Basic Overview of The Chapter 13 Bankruptcy Process

A basic overview of the chapter 13 bankruptcy process includes the understanding that people are repaying their debts under this bankruptcy option. Typically, people repay all their debts—or a portion of them—in a three to five year timeframe. The chapter 13 bankruptcy process is a complicated process. For instance, people must be eligible to file chapter 13. For instance, they may be ineligible to file if their secured debt exceeds $1,010,650 and unsecured debt exceeds $336,900 as of 2010, according to Nolo.

The Process: Credit Counseling

Under the U.S. Bankruptcy law, people must obtain credit counseling from an agency approved by the U.S. Bankruptcy court. Typically, the credit counseling agencies charge fees, but they may be free or reduced if people can’t afford to pay.

The Process: File Bankruptcy Paperwork

Petitions must be filed at people’s local U.S. Bankruptcy court. The paperwork often includes proof that people obtained credit counseling, schedules of assets and liabilities, tax returns and a copy of repayment plan. The repayment plan describes the amount of money that people will repay and the amount of time. Debts that deemed a priority—which include child support and alimony—must be paid in full. In addition, when bankruptcy petitions are filed, all fees should be paid. However, the bankruptcy courts can allow people to pay in four installments.

The Process: People Receive an Automatic Stay

Once bankruptcy cases are filed, people receive automatic stays. An automatic stay means that creditors can’t sue, garnish wages or take people’s homes that are facing foreclosure. The automatic stay remains in effect until the bankruptcy cases or discharged or dismissed. Bankruptcy trustees can dismiss bankruptcy cases for lack of payments. So people must make sure they keep bankruptcy payments and their other payments such as mortgage payment under control.

The Process: Fresh Start

When people complete their repayments under chapter 13, all their remaining debts are eligible to be discharged are eliminated, according to Nolo. However, before the cases are discharged, people must show bankruptcy trustees that they are current on all their debts like child support and have received debt education courses.

Getting Legal Help

No one should go through bankruptcy without getting legal help. A bankruptcy lawyer guide people through the chapter 13 progress. Also, a lawyer makes sure that people haven’t unknowingly committed fraudulent actions such as transferring their assets into someone else’s name or run up debt close to filing bankruptcy. The bankruptcy lawyer takes into account people’s financial situations and if there are other options besides bankruptcy.

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