The Process of Filing for Chapter 13 Bankruptcy
Filing for bankruptcy is a necessary evil for some individuals who find themselves in dire financial situations. The decision to file for bankruptcy should not be taken lightly. Filing for chapter 13 bankruptcy will stay on your credit report for seven years, making it difficult for you to obtain credit or be approved for loans with reasonable interest rates. If however, you do need to file for chapter 13 bankruptcy, there are a few things you should know about the process.
First of all, you need to know if you are eligible to file for chapter 13 bankruptcy. In order to qualify for chapter 13, you must first of all have a stable and regular income because chapter 13 bankruptcy is a reorganization of debt into a payment plan rather than total bankruptcy. You must also have enough disposable income in order to pay for every day expenses. Finally, to be eligible for chapter 13 bankruptcy, your debt load must not exceed certain limits. You can qualify for chapter 13 if your unsecured debts are less than $360.475 and your secured debts are less than $1,081,400. Secured debts are those which are linked to tangible properties like homes and cars. Unsecured debts are those that are not linked to objects, for example, credit card bills. Finally, your federal income taxes must be up to date,
After you determine whether or not you qualify to file for chapter 13 bankruptcy, there are two steps. The first step is to file the required paper work. In order to file for chapter 13, you have to make a petition in federal court, requesting the right to file for bankruptcy. One you pay the filing fee, creditors are ordered to cease attempting to collect from you under order of the court. By giving the petition and case number to creditors, it may also help to prevent foreclosure proceedings on your house. Next, you will be required to submit paperwork that shows your complete and up to date financial history. These documents need to include a list of all creditors to whom you owe money, a breakdown of what you owe, a list of your assets, a report on your income, and your expenses and liabilities. In addition to this, you will need to present a plan, detailing your how you will reorganize your debts and pay them off in a timely manner. If any amendments need to be made to the paperwork submitted, it may be done after the initial filing for a fee.
Your paperwork will then be processed and handed to a chapter 13 trustee. These are agents of the court whose job it is to determine whether or not your plan is viable and who will be overseeing your bankruptcy proceeding. Most of the time you will be dealing with a chapter 13 trustee and not a judge unless there are legal issues or conflicts with creditors that need to be resolved. After the trustee has gone over all of your financial history and your reorganization plan, a hearing date will be set. At this hearing, all of your creditors are invited to the proceedings. It is unlikely that all of the creditors will send representatives. Usually the only ones that show up are those to whom you own large amounts of money, typically mortgage holders and banks.
During the hearing, the trustee will present the repayment plan to the creditors. Creditors have the opportunity to ask questions concerning the proposed reorganization plan. If they have any objections, the trustee with arbitrate disagreements or make a decision on his own. Following acceptance of the repayment plan, you will be ordered to make regular payments to the chapter 13 trustee in order to pay off your debts. The trustee in turn will disseminate all collected funds to your creditors. It is important that you pay your bills on time because if you miss too many payments, the bankruptcy can be revoked, ending your bankruptcy protection.
A reorganization plan usually spans a period of 36 to 60 months, but may depend on the amount owed and the financial situation of the debtor. Bankruptcy should be avoided at all costs, but if you have to, it is important to know the steps of the process in order to speed up your financial recovery.
