Chapter 13 Bankruptcy

Chapter 13 bankruptcy is an interest-free debt repayment plan through which you consolidate your debts and make a payment on your debt over a 3 to 5 year period. While in a Chapter 13 debt repayment plan, the creditors cannot collect from you, and the creditors are required by a Federal Court order to adhere to the terms of the plan.

One very important thing to remember about Chapter 13 bankruptcy is that you must be working or have a consistent source of income for your repayment plan to be approved by the court. Not only must you be able to pay for your monthly living expenses, but you must also be able to make a payment to the court to consolidate your debts.

Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts. All outstanding debts must be included in the Chapter 13 bankruptcy consolidation.

You can expect the Chapter 13 bankruptcy process to last anywhere from 36 to 60 months. The process begins when you file a two-page petition starting Chapter 13 proceedings and pay a fee. You will be given a docket number, and all actions by creditors are stopped, except those that might be allowed by motion in the bankruptcy court.

Creditors Stop Demanding Money

This means creditors may no longer demand money from you, bring you to court to collect debt, or foreclose or repossess your property.

Within several days of filing your petition, you must submit a list of the names and addresses of all your creditors to the bankruptcy court. About a week after submitting the list, you are responsible for completing a lengthy document including many lists of your assets, liabilities, income, expenses, past financial history, a plan outlining exactly how you propose to reorganize under Chapter 13, and evidence that you are capable of completing the plan. You’ll be able to file amendments, add creditors, change the status of a creditor, or change the schedules or plan if you need to.

Meeting With The Trustee

The next step is meeting with a Chapter 13 trustee to finish your reorganization plan. This meeting takes place one to three months after you have filed the bankruptcy petition. You will face your creditors and they will have a chance to ask questions and raise objections to your plan. Few creditors attend these meetings.

You then begin the repayment plan. How long you are in the plan depends on your income and the size of your debt. Bankruptcy law requires all plans to take between 36 and 60 months. Even if you turn out to have enough income to satisfy your debts in less than 36 months, the trustee will likely demand that the plan be 36 months and that a larger percentage of funds go to the unsecured creditors.