7 Bankruptcy Information
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Chapter 13 Bankruptcy
Chapter 13, or repayment bankruptcy, affords you the opportunity to keep more of your property provided that you pay back your creditors an agreed upon amount over a three to five year period. You are put on a court approved plan to do this. This type of bankruptcy may be better for debtors who have larger assets that may not be protected in a
Chapter 7, such as real property with higher equity.
In a Chapter 13 the attorney will meet with the debtor and obtain from them the various information necessary to proceed with the case. The attorney will begin constructing the bankruptcy petition. Once the petition is completed and the debtor has attended the credit counseling class, the attorney will file with the court.
Credit Counseling and
Debtor Education Classes
Sometime before filing the petition, the debtor will be required to attend a “credit counseling class”. The class is a short non-complicated class that is offered in person as well as over the internet. The fee is usually about $50. The debtor will receive a certificate of completion. Another class must be attended after filing the petition which is a “financial management course”. Likewise it is relatively brief, non-complicated, and costs around $50.
This is probably the most important document in your bankruptcy. It lists and categorizes your debts and indicates how much you will be paying on each of those debts. The repayment plan needs to be confirmed by the court, but even before this is done you must begin making payments under your proposed
Chapter 13 repayment plan within 30 days after you file. This provides the court with the indication that you have good faith as well as the ability to make payments. Once the plan is confirmed you will make regular monthly payments for as long as your plan lasts, which will be either 3 or 5 years. In order for a
Chapter 13 to work, it usually means the debtor must have a regular income every month to pay into the plan.
How much will be
To start with, your plan will include regular payments on secured debts for property you wish to keep, such as mortgages and car loans. This will also include any payments in which you’ve fallen behind.
Your plan must also pay certain debts in full. These debts are known as “priority debts”. Debts of this type will include certain tax debts, child and spousal support, and penalties and fines owed to governmental institutions.
The Chapter 13 plan must show that any disposable income you have left over after making the above required payments will go towards paying your unsecured debts, such as your credit cards. You often don’t have to repay this debt in full.
Once the payment plan has been completed,
you will receive a discharge, which
wipes out your remaining eligible debt.
Chapter 7 Bankruptcy
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