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Chapter 13 Reorganization
Chapter 13 bankruptcy generally offers the broadest, most sweeping protections for you and your property. This is the type of bankruptcy for people who are behind on their mortgage or car loan and want to make up the missed payments over time and reinstate the original agreement. Chapter 13 works to consolidate, order and, in some cases, reduce your debts. Then, instead of juggling your bills and creditors, you will make one monthly payment (except for home mortgage and car loan payments) to your court-appointed trustee who will handle all of your creditors. No more calls from creditors.
Chapter 13 may put a stop to foreclosure, repossession, lawsuits and creditor harassment because when you file a Chapter 13 bankruptcy case you typically receive the protection of the automatic stay, which is a court order that prohibits further collection efforts from creditors. For the duration of your repayment plan, typically 3-5 years, you will have the breathing room and protection to eliminate your debt.
Chapter 13 is a good option if you have debt that is the result of a temporary financial setback, like a job loss, injury or illness; own lots of property - such as houses, land, cars, professional equipment - that you want to entirely protect; and have steady, regular income with which to make payments to a trustee.
If this does not sound like the bankruptcy type for you, look at Chapter 7.
What happens when I file a chapter 13 bankruptcy case?
A Chapter 13 bankruptcy case begins with the filing of the bankruptcy petition. In most cases, the court will enter an "automatic stay" as soon as the case is filed, prohibiting creditors from taking any further collection action while the bankruptcy case is pending or until further order of the bankruptcy court—lawsuits and harassing phone calls stop! Your attorney will file forms disclosing information about your debts, assets, income and expenses within 15 days after the case is commenced.
The bankruptcy court will send notice to all of the creditors listed in the Chapter 13 petition and will assign a bankruptcy trustee to the case. Within about 15 days after the petition is filed, the court will send a Notice of Commencement of Case to you and to all of the creditors listed in the bankruptcy petition. This notice includes important information like the time, date and location of a meeting of creditors. You must be present for that meeting. The trustee will ask you questions under oath about your property and debts. Creditors can also question you on those subjects.
A typical Chapter 13 bankruptcy repayment planlasts from 36 to 60 months. During that time, you must keep current payments current on your own while making monthly payments to the trustee to pay your past due balances. Debts are prioritized by the bankruptcy court and secured creditors get paid first. Remaining income goes to pay unsecured creditors, in an order established by the Bankruptcy Code.
If you make all payments as scheduled, the court will forgive any unsecured debt remaining at the end of the plan. Those creditors will not be allowed to collect the difference from you.
For those who do not qualify to file Chapter 13 bankruptcy, Chapter 7 may be an option.
Is Chapter 13 Bankruptcy Right for Me?
Chapter 13 bankruptcy can be a complicated process and mistakes in that process could potentially cost you the protection of the automatic stay or prevent a Chapter 13 bankruptcy repayment plan from being approved. We can help you determine whether filing Chapter 13 bankruptcy is the right option for you. We will guide you through the process, ensuring that all filing requirements and deadlines are met and that you have accounted for all of your allowable expenses and proposed a plan that will allow you to make payments while keeping up your regular expenses.
Just talking to a bankruptcy attorney does not necessarily mean you have made a decision—it can just be part of the information-gathering process to help decide whether filing bankruptcy under a Chapter 13 plan makes sense for your situation. Unfortunately, many people wait until their circumstances are desperate to talk to a bankruptcy lawyer and then find themselves with only days in which to stop foreclosure, vehicle repossession or other collection actions. Please contact our office as soon as possible if you wish to discuss whether a Chapter 13 bankruptcy filing might be right for you.
See also: Chapter 7, What to Bring With You