A Chapter 13 bankruptcy, more commonly known as reorganizational bankruptcy, is a type of protection which allows the debtor to keep their property and repay their debts with a structured plan over a three to five year period. There are specific qualifications, however, that the debtor must meet to qualify for this type of filing.
How to File for Chapter 13 Bankruptcy
Prior to submitting a request for bankruptcy protection, everyone who files for Chapter 13 bankruptcy must attend credit counseling by a court-approved counselor. After this counseling, one can file for bankruptcy protection if they are still unable to resolve their debts.
Additionally, to file for Chapter 13 bankruptcy protection, one must prove to the court that they have a monthly income which will allow ultimately them to repay their debts. If one does not have a regular income, the court may deny the request or suggest that the individual file for Chapter 7 liquidation bankruptcy instead.
When one files for Chapter 13 bankruptcy protection, one must submit a list of all debts and assets to the court and a repayment plan that they believe can be reasonably fulfilled. Once this has been accomplished, the court trustee will review the documents and determine if the repayment plan is acceptable.
What is Included in the Repayment Plan?
Some debts are required to receive full payments each month as part of the plan, including mortgage, car payment, and any other secured debt. If any of these debts have past due amounts, the past due balance will be included in a different part of the repayment plan.
Once these debts are covered, priority debts, including support payments and tax debts, must receive payments. Even if the payments are partial, these debts take highest priority. Finally, any unsecured debts will receive payments, or the court will eliminate the debt.
The repayment plan must then be approved by the court. Creditors can dispute the repayment plan, but the court has the final word on who is paid and how much they will receive.
When is Chapter 13 Bankruptcy Considered Discharged?
When one has completed the repayment plan in full, attending an additional credit counseling course, and proven to the court that all secured debts and support payments are current, the court will administer a final discharge of one’s debts. At that time, any unpaid debts will be absolved, and any debts that have been kept current on through the repayment plan will be considered good.
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