Chapter 13 Bankruptcy

Bankruptcy chapter 13 gives individuals with average incomes an opportunity to create an individual plan to repay debts. Generally your financial plan will include payments for the next five years, but if your income is less than the state median payments will be spread over a three year period instead.

The Advantages of Bankruptcy Chapter 13

When you file bankruptcy chapter 13, you have the opportunity to relieve financial stress resulting from credit card debt, medical, and utility bills, etc. What’s unique about the chapter 13 bankruptcy process is that it also provides you with an opportunity to save your home from foreclosure. You can delay foreclosure proceedings and even have past due payments forgiven over time.

Payment Options

Chapter 13 also gives you an opportunity to delay and reschedule secured debts besides your mortgage payment like student loans. Over time deferring these debts could lower the amount you wind up owing. When you file chapter 13, all of your debts are lumped together into one manageable payment, kind of like loan consolidation. The payments go directly to the appointed trustee who is responsible for distributing the payments to your creditors.

The Process

Bankruptcy chapter 13 starts with filing a petition with your local bankruptcy court. You will need to provide a list of your creditors and the amounts owed to each; your income, how it’s earned; a list of any property you own and a detailed outline of your monthly living expenses. You will also need to file with the court:

• A schedule of assets and liabilities
• A schedule of executor agreements and unexpired leases
• A financial statement
• A certificate of credit counseling
• A copy of a debt repayment plan obtained through credit counseling program
• Paycheck stubs from employers
• Monthly net income verification
• Recent tax return

Married couples can file together or separately. In most cases you have the option of paying court filing costs all at once or in installments. Even if only one spouse files the court will request income verification for both.

Discharge Options

Bankruptcy chapter 13 is a very broad, complex process. Once the process is complete you may receive a discharge once all of the payments are complete as long as you are able to certify special situations like spousal support haven’t been awarded discharge in a previous case within two years and have successfully completed an approved financial management course.

A discharge means you are no longer obligated to reimburse the debts included in your plan. Those creditors must stop all legal and other efforts to collect on the debt. Debts that can’t be excused include mortgage payments, child support, alimony, certain taxes and debts associated with a criminal fine resulting from a court ordered sentencing.