You begin a Chapter 13 Bankruptcy by filing a petition. Following the petition you must also file the following documents with the court:
- Schedules of assets and liabilities
- Schedule of current income and expenditures
- Schedule of executor contracts and unexpired leases
- Statement of financial affairs
- Certificate of credit counseling
- Copy of any debt repayment plan created during counseling
- Evidence of payment from employers received 60 days before filing
- Statement of monthly net income and any anticipated increase in income or expenses
- Record of any interest in federal or state qualified education or tuition accounts
- Copy of the most recent tax return or transcript
These documents are not available from the court. They can be purchased from legal stationery stores or downloaded from the internet.
In order to complete the above forms you will need to compile a list of all your creditors plus the amounts and nature of their claims, the source, amount and frequency of your income, a list of all your property and a detailed list of all your monthly living expenses.
As soon as you file your petition a bankruptcy clerk will alert all creditors you listed requiring all collection actions to stop. This is known as an “automatic stay.” Those collection actions include lawsuits, wage garnishments and harassing telephone calls.
Your case will be assigned a trustee who is responsible for administering and evaluating your case. If your case is approved, this trustee will also collect payments from you and turn around to pay your creditors for the length of your repayment period.
Additionally, you will have to provide a repayment plan to the court when you file or within 14 days after you submit your petition. Your repayment plan must include fixed payment amounts (which are based on what you can afford to pay) you will provide to your trustee and the schedule on which you will be making these payments (typically monthly or every 2 weeks). Your trustee will distribute the funds according to the plan you provide.
Your repayment plan must include plans to pay priority claims in full, pay secured claims at minimum the value of the collateral and pay unsecured claims up to the amount creditors would receive if your assets were liquidated.
The court will review your repayment plan and approve or deny the plan in the confirmation hearing.
As part of your trustee’s administration duties, he or she will call a meeting of creditors 21-50 days after you file a Chapter 13. You are required to be present at the meeting and will be placed under oath. Additional attendees include the trustee, your creditors and your bankruptcy lawyer, if you have one. The trustee and creditors will ask you questions regarding your debt, which you must answer to the best of your abilities. If you have a Bankruptcy Lawyer, he or she will prepare you for the types of questions that will be asked, giving you time to prepare your answers.
Following the meeting of creditors, you will need to attend a confirmation hearing to determine the status of your repayment plan. This must be held within 45 days after the creditors meeting. Your creditors will have an opportunity to object the plan prior to the hearing. This usually only occurs if they won’t receive the amount they would if your assets were liquidated or you don’t commit all of your disposable income for the applicable commitment period. (Download our Debt Solutions 101 eBook to learn more about disposable income and applicable commitment periods.)
During your confirmation hearing the bankruptcy judge will approve or deny your plan. If denied you may convert your case to a Chapter 7 Liquidation or modify your current plan.
Costs & Payments
Regardless of the approval of your repayment plan and the progress of your case, you must start making payments according to your proposed plan 30 days after you file your petition. If any secured payments come due prior to your hearing, you must make protection payments. If your modified plan is denied or your case is dismissed entirely, the trustee may only keep enough funds from the amount you have paid to cover the court costs. The remaining balance needs to be returned to you.
If your plan is approved, you and your creditors are bound to it. You must make the payments on time and your creditors may not demand more or harass you. Any unpaid debt will be eliminated and you will be able to start fresh, with a clean slate when:
- You complete your repayment plan
- You confirm all domestic support obligations have been kept and paid during your repayment period
- You haven’t received a discharge in a prior case filed within:
- 2 years for prior chapter 13’s
- 4 years prior for chapter 7’s
- You completed an approved financial management course
If you would like to learn more about a Chapter 13 bankruptcy or if you believe it is the correct debt solution for you, request a free bankruptcy consultation from our bankruptcy attorneys: