Chapter 13 Bankruptcy

Filing Chapter 13

Chapter 13 Bankruptcy is frequently referred to as a reorganization. bankruptcy. It is designed for people who are behind on their mortgage or car payments, or have student loans, IRS debts, or child support arrearage that they cannot pay according to their current demand. Because these things must be paid, the law allows a debtor to propose a repayment plan to the Court. This plan can be a minimum of 3 years or a maximum of 5 years and is determined by the “Means Test”. During that time you would make a payment to a federal trustee once a month The Trustee would then take that money and apportion it among the creditors listed in your plan.

The Court then becomes a buffer between you and your creditors, putting into place an automatic stay, which acts as a temporary restraining order, prohibiting your creditors from taking any additional act, or making any attempts to collect their debts outside the plan. They also are prohibited from contacting your employer and jeopardizing your job. In the instance of a mortgage payment, you would resume making regular monthly payments in the month following the filing of your case, as if your payments were current.

The amount you are behind, also known as arrearage,is what the Court will pay through your plan. All debts must be included in your filing, but there are several methods of treatment according to the type of debt involved. For example, a credit card that would be dischargeable in a Chapter 7 might well be dischargeable in a Chapter 13. The same would be true for medical debts, many old judgments, and contingent losses from repossessions and foreclosures that have already taken place. If you are unsure of who your creditors might be, it is advisable to get your credit reports.

We advise that each individual get a report from all three credit reporters. They are Equifax 800-685-1111 www.equifax.com , Experian 800-888-397-3742 www.experian.com and Transunion 800-888-4213 www.transunion.com Chapter 13 debtors do not generally make any appearances before the court, but instead are required to attend an all day seminar. At that time, your proposed plan of reorganization will be reviewed by the trustee, your attorneys office and any interested creditors. Attendance is mandatory except in cases of extreme hardship.A successful bankruptcy requires communication and diligence on the part of both the debtor and his attorney.

It is important that you choose a law firm you feel comfortable with. You will, after all be spending a period of years together, working on your financial recovery.

Finally, it is important to remember that bankruptcy is a difficult decision that should not be taken lightly. It should however reduce the stress of financial setbacks by moving toward a solution, and sharing the problem with a law office who cares about you.