For many folks in local areas like Citrus Heights and Carmichael, debt problems can be complicated by home mortgages and car loans. The good news is that Chapter 13 bankruptcy exists and can help people overcome these complications. Filing the Chapter 13 petition and plan is the first step in a complicated process that will ultimately lead to the completion of the case. The following is a short list of answers to questions that are frequently asked by Chapter 13 debtors in bankruptcy.

How and when do creditors get their money?

A Chapter 13 debtor makes payments directly to the trustee who uses the funds to pay creditors, attorney fees and trustee fees. Creditors are grouped into three main categories: secured, priority and general unsecured. These creditors get paid according to the Chapter 13 bankruptcy plan, as proposed by the debtor and her attorney. The trustee will be in charge of distributing the funds as intended by the debtor and her attorney on a monthly basis.

What if the debtor gets behind on her monthly plan payments?

If a debtor becomes delinquent in her plan payments, there will likely be some consequences. Therefore, it is very important for the debtor to immediately contact her attorney. There are a variety of solutions to help dig out of the hole, but those options will be limited if the debtor keeps her attorney in the dark.

What happens if the debtor needs to refinance or purchase a home or vehicle while the bankruptcy is still going on?

Since Chapter 13 bankruptcies typically last between three and five years, it is certainly understandable that unexpected life events are going to happen from time to time. As such, the law permits use of credit while in a Chapter 13 bankruptcy under limited circumstances. This is also another situation in which it would behoove the debtor to contact her attorney immediately upon discovering this need. The attorney will then determine whether or not the request complies with the rules. If it does, the attorney can then file a motion to seek the court’s approval. If a debtor tried to pursue credit without the court’s permission, it could lead to a dismissal and effectively end the bankruptcy.

Will creditors continue to call?

If the creditors under the plan are under the automatic stay, they are not allowed to contact the debtor unless the debtor is not represented by an attorney. If a creditor calls, it is a good idea for the debtor to inform her attorney immediately so that he may pursue legal remedies to protect the sanctity of the automatic stay.

Is it possible to pay off a Chapter 13 plan early?

Any debtor considering this possibility should contact her attorney to discuss the details. Generally, it is possible to complete a plan early, but there may be consequences. For example, if the debtor attempts to pay off the case before three years have elapsed, the trustee may request that 100% of the unsecured debt (e.g. credit cards and medical bills) be paid, no matter what percentage dividend the Chapter 13 plan provided.

What happens when the plan is complete?

At the conclusion of the Chapter 13 payment plan, the trustee will verify that all of the creditors have been paid according to the terms of the confirmed plan. Once the trustee has completed these tasks, he will submit a Final Report and Account to the court. Creditors will have 30 days to object. In addition, a number of other documents will be mailed to the debtor and her attorney depending on the specifics of the case. While it is true that every document in a bankruptcy case is important, it is also true that the Final Report and Account and the debtor’s Discharge are the most important.

Filing a Chapter 13 bankruptcy is a big decision and a difficult task. Completing a Chapter 13 bankruptcy plan is even harder. That is why it is so crucial to choose an experienced bankruptcy attorney who is familiar with the rules and customs of the local bankruptcy courts. With a little will power and the right attorney, there is a solution out there for Sacramento-area consumers with complicated debt problems.