Chapter 13 bankruptcy is often called a reorganization bankruptcy. Chapter 13 is different from a Chapter 7 bankruptcy in that you keep all of your assets and pay back past due payments on secured items such as your home or your vehicle.
In a Chapter 13 bankruptcy, you submit a plan to the bankruptcy court on how you intend to repay your creditors. The plans can take anywhere from three to five years to complete. At the end of the approved payment plan, any remaining unsecured debt will be eliminated. You will have to continue to pay your mortgage and car loans if you wish to keep them.
The plan can be a simple document outlining how you plan to make the payments to your creditors. You must start making the payments to your trustee within 30 days of filing the plan.
You must have a reliable source of income to file Chapter 13 bankruptcy. The monthly payments to the court will be based on the debt you intend to pay, and the amount left over after paying your necessary living expenses will go towards your bankruptcy plan.
The court will approve the plan at a confirmation hearing, usually the same day as the meeting of the creditors. The court will determine if all the laws and requirements have been met and will hear any objections to the plan from your creditors.
Fail to Complete Plan
If for whatever reasons you are unable to make the payments, there are four options available.
- Hardship discharge: usually, if you have a loss of income at no fault of your own.
- Modification: to change the plan to fit your new circumstances.
- Conversion: to change it to a Chapter 7 bankruptcy.
- Dismissal: to stop the whole process and start over again later if desired.
A Chapter 13 discharge will include all debts provided for in the plan. Credit card debt, personal loans, payday loans, medical debt are the usual types of debt eliminated. Like other types of bankruptcy, a Chapter 13 discharge stays on your credit report for ten years.
If you have questions about the bankruptcy law and how it can benefit you, contact a Hidalgo County bankruptcy attorney.