Chapter 13 is an extremely powerful tool – but most people don’t know anything about it. In most cases, filing a case immediately stops foreclosures, repossessions, IRS levies, wage garnishments, and collection lawsuits. You will be required to make regular monthly payments for several years in a good-faith effort to repay as much debt as you can afford. A well-designed plan will save your home, your car, and your paycheck. A poorly designed plan by an inexperienced or ineffective attorney will cost you money, time, and aggravation – without helping you with your financial issues.
How does Chapter 13 bankruptcy work?
You propose a plan to make a certain payment each month to a government-appointed officer called a trustee. The trustee will use that money to pay your creditors according to your repayment plan (once it’s approved by the court). Most Chapter 13 plans last anywhere from 3 to 5 years. During that period, the federal court protects you and your property from creditors as long as you fulfill your obligations under the plan. Typically, a person who completes a plan as approved gets to keep his or her property and receive a discharge of the unpaid balance of most types of unsecured debt.
The Chapter 13 bankruptcy process
As in all bankruptcy cases, filing of a Chapter 13 case usually triggers immediate court protection, known as the “automatic stay.” The automatic stay legally requires that most collection actions, such as lawsuits, judgments, wage garnishment, foreclosure, repossession, and harassment against the debtor, must stop.
The court sends notices of the bankruptcy to all listed creditors. The case is assigned a federal judge and a bankruptcy trustee. The trustee’s primary job is to administer the repayment plan submitted by the debtor. In other words, the trustee uses the money paid by the debtor to pay creditors according to the plan.
The timeline for Chapter 13 bankruptcy
30 days after filing of the bankruptcy petition, you start making your payments. You are also required to attend a meeting of your creditors. Creditors have the right to attend the meeting and ask you questions, but they rarely show up. Typically, you meet with your trustee, who asks a few questions about your debts, assets, income, expenses, and financial affairs. The main purpose of the meeting is for the trustee to determine if the plan meets the requirements of the bankruptcy law. If you elect to hire Rubin & Associates to represent you, we will be with you at this meeting.
The court then holds a confirmation hearing about four weeks after the creditor meeting, where the trustee recommends whether the plan should be approved. Your creditors and trustee may object to the plan being confirmed and request that the automatic stay is modified to remove them from the bankruptcy protection. If this happens, you need an experienced attorney in your corner who knows how to deal with these objections and motions.
Once the plan is confirmed, you simply continue to make your payments as required by the plan until the plan is completed. At this point, the court will issue a discharge if you are eligible. Your plan is not set in stone, however. If your financial situation changes after the plan is confirmed, your plan may be modified to meet your new situation. Modification requires the plan to be completely recalculated and a motion with supporting evidence to be filed with the courts. Again, this is where you want an experienced attorney representing you.
You can also incur new credit while in a Chapter 13 bankruptcy, but you must get court approval to do so. The court must find that the credit is reasonable and necessary, so you need to have an experienced attorney to make that argument on your behalf.
Call and schedule a free consultation today
At Rubin & Associates, we have helped hundreds of Richardson residents file for Chapter 13 bankruptcies. We will take the time to listen to you and explain every available option, so you can make the best decision to move forward with your life. Call us at 214-760-7777 today for a free consultation.