Chapter 13 Bankruptcy
A Roadmap to Help Guide You Through Filing For Chapter 13 Bankruptcy
Eligibility Criteria
Not just anybody can file for Chapter 13 Bankruptcy. In order to do so, an individual must meet certain criteria determined by the United States Bankruptcy Code.
First and foremost, the prospective filer must prove they have a stable income that will allow them to pay back their debts through the repayment plan that will be put in place for a specified course of time.
The individual must not have unsecured debt that exceeds the accepted limit outlined in the bankruptcy code. This is debt that has been accumulated without being backed by any assets as collateral. Late credit card payments are just one example of unsecured debt.
If a person meets these two requirements, they must then enroll and complete a credit counseling course that is administered by an agency that has been vetted and approved by the U.S. Department of Justice. To find a list of approved agencies, click HERE.
Once you have received your certificate of completion for credit counseling, you can take the next steps outlined below.
Forms Required
MAKE SURE YOU HAVE THESE
In addition to the certificate you will receive to show you finished the class, you will need to gather financial records that contain information regarding your status. This will help the courts in deciding on your payment plan.
Collect these forms and keep them in a secure place. You will need these when you attend the confirmation hearing that will accept or reject the repayment plan you and your bankruptcy attorney draw up.
Financial Documents You’ll Need
- Pay stubs
- Tax returns
- Bank Statements
- Mortgage Documents
- Asset appraisals
Giving Homeowners a Helping Hand When Facing Foreclosure
Creating a feasible plan that is satisfactory to your creditors is highly important. The plan will be discussed between you and the creditors during the 341 meeting in which you will have an opportunity to make your case.
The plan won’t officially be put into effect until you have attended the confirmation hearing where the bankruptcy judge will review your case and any objections made by your creditors.
There are two possibilities that can happen now:
Approval
If the judge approves your plan, you will begin the process of repayment.
Rejection
There are four possible ways a judge will go about rejecting a proposed plan.
If Your Plan is Rejected…
1. ADJUSTING THE PLAN: The judge can suggest making modifications to the plan that will better address any issues present, and the debtor will have a chance to look it over and make any revisions before resubmitting it.
2. CONTINUING THE HEARING: This allows for more time to talk through the plan and make any adjustments or negotiations that need to be made.
3.DISMISSAL OF THE CASE: Sometimes, a judge will decide that the plan proposed is not feasible and lacks any conflict resolution, so they will dismiss it. This means the debtor won’t be protected by bankruptcy laws and is vulnerable to debt collection efforts.
4. CONVERSION TO CHAPTER 7: If the judge finds that Chapter 13 is not suitable, they may allow the debtor to convert the case to a Chapter 7 bankruptcy. This involves liquidating assets to pay off debts rather than implementing a repayment plan.
Post-Filing Financial Management Course
In addition to repaying the debt AND taking a pre-filing credit counseling course, filers will have to take a debtor education course that teaches financial management skills. You MUST complete this course, which is the second one you will have to take, in a timely manner to be discharged.
The course must be given by a provider that has been approved by the U.S. Trustee Program. Find one HERE.
Discharge From Bankruptcy
Successful completion of your repayment plan and debtor education course will warrant your discharge from bankruptcy. This means your qualifying debts will be forgiven and you can have a fresh financial start.
Remember, being discharged does not mean all debts you have will be forgiven. Only the ones that were outlined in your repayment plan will be eligible for elimination or forgiveness.