If you are struggling to pay bills and overwhelmed by debt, Chapter 13 bankruptcy may be an option to relieve the financial burden. This type of consumer bankruptcy reorganizes your debt, establishing an affordable repayment plan to pay off some of the debt. Referred to as a “wage earner’s plan,” Chapter 13 can avoid foreclosure, wage garnishment, and the other negative effects of having trouble paying your bills. The Law Office of Ricky Stern helps individuals and married couples with Chapter 13 bankruptcy.

Benefits of Chapter 13 Bankruptcy

Proceeding under Chapter 13 of the U.S. Bankruptcy Code as an alternative to Chapter 7 enables you to reduce certain debts through a repayment plan. Many times, you can avoid losing your home, vehicle, personal property, and retirement savings through Chapter 13 bankruptcy. This process is often used to prevent foreclosure or repossession, or to resolve or eliminate legal actions that have already started. It can help reduce loan balances, payments, and interest rates.

When you file for Chapter 13, you get an automatic stay on collection efforts of creditors. You may be able to keep your property, including your home and your car. You also may stop foreclosure, cure delinquent mortgage payments, and reschedule secured debt (other than the mortgage on your primary residence) to extend over a repayment plan period.

Chapter 13 bankruptcy may help individuals or married couples whose income does not qualify them for Chapter 7, and who earn above-average income (as determined by the Bankruptcy Code). There are limits on the amount of debt for Chapter 13 eligibility. If you have income and can pay off part of your debts, even though you cannot pay monthly minimums or all your debt, Chapter 13 may be an option worth considering.

Filing for Chapter 13 Bankruptcy

Filing for Chapter 13 bankruptcy begins with filing a petition in the United States Bankruptcy Court. You may file as an individual or jointly with your spouse. With the petition, you file detailed information about your property and assets, debts, and current income and expenses of both spouses, even if you file individually.

With the petition or within 14 days, you also must file a proposed repayment play. The plan must meet specific requirements for addressing your debts. A repayment play includes fixed payments made on a regular basis, typically biweekly or monthly. In some cases, the plan may offer less than full debt repayment. Depending on your monthly income, the plan proposes repayment over either a three-year or five-year period.

Filing the petition creates an automatic stay on most collection actions, although the stay may be only temporary in some circumstances. While the stay is in effect, creditors must stop collection efforts and cannot take any action against you.

Chapter 13 Process

The bankruptcy court appoints a bankruptcy trustee to supervise your case. In Chapter 13, the trustee serves as both the evaluator and the disbursing agent who collects your payments and distributes them to creditors. During the repayment plan, you have no direct dealings with creditors.

The trustee holds a meeting of creditors, where you testify. The trustee and creditors may ask questions. You must attend the meeting and address questions about your finances and about the proposed repayment plan. Usually, the creditors’ meeting resolves issues with the repayment plan.

Within 30 days of filing the petition, you must begin making payments to the trustee under the plan, even if it has not been approved. Within 45 days after the creditors’ meeting, the bankruptcy judge holds a confirmation hearing to determine whether your plan meets Bankruptcy Code requirements and is feasible. Creditors are notified of the hearing and may object to confirmation of the plan.

If the court approves the repayment plan, the trustee distributes funds received under the plan. If the court does not approve the plan, you may file a modified plan or convert the case to a Chapter 7 bankruptcy.

During the repayment plan period, you cannot incur new debt without consulting the trustee and must make the scheduled payments. If you fail to make payments, the court may dismiss the case or convert it to Chapter 7.

On completion of the repayment plan and meeting other requirements, you receive a Chapter 13 discharge. The discharge releases you from debts covered by the plan, except for specific long-term obligations, such as your home mortgage.

Alternatives to Chapter 13

There are alternatives to Chapter 13 bankruptcy relief for consumers. Individuals without a regular income may be able to seek relief and eliminate many debts through a Chapter 7 bankruptcy proceeding. The Law Office of Ricky Stern assists consumers with both Chapter 7 and Chapter 13 bankruptcy. Before you decide how to proceed, we make certain that you are fully aware of the options that are available in your circumstances, so you make a fully informed decision before moving forward.