Chapter 13 Bankruptcy Process
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The process for filing Chapter 13 is a maze-like process, and you will want to have an attorney by your side. The paperwork involved is truly overwhelming, and the time is much greater than a Chapter 7 bankruptcy.
Preparing the Petition and Plan
Like any bankruptcy case, you will need to have a bankruptcy petition for the court. This is often 30-50 pages thick and lists your debts, possessions and other information in a very particular order and fashion.
The payment plan is the key to a Chapter 13 bankruptcy, and what sets it apart from a Chapter 7 bankruptcy. It sets out all the ways which the debt will be handled during the administration of the bankruptcy by the Chapter 13 Trustee. How much unsecured debt will be paid? Are you going to keep paying on the car, or give it back for a voluntary repossession? What about the mortgage: will it be caught up if you're behind to avoid foreclosure, or if so, how long will it take to pay the arrearages that you're behind?
In short, a lot of precise and important calculations go into the Payment Plan with the aim of determining the number that matters most to the debtor. This number, of course, is the monthly payment. This monthly payment will be paid for the next 36 months (yes, that's 3 years), so it should be something that the debtor can afford. An attorney will try to ensure it's something that can be afforded, as well as will be accepted by the bankruptcy trustee and creditors.
Filing the Bankruptcy Papers
After these are ready, the bankruptcy petition and payment plan are submitted to the U.S. Bankruptcy Court. The papers are filed and the case gets a number and the ball is rolling.
The Meeting of Creditors (341a)
Like a Chapter 7 bankruptcy, you must go under oath with penalty of perjury regarding the facts that are contained in your bankruptcy petition. You will need to appear in bankruptcy court to answer some brief questions. This is the 341(a) Meeting of Creditors.
After the bankruptcy court date, your attorney will need to return to court. This involves making sure that the numbers all add up, your chapter 13 payment plan is fair to both you and your creditors, and of course, to accept your next monthly payment. If all goes right, your plan will be "confirmed," your plan is accepted and everything is on automatic pilot.
After Bankruptcy Court
After confirmation, from this point forward, you will just mail your monthly payments to the chapter 13 trustee. There usually are a couple of restrictions, such as notifying the trustee if you get a change in your income, not spending more than $250 on any particular item, and so on. Remember, by definition, you are not supposed to have any extra money above and beyond your monthly expenses, since that is what is going to your creditors. So, it makes sense that the bankruptcy court and trustee would have an interest on anything that would change the formula of your confirmed plan.