Chapter 13 And You: A Journey Of Repayment

Bankruptcy can be a difficult process to navigate, as it requires detailed actions in order to ensure a successful outcome. Filing for bankruptcy is best done with the help of a professional bankruptcy lawyer who is able to guide you as you decide if bankruptcy is right for you and then direct you through the individual requirements and conditions of the type of bankruptcy that you best qualify for.

Chapter 13 Or Chapter 7 Bankruptcy

There are several types of bankruptcy for individuals facing the overwhelming burden of debt.  Under Chapter 13 Bankruptcy, the debtor is makes consolidated payments for their total debt under a manageable repayment plan. Chapter 13 allows debtors to prevent the loss of personal property, avoid foreclosures, repossessions, or shut off of services as they work towards paying down their debt.

Another common type of bankruptcy for individuals is Chapter 7. Different from Chapter 13, Chapter 7 will result in loss of personal property for the debtor. Under Chapter 7 Bankruptcy, the assets and property of the debtor are liquidated, or sold, in order to pay off their debt.

In comparison, Chapter 7 provides a shorter solution as liquidation typically takes around 4 months. Chapter 13 repayment plans last three to five years depending on the person’s level on income.

The Process For Chapter 13 Bankruptcy

The first step in filing for bankruptcy, regardless of what type, is to speak to an experienced bankruptcy lawyer with a detailed understanding of bankruptcy law and the bankruptcy court system in your state. Filing for bankruptcy can be technical and complicated if you don’t understand the process and requirements. Failing to complete each aspect of the process correctly or on time can result in dismissal of your bankruptcy case.

Once you have retained an expert attorney, you will then be required to complete extensive and comprehensive paperwork. Be careful to fill out forms carefully so that you avoid any costly mistakes for your case. Before you can file your paperwork, however, you will likely be required to complete a pre-filing credit counseling course. The purpose of credit counseling is to verify that bankruptcy is the right step for your financial situation and ensure that understand what will be required of you going forward.

Once you have completed these obligations, you can file for Chapter 13 bankruptcy. Once you have filed, an automatic stay will take effect prohibiting creditors and debt collectors from taking actions towards collecting the debt.

As part of the necessary paperwork, you will be required to submit a proposed repayment plan describing in detail how you will pay back your debt. Your bankruptcy lawyer and credit counselors can help you to put together a feasible plan that will satisfy the courts. A repayment plan must include all priority debts such as child support, alimony, or unpaid taxes. It must also include secured debts such as mortgages or vehicle loans, along with unsecured debts such as credit card balances or medical bills. You will be required to provide documentation for income sources, assets, and debts.

After your proposal has been submitted, the court will appoint a trustee who will be responsible for overseeing your case. The trustee will be responsible for reviewing your paperwork, evaluating your repayment plan, collecting payments, and distributing payment funds to creditors.

The length of repayment plan will be dependent on two primary factors: your total income and your total debt. Typically three-year plans are approved for those with household incomes about the median for the state, while five-year plan are approved for incomes about the median. During your designated repayment period, you will be required to make monthly payments that will be distributed to your creditors. After the completion of your repayment plan, remaining and eligible debts will discharged. Debts that will not be discharged include mortgage debt, student loans, child support, alimony, unpaid tax debt, and fees associated with your bankruptcy.

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