What to expect when filing a Chapter 13 bankruptcy.

As in a chapter 7, you are required as your first to take an online credit counseling course. It’s a prerequisite, it has to be done before the bankruptcy can be filed and there’s a list of approved courses on the bankruptcy courts website. So we have a link at learn-about-law.com to the list of approved courses. You take the online course and you’ll get a certificate sent to your attorney that the course has been complete and then this certificate is filed with your bankruptcy.

Step two is filing your bankruptcy petition and schedules. The petition is basically a standard document that lets the court know that who you are and that you’re filing for Chapter 13 bankruptcies. The schedules are where the action is. The schedules list all of your liabilities, assets, income and expenses, there’s also other ancillary documents like a statement of financial affairs, there’s a whole packet that needs to be filed. But basically, it’s kind of like filing your taxes all of the information about your financial life is included here and filed with the court. The court once they receive the schedules and they’ll also receive a list of all your creditor’s names and addresses, will mail a notice to anyone that you owe money to and that you’ve named in your bankruptcy packet that the bankruptcy has been filed. Once this notice has been sent to creditors basically from the day you file your bankruptcy, there’s an automatic stay on collection actions which means that creditors have to stop any collection action against you while the case is going on and hopefully, the debts will be discharged in the Chapter 13 bankruptcy. So this should be the end of collection actions for you.

Step three is filing your repayment plan. So within 14 days of filing your Chapter 13 petition, you’re required to file a repayment plan. A repayment plan basically shows how you intend to pay off your debts over the course of three to five years. The time frame is based on your income. So people with higher income will pay the debts off over the course of five years, people with lower income over the course of three years and if you can’t based on your income afford to pay off all the debts, then some of the debt may be wiped out without repayment. So once you file this plan, you’ll begin making payments to the trustee on a monthly or bi-weekly basis and the trustee will distribute once the plan is approved those payments to your creditors according to the plan. You have to start making payments to the trustee within 30 days of filing your petition even if the plan hasn’t been approved yet. So you make whatever payments to the trustee you have proposed under the plan to the trustee within 30 days of filing your petition and then if the plan isn’t approved and the bankruptcy is dismissed, that’s sorted out later.

The trustee is not a judge.  He or she is basically an attorney that’s responsible for recommending the plan to the judge and protecting the interests of the creditors and making sure everything is on the level and being done in good faith. So it’s an attorney appointed by the court to oversee the case.

The next step, step four is a meeting of the creditors. A lot of times creditors won’t show up to this meeting. It’s going to at least be your attorney, yourself and the trustee and creditors are welcome to show up and ask questions. But basically, it is you answering questions about your financial situation that the trustee asks and this is where the trustee reviews your schedules, reviews the plan and make sure that everything looks okay to go forward and that there’s nothing fishy going on. And these meetings are often pretty painless. The trustee asks some pro forma questions and we recommend that you just answer fully and honestly and your attorney should be in charge of making sure that there’s no irregularities with your schedules that would cause any problems in this meeting. The meeting happens within 60 days after your petition is filed and usually trustees require that you provide tax returns and pay stubs to them within a certain number of days prior to the meeting so that they can review those along with the other documentation that you filed.

Step five is the confirmation hearing. So this is where you actually go to court and your plan is either approved or denied by the judge. This happens within 45 days of the first meeting of creditors. And if the trustee recommends the plan and says, this is a good plan for to everybody and no creditors object, then often the case won’t even be formally called before the judge: the judge will just as a matter of course approve it and that’ll be that. If creditors object there will be a hearing on any objections and if the judge ultimately denies the plan, then you have the option of either proposing a modified plan to overcome any objections that creditors or the judge may have or you can convert the Chapter 13 case to a Chapter 7.

Step six is actually performing under the plan and eventual discharge. So these plans last for three to five years and again over the course of these three to five years, you’ll be making payments to the trustee and the trustee will be distributing those payments to creditors. When the plan has run its course, there are a couple prerequisites to discharge of any remaining debt and closing up the bankruptcy case. One of those prerequisites that you have to take a second online course. This is a financial management course and again it’s the same companies that put on the original credit counseling course. So you certify that you’ve taken this financial management course. Another prerequisite is that all of your domestic support obligations if you have any have to be up to date before discharge will be entered. Once your discharge is entered, any debts that you had that weren’t paid off by the plan that are the type of debts that can be discharged are discharged assuming that the plan did not provide for them to be paid off in full. So discharge means your plan is run its course, you don’t have any more domestic support obligations that are past due and you’ve taken this financial management course and at that point you’ll be discharged and your case will be closed.

So the next article in video we’re going to do deals with what goes into a Chapter 13 repayment plan. So stay tuned for that one and again go to learn-about-law.com to find out what a Chapter 13 is all about, why someone would file a Chapter 13 in the first place and when it makes sense instead of a Chapter 7.

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