Filing bankruptcy is often a difficult decision to make. Last year alone, more than 1 million people filed consumer bankruptcy actions to improve their financial situation. With the down turn in the economy, more and more people are looking for financial relief, but not everyone needs, or qualifies for, the relief offered in a Chapter 7 bankruptcy.
Chapter 13 bankruptcy lets debtor's reorganize their debts.
Chapter 13 bankruptcy, also known as a reorganization bankruptcy, allows people with a steady income to develop and propose a plan to repay some or all of their debts over a period of time. Typically, Chapter 13 bankruptcy repayment plans span a period of 3 – 5 years, and are based on each debtor's individual financial situation.
Chapter 13 bankruptcy allows the debtor to keep their property.
As long as a debtor continues to make monthly payments in accordance with their approved repayment plan, Chapter 13 bankruptcy allows the debtor to keep their property. One significant advantage of a Chapter 13 bankruptcy is that it offers people an opportunity to save their homes from foreclosure by stopping foreclosure proceedings, and allowing them to cure delinquent mortgage payments over time. Chapter 13 bankruptcy also allows people to restructure secured debts (such as automobile loans), and to pay them over the life of the Chapter 13 bankruptcy repayment plan.
Chapter 13 bankruptcy stops creditor harassment and collection action.
Once a Chapter 13 bankruptcy Petition is filed, creditors are prohibited from most collection actions against the debtor or the debtor's property, which includes foreclosure of your home. This is called an "automatic stay". As long as the stay is in effect, creditors may not initiate or continue most lawsuits, wage garnishments, or continue harassing collection efforts.
Chapter 13 Process
The Chapter 13 Bankruptcy process starts when a Petition, complete with schedules of assets and liabilities, income, expenses, and other required documentation, is filed with the bankruptcy court. In addition to the Petition, a Chapter 13 bankruptcy debtor also files a proposed repayment plan. This plan must be approved by the Court, and provide for payment of fixed amounts to the trustee on a regular basis.
After filing, a trustee is appointed to evaluate your case, as well as to disburse all payments you make into the plan to your creditors. Approximately 4-8 weeks following the filing of your Petition, the trustee will hold a meeting of creditors. This is a mandatory meeting, and all debtors must attend.
At the meeting of creditors, the trustee places the debtor under oath, and both the trustee and creditors may ask the debtor questions regarding his or her financial situation and the proposed terms in the repayment plan.
No later than 45 days following the meeting of creditors, the bankruptcy court will hold a confirmation hearing to decide whether the repayment plan is reasonable, feasible, and meets the standards set out by the Bankruptcy Code. If the Court confirms the plan, the repayment plan will go into effect, and the debtor is bound by the plan terms. If the Court does not confirm the plan, the debtor may file a modified plan or convert the case to a Chapter 7 bankruptcy (if qualified).
To schedule a free, confidential consultation, contact Attorney Kimberly M. Glencer at 301-220-2288.
