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Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is when a proposed repayment plan is submitted to the trustee and the bankruptcy court for approval. With Chapter 13 Bankruptcy, the debtor is required to create a reasonable monthly budget that will enable them to meet their basic needs and make make scheduled payments to the bankruptcy trustee. Chapter 13 Bankruptcy permits a debtor to repay in monthly installments for three to five years, and allows the debtor to keep all of their assets, even if their value exceeds the amount of the exemptions allowed by the state.

When developing your Chapter 13 Bankruptcy payment schedule, you need to ask yourself honestly: How much money will be left over that you can apply toward your outstanding bills after all of your necessities -- such as mortgage, car payment, food, and utility bills have been paid? You also need to keep in mind when developing your Chapter 13 Bankruptcy payment schedule -- how will this money -- be divided up among those creditors that you owe funds to? Priority claims -- such as taxes and back child support -- must be paid in full; unsecured debts -- like credit card debt and medical bills -- are usually paid in part. Depending upon the judgments of those involved with your Chapter 13 Bankruptcy case, unsecured debts can be paid off for as little as 10 cents on the dollar.

In addition to the general requirements listed above, the Chapter 13 Bankruptcy repayment plan must pass three tests:

1) It must be delivered in good faith.

2) Unsecured creditors must be paid at least as much as if a Chapter 7 bankruptcy had been filed. Generally, this is the value of all the nonexempt property you own.

3) All disposable income must be paid into the plan for at least three years. You may use up to five years in order to meet the second test that you pay at least as much as in a Chapter 7.

If you file Chapter 13 Bankruptcy, you must begin making your agreed upon payments. Generally these payments will be withdrawn directly from your wages, which either you or your attorney should arrange with the court for these payments to be deducted from your wages.

Automatic Stay

Once you have filed your paperwork with the bankruptcy court, an automatic stay immediately goes into effect. This provision prevents creditors from making direct contact with you or staking a claim on any of your property from the day of filing forward. This will stop any legal proceedings.

Bankruptcy Trustee

Upon filing for Chapter 13 Bankruptcy or Chapter 7 Bankruptcy, the court will assume legal control of your debts and property not covered by your states exemptions. A trustee will be appointed to your case by the court. The job of the trustee is to see that your creditors are paid as much as possible. This person will thoroughly review your paperwork, particularly the assets you have in your possession and the exemptions you wish to claim, and can challenge any element of your case.

Meeting of Creditors

Approximately a month after filing, the trustee will call a first meeting of creditors, which the debtor must attend. Creditors rarely attend a Chapter 7 bankruptcy meeting; one or two creditors may attend a Chapter 13 Bankruptcy meeting, especially if there is a question as to the legitimacy of some aspect of the plan. Objections are typically resolved by negotiation between the debtor or the debtor's counsel and the creditor. If a compromise can not be reached, a judge will intervene.

The meeting of creditors typically lasts about five minutes. Most Chapter 7 filings involve no non-exempt assets, however, if you filed for Chapter 7 and do have non-exempt assets, you will have to turn over non-exempt property (or its fair market value in cash) to the trustee after the meeting. The trustee will sell this property and distribute the proceeds to your creditors. If the property isn't worth a great deal or would be hard to sell, the trustee may decide to abandon the property (and return it to you). Trustees and creditors have 60 days to challenge the debtor's right to a discharge. If there are no challenges, you will receive a notice from the court that your dischargeable debts have been discharged within roughly three to six months.

Chapter 13 Bankruptcy Plan Confirmation

If you filed a Chapter 13 plan will need to attend a hearing before a bankruptcy judge who will either confirm or deny the repayment plan. If your plan is confirmed and you make good on it, the balance (if any) on the dischargeable debts you owe will be eliminated at the end of your term.

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