Chapter 13 bankruptcy is often considered a consumer reorganization bankruptcy. In this type of bankruptcy, you will make a plan to pay back any debt you got behind on. You will have three to five years to make these payments on your court-approved plan. At the end of that time, any remaining debt will be eliminated. You will, however, have to continue to make payments on any secured debt if you wish to keep those assets, such as a home or car.
Who Can File
Anyone who lives or has a business in the United States with a regular income can file Chapter 13 bankruptcy. Regular income can include
- Government benefits
- Support payments
Your debt can exceed over one million in total, and you will still be able to file Chapter 13 bankruptcy.
How to Start
You begin a Chapter 13 bankruptcy by filing the appropriate papers with the bankruptcy court. Part of the paperwork must include how you plan to pay back your creditors. This will include who you will pay back with their addresses, with what income you have to pay them and what amount you plan to pay them.
When you file your paperwork with the court, the automatic stay goes into effect all collection attempts from your creditors must stop. This includes all harassing phone calls, foreclosure proceedings, or repossessions.
What Does a Trustee Do
You will first meet your court-appointed trustee at the meeting of the creditors, or 341 meeting. The trustee will look over your paperwork and ask any questions. The trustee will determine if your plan meets the legal requirements and if you will have the resources to continue to make the payments.
For a Chapter 13 bankruptcy, the trustee will collect your payments anywhere from three to five years depending on the plan, and distribute that money to your creditors.
If there are any objections to your plan, you will have time to make changes before the confirmation hearing. If there are no objections to your plan, then you will not need to come to court.
Failing to Complete the Plan
If you are unable to make the payments due to loss of income or any other financial hardships, you will have a few options available to you.
Modification to the plan to fit your new circumstances
Hardship Discharge of debts if the financial problems were not brought on by your negligence
Conversion from Chapter 13 to a Chapter 7 bankruptcy case
Dismissal of the case
What Debts are Discharged
At successfully completing the payment plans at the end of the Chapter 13 bankruptcy case, all debts covered in the plan will be discharged. You will, however, have to continue to make payments on your home and your vehicle if you wish to keep them.
If you have more questions about Chapter 13 bankruptcy, contact a Dallas bankruptcy attorney.