Chapter 13 is often referred to as the “wage-earner’s plan.” When filing a chapter 13 bankruptcy you need to create and submit a repayment plan that will span 3-5 years, with installments based on your income. If your monthly income is less than your state’s median, 3 years is the typical repayment plan length. If higher, your repayment plan will span 5 years.
Essentially, Chapter 13 acts like a debt consolidation loan by consolidating all of your debt and allowing you to make one payment. The added benefits include:
First, you will need to be able to make regular installments on your debt which in most cases mean you need to have an income. Additionally, the amount of your debt plays a role in your eligibility. Your unsecured debt must be less than $360,475 and your secured debt must be less than $1,081,400. These numbers are adjusted periodically to align with the consumer price index.
Additional eligibility requirements preventing you from filing, which relate to previous debt actions within the previous 180 days, include:
The court charges minimal fees for filing for bankruptcy. The first fee is a $235 case filing fee. Then there will be a $46 administrative fee. However, because the court understands you are resorting to bankruptcy due to a difficult financial situation, there can be some flexibility with payment, with permission from the court.
To initiate the bankruptcy process you must file a petition. Along with this petition you must file the following:
Upon completion of filing your petition, any collection actions by creditors must be stopped. This is known as the “automatic stay.” The court will notify all the creditors you named in your petition who then need to stop attempting to collect on your debt through lawsuits, wage garnishments, telephone calls, etc.
Additionally you will have to provide a repayment plan to the court when you file, or within 14 days after you submit your petition. The plan must include fixed payment amounts you will provide the trustee assigned to your case and the schedule on which you will be making these payments. Your trustee will distribute the funds according to the plan you lay out, which may mean your creditors do not receive full payment.
Regardless of the approval of your repayment plan during your confirmation hearing, you must start making payments according to your proposed plan 30 days after you file your petition.
A creditors meeting will take place 21-50 days after you file a Chapter 13. You are required to be present at the meeting and will be placed under oath. Additional attendees include the trustee, your creditors and your bankruptcy lawyer, if you have one. The trustee and creditors will ask you questions regarding your debt, which you must answer to the best of your abilities. If you have a bankruptcy lawyer, he or she will prepare you for the types of questions that will be asked, giving you time to prepare your answers.
Following the meeting of creditors, you will need to attend a confirmation hearing where the judge will approve or deny your repayment plan. This must be held within 45 days after the creditors meeting.
Bankruptcy is a viable debt solution for those looking to get their life back and their financial situation under control. Talk to a Bankruptcy Attorney to see if you are eligible for bankruptcy and discuss how it will improve your quality of life.