Chapter 13 bankruptcy is for reorganization and repayment of your debt. People often choose Chapter 13 when they are behind in their secured loans such as their home or vehicles, and they want to keep those assets. Chapter 13 bankruptcy can also be an option if someone doesn’t qualify to file a Chapter 7 liquidation bankruptcy. This may be because you either have too much income and will not pass the means test, or you risk losing some of your non-exempt assets to the trustee in your case.
The repayment plan
The court-approved repayment plan will be based on your income level and your debt. The plan will be very specific. You will establish a monthly budget that allows for:
After you and your lawyer fill out your financial information, the court will establish the amount of monthly disposable income you have to pay towards your debt. By law, the repayment period cannot last longer than five years. If you have made your payments, your eligible debt will be eliminated at the end of your bankruptcy process.
In order to file for bankruptcy, you will be required to attend two credit counseling courses. These courses can be taken online. The first course must be taken before you file your bankruptcy paperwork. You can find court-approved agencies at www.debt-foundation.org. The purpose of this course is so you understand other options that may be available to you.
Pre-Discharge Debtors Education Course
Before you can receive your discharge in bankruptcy, you must complete a debtor education course. The goal of this course is to teach you how to manage your financial affairs and establish better habits, so you do not get behind in your debt again. You can find approved courses at the U.S. Justice Department website (www.usdoj.gov).
The 341 Meeting
Also called the creditor's meeting, this meeting will take place approximately 30 to 45 days after you file your bankruptcy paperwork. You, your attorney, the trustee assigned to your case, and possibly your creditors will attend this meeting. The trustee will review your repayment plan and ask you questions regarding your income, expenses, and debt. The plan must show that you are making a good faith effort to repay your creditors before the trustee approves it.
When the 341 meeting is finished, your Chapter 13 plan is sent to the bankruptcy judge. The judge will make sure all court administrative fees have been paid and will determine if the plan is a good faith effort and if you are likely and able to make the payments.
You will start making a payment to your trustee within 30 days of filing your bankruptcy paperwork. The trustee will distribute the payments to your creditors as determined by the plan.
When you have made all the required payments within the three to five-year period determined by the court, your bankruptcy will be complete. All remaining unsecured debt will be eliminated, and you will have control over your money again.
If you have questions about bankruptcy contact a Citrus Heights bankruptcy attorney to find out if Chapter 13 bankruptcy is right for you.