The Process of Filing for Chapter 13 Bankruptcy
Filing for bankruptcy is a necessary evil for some individuals who locate themselves in dire financial situations. The decision to file for bankruptcy should not be taken softly. Filing for chapter 13 bankruptcy will stay on your credit for 7 years, making it difficult for you to acquire credit or be OK'd for loans with reasonable interest rates. If however, you do need to file for chapter 13 bankruptcy, there are a few things you should know about the process.
First of all, you need to know if you are eligible to file for chapter 13 bankruptcy. In order to qualify for chapter 13, you must first of all have a stable and regular income because chapter 13 bankruptcy is a reorganization of debt into a payment plan instead of total bankruptcy. You must also have enough disposable salary in order to pay for every day expenses. Finally, to be eligible for chapter 13 bankruptcy, your debt load mustn't exceed certain limits.
Secured debts are those which are linked to tangible properties like homes and cars. Unsecured debts are those that are not linked to objects, for example, credit card bills. Finally, your federal salary taxes should be up to date, after you decide whether or not you qualify to file for chapter 13 bankruptcy, there are two steps. The first step is to file the required paper work. In order to file for chapter 13, you have to make a petition in federal court, requesting the right to file for bankruptcy. Once you pay the filing fee, creditors are ordered to cease attempting to collect from you under order of the court. By giving the petition and case number to creditors, it may also help to prevent foreclosure proceedings on your home. Next, you will be required to submit paperwork that shows your full and up to date economic history. These documents need to include a list of all creditors to whom you owe money, a breakdown of what you owe, a list of your possessions, a credit on your income, and your costs and liabilities. In addition to this, you will need to present a plan, detailing your how you'll restructure your debts and pay them off in a timely manner. If any amendments need to be made to the paperwork submitted, it may be done after the first filing for a fee.
Your paperwork will then be processed and handed to a chapter 13 trustee. These are agents of the court whose job it is to determine whether or not your plan is viable and who will be overseeing your bankruptcy proceeding. Most of the time you'll be dealing with a chapter 13 trustee and not a judge unless there are legal issues or conflicts with lenders that need to be resolved. After the trustee has gone over all of your financial history and your reorganization plan, a hearing date will be set.
At this hearing, all of your lenders are invited to the proceedings. It’s unlikely that all of the creditors will send representatives. Usually the only ones that show up are those to whom you own large amounts of cash, typically mortgage owners and banks. During the hearing, the trustee will present the repayment plan to the creditors. Lenders have the opportunity to ask inquiries concerning the proposed reorganization plan. If they've any objections, the trustee with arbitrate disagreements or make a choice on his own. Following acceptance of the repayment plan, you will be ordered to make normal payments to the chapter 13 trustee in order to pay off your debts. The trustee in turn will disseminate all collected funds to your lenders. It’s critical that you pay your bills on time because if you miss too many payments, the bankruptcy may be revoked, ending your bankruptcy protection.
A reorganization plan normally spans a period of 36 to 60 months, but may depend on the amount owed and the economic situation of the debtor. Bankruptcy should be avoided at all costs, but if you have to, it is important to know the steps of the process in order to speed up your financial recovery.
