Filing for bankruptcy is not an easy decision. For one, a debtor must first know which chapter is most appropriate in his circumstance and his goals. It is best to get help and/or advice from a lawyer or an expert on this issue before moving ahead with the process. The chapter 13 bankruptcy is a viable solution for people who wish to keep his/her property and pay the debts through a plan made with the help of credit counselor. The payment plan which generally spans 3 to 5 years will help debtors stop a foreclosure process on their homes, improve the untimely payments of mortgage and pay secured debts in longer time schedule making the payments more manageable.
Are you qualified?
Chapter 13 bankruptcy is only available for individuals and not business entity. Therefore, debts must be under your personal name and not under your business (corporation or LLC). Your unsecured debts must also be less than $394,725 and secured debts must not exceed $1,184,200. These figures are adjusted every few years to account for market inflation.
You must complete a credit counseling and has not had a dismissed bankruptcy case due to violation of court order or inability to pay the required fees for the bankruptcy case. Upon completion of your credit counseling, you must also complete a repayment plan for your outstanding debts. This repayment plan is very important since this must be presented to the court and will be the basis of whether your case will be dismissed or not.
A debtor must also have a regular monthly income by having a secured employment or through operating an unincorporated business. You can prove this by producing documents like pay slips and/or income tax returns.
How to proceed with a chapter 13 bankruptcy case
After determining that you are qualified to file under chapter 13 bankruptcy, the first step is to secure form to file for a petition. Along with the forms, you must provide other documents necessary like:
- List of assets and liabilities
- List of income, yours and your spouse (if any) and expenses
- Lists of creditors
- List of unexpired rents and executor contracts
- Certificate that you have completed credit counseling and your repayment plan
- Payments slips of the last 60 days with a statement of further increase in income
- List of student loans (if any)
- Present year’s tax return copy for your trustee as well as the tax return approved within the years under the repayment plan.
Once all these documents have been provided, you proceed with the filing and the payment for the administrative fees. The fees are paid to the court clerk and can be paid in installments but must not exceed 4 installments. Here’s a guide as well on how you can proceed through a Chapter 13 bankruptcy.
Once the filing is completed the court will assign a trustee to your case. The trustee will serve as the point person between you, the debtor, and your creditors. This is necessary since, if or when the court approves your bankruptcy petition, the creditors are to cease all direct communication to you.
The trustee will also evaluate your repayment plan and communicate with your creditors to explain to them your plan on how to pay them. This is where the document of list of creditors is important. All these creditors, you and he trustee will meet and evaluate the plan. Once all creditors agree, the plan will be evaluated by the court and then be decided whether it will be approved or dismissed.