you.
According to Chapter 13 bankruptcy rules, it is necessary for a debtor to attend credit counseling prior to filing for bankruptcy. After the completion of counseling, the debtor must pay $274 and provide the bankruptcy court with information about income, debt, expenses, and creditor holdings of secured and unsecured debt. Once the court receives the appropriate paperwork, a trustee will review the case. The trustee will request information from the debtor, communicate with creditors, and hold a creditors meeting. The debtor is also responsible for filing a repayment plan with the court. Once the bankruptcy court approves the repayment plan, Chapter 13 bankruptcy is complete.
Much like a Chapter 7 bankruptcy filing, Chapter 13 bankruptcy proceedings start when you file a petition, along with various required forms regarding your assets, income, debts, and expenses. Filing Chapter 13 bankruptcy also requires you to file a repayment plan at the time of or shortly after the petition is filed, for approval by the court. The court also appoints a trustee to manage your Chapter 13 bankruptcy case; the duties of a trustee are primarily to evaluate your case and proposed repayment plan, as well as to receive payments from you pursuant to the plan, and disburse those payments to your creditors, or to the companies to whom you owe debts. Within 30 days of filing Chapter 13 bankruptcy, you have to begin making payments to the trustee as per the terms of your plan.
Furthermore, a Chapter 13 bankruptcy filing will result in an “automatic stay”, or a temporary order of the court that stops your creditors from taking further action to collect their debts from you, such as by garnishing your wages. The automatic stay typically remains in place throughout your bankruptcy proceedings. Therefore, a Chapter 13 bankruptcy filing may be a way to save your house from foreclosure, so long as payments are made according to the Chapter 13 plan.
After the Chapter 13 bankruptcy filing, the trustee holds a meeting of creditors, at which you must appear and answer any questions, and any potential problems with the proposed plan must be resolved. The bankruptcy court will then schedule a confirmation hearing in order to determine whether your plan is feasible and appropriate.
Assuming that your Chapter 13 bankruptcy plan is confirmed by the court, then it is up to you to make the plan work. In other words, you must comply with the terms of the plan in terms of repayment, and you must not incur new debts during the repayment period. If you complete the plan successfully, then you will receive a discharge of any remaining amounts owed on your debts included in the plan.
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