In this type of bankruptcy, you must file a reorganization plan to outline how you intend to pay back your creditors. You must also have a regular income and live in the United States. Chapter 13 has monetary limits as to who can file since it is over one million dollars; most people do not have any problems filing Chapter 13. Some people who intended to file Chapter 7, liquidation bankruptcy did not pass the means test, and the case was transferred over to a Chapter 13 bankruptcy.
You must complete a court-approved credit counseling course before you can file for bankruptcy. The next step is to file a two-page petition with the bankruptcy court, a list of your creditors and how much and when you intend to pay them must be included.
Once the petition is filed with the court, an automatic stay goes into effect, and all actions to collect on your debt must legally stop. This includes harassing phone calls, letters demanding payment, foreclosures, utility shut-offs, vehicle repossessions, liens, and wage garnishments will also stop with an automatic stay. If a creditor contacts you without court approval, they could be fined and forced to pay your attorney bills.
Trustee and the 341 Meeting
You will meet with a court-appointed trustee and your creditors. At this 341 (or meeting of the creditors) you will be asked to verify your documents and your source of income. The trustee will either approve or not approve your plan. You will then have the chance to make changes to your plan to get it approved.
Once the court approves the plan, your trustee will take your payments over the next three to five years, depending on the plan, and distribute them to your creditors. If you fail to make the payments, the trustee can ask the court to dismiss your case, and you will be back where you started.
The final step for a Chapter 13 bankruptcy is after you have made all of your payments according to the court approved plan, any remaining debt will be discharged. This does not include secured assets that you intend to keep like your home or your vehicle. You will have to continue to make these payments if you want to keep these items. Alimony and child support will never be included in a discharge no matter what type of bankruptcy you file.
If you have more questions about Chapter 13 bankruptcy, contact a Dayton bankruptcy attorney to find out how you can keep your assets while eliminating additional debt.