Chapter 13 bankruptcy is an opportunity for a financially distressed person to reorganize his/her financials with protection. Before filing, one must decide whether bankruptcy is the best option.
Chapter 13 bankruptcy is an alternative to Chapter 7 bankruptcy. It is particularly designed for people having regular fixed income and who requires certain amount of time to pay off their debts. In this type of bankruptcy, debtors get a chance to pay off all the debts either in full or part within three to five years. The credit limit for filing for Chapter 13 bankruptcy may vary from one state to another. However, anyone whose bankruptcy petition had been dismissed in the past six months shall not be eligible for refilling under Chapter 13.
A financially troubled person can file for chapter 13 bankruptcy with the bankruptcy court in his/her home district. The petition should also be followed by a schedule of assets and liabilities, current income and expenditures, executory contracts, unexpired leases, and schedule of exempt assets. The filing fee should include that prescribed by the court and miscellaneous administrative fee. Many bankruptcy forms are available online either on court websites or available for sale on commercial websites selling legal forms.
Most legal actions such as collection calls, lawsuits, and wage garnishment against the debtor will be stayed once the petition is filed with the court. The petitioner must file a repayment plan along with the petition or within fifteen days of filing of bankruptcy petition.
After filing the bankruptcy petition under Chapter 13, the petitioner must attend a meeting of creditors. Usually, such a meeting is held 20 to 50 days after filing the petition. This meeting is conducted for creditors to assess the petitioner’s assets and financial situation. After the meeting, the petitioner will be summoned by the court for confirmation hearing. At the bankruptcy court, a bankruptcy judge will verify if your repayment plan is reasonable, and meets all Bankruptcy Code standards. Creditors will also be given notice of hearing providing them an opportunity to object bankruptcy confirmation. The creditors may protest confirmation if the repayment plan quotes lesser amounts than what they would receive in a chapter 7 liquidation. They may also object if the debtor’s plan does not commit all of his or her projected disposable income for the plan period.
It is always desirable for the debtor to start making payments within 30 days of filing the repayment plan. Payments can be made to the bankruptcy attorney even before court’s confirmation. This will build the creditors’ and court’s faith in the debtor. In case the repayment plan is not approved, the petitioner can change over to chapter 7 bankruptcy.