During this time payments are made to a trustee who will distribute payments to creditors. The individual filing Chapter 13 bankruptcy will have no direct contact with creditors. Creditors are not permitted to start or continue collection efforts against an individual while they are under the protection of a Chapter 13 plan.
Chapter 13 and Foreclosure:
For individuals facing foreclosure, Chapter 13 can help them keep their homes. Like a Chapter 7, filing for bankruptcy under Chapter 13 "automatically stays" harassing collector calls, most wage garnishments, and all other collection actions.
Under a Chapter 13, this "stay" also applies to foreclosure proceedings. Chapter 13 allows the individual to pay the past due amount over the three to five year period instead of having to come up with the lump sum of money to save their home.
Chapter 13 and Automatic Stays:
Chapter 13 has a special provision that "automatically stays" actions against a co-debtor as well. This happens if the debt is considered "consumer" in nature, which means a debt primarily incurred for a household or individual purpose. Chapter 13 may also help lower payments on other secured debts. A bankruptcy petition must be accompanied by numerous financial documents and statements.
Chapter 13 and Credit Counseling:
An individual must receive credit counseling within 180 days before the filing of his or her petition to be eligible to be considered a debtor. Lynn Osborne provides the contact information for a credit counseling agency approved by the Bankruptcy Court.
Chapter 13 and Confirmation Hearing:
Within 45 days after the meeting of creditors, the court will hold a payment plan confirmation hearing. The court-appointed trustee will attend, as well as any creditors who want to. During this hearing, creditors may object to the submitted plan for various reasons.
An experienced bankruptcy attorney helps structure payment plans to avoid as many creditor objections as possible. The court will determine whether an individual has the ability to adhere to the submitted repayment plan and whether the plan meets all necessary standards for approval.
Once a repayment plan is confirmed, those involved are bound to the plan by law. The individual is required to make all payments to the trustee in full and on time as outlined in the plan. In addition, the individual must consult the trustee before incurring any new debts.
Chapter 13 and Repayment Plan:
In most cases, an individual must file a repayment plan with the court within 14 days of filing a Chapter 13 bankruptcy petition. The plan should outline the amounts to be paid to creditors over the life of the plan, as well as a payment schedule with fixed amounts to be paid to the court-appointed trustee at specific times (typically a biweekly or monthly schedule).
Rules govern which debts must be paid off first, and what an individual must do to keep any property associated with a secured debt (i.e., a house or an automobile). A qualified bankruptcy attorney assists in drafting plans to ensure all rules are met.
Chapter 13 and Meeting of Creditors:
Within 20 to 50 days after filing a petition, the court-appointed trustee will hold a meeting of creditors. The individual filing must attend this meeting.
If an individual has filed a joint bankruptcy petition with a spouse, both must appear. During this meeting, creditors will ask questions regarding specific financial situations.
Chapter 13 Discharge:
A discharge of debt occurs only after the successful completion of a court-approved, structured payment plan. It can take many years before all debts are successfully discharged. In some cases, if an individual is unable to complete an approved Chapter 13 payment plan, he or she can request a "hardship discharge" from the court.
To be eligible for such a discharge, an individual must have been unable to complete payments due to a reason outside of his/her control.