While it generally takes longer for you to pay off your debts, you will have more time to make your payments and Chapter 13 trustees may be flexible on the terms of your payments. You may be able to stretch out your debt payments, reduce the amounts of your payments, or giving up an item of your property that you are making payments on. Also, once you successfully complete a repayment plan under Chapter 13, individual creditors cannot obligate you to pay them in full.
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 a fee 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.
Chapter 13 bankruptcy principles affirm that a creditor may no longer pursue collection activities when a debtor files for bankruptcy. An automatic stay comes into picture as soon as debtor files the proper paperwork and pays the filing fee. This prevents the creditors from further collection of debt. This means that any lawsuit proceedings must cease, a creditor may not report the debt to credit reporting agencies and the debtor’s property will be in safe zone from seizure.
To qualify for Chapter 13 bankruptcy, a debtor have to refund all secured creditors and priority debts in full and must repay a portion of the amount owed to unsecured creditors. Secured debt is a debt obligation backed by collateral such as a car or real property. Priority debt includes child support payments and back taxes and unsecured debt are those obligations that are not backed by collateral. Unsecured debt includes money owed on a credit card.
If you don’t owe money on the type of debts that survive bankruptcy, the amount and number of debts that a bankruptcy court can relieve you from paying are potentially unlimited.
A Chapter 13 bankruptcy places a filer’s debt into a repayment plan. A bankruptcy court will not approve a plan unless the arrangement requires that the debtor repay all priority and secured debt in full. The repayment plan must also require the debtor to repay unsecured creditors in an amount equal in value to the filer’s nonexempt property. Nonexempt property includes any interest held in real property, business assets, and artwork. Once a Chapter 13 repayment plan begins, a trustee will disburse the monthly payment made by the debtor to the creditors each month.
If you are facing financial intricacies and believe bankruptcy is your best route, you’ll need to decide whether Chapter 7 or Chapter 13 is best for your needs. Not everyone is eligible for Chapter 13, but our office lawyers will be able to guide you through the process. Get some peace of mind today with a free legal evaluation for your prospective bankruptcy filing.