Chapter 13 Bankruptcy Basics

If you are planning to file Chapter 13 bankruptcy you have probably already met with an attorney and decided that this is the best course of action for your current situation. The next step is navigating through the process to figure out what you need to do and when it needs to be done. If you don't already have someone to represent you, now is the time to find a professional that can assist you.

The Plan

Chapter 13 bankruptcy involves coming up with a plan to repay the debt that is owed. This means that to be eligible to file you would need to have a job and there would be a possibility of you being able to pay. Depending on your income the courts will determine whether or not you will have a three or five year plan. It is your responsibility to come up with the plan, so it is important that you hire an attorney to help you with the process.

This plan is much like consolidating all that you owe into one bill. You make one payment and it is sent out to each of the creditors. This makes the entire process easier and more convenient. There is no communication between creditors and individuals so if you are looking to get away from the constant phone calls and letters in the mail reminding you about the money owed, chapter 13 bankruptcy is the way to go.

Benefits

Unlike other options, chapter 13 bankruptcy doesn't require that you liquidate all of your assets. You can keep the house as well as a vehicle. If the home is in the midst of foreclosure the process stops, however there are payments during during the time of the plan. For most people, being able to keep their residence while they work to make payments is a huge benefit.

As a person falls into debt and can't make the appropriate payments creditors begin to talk to the person through phone call and letters. These can be intimidating for anyone to handle and so filing under these guidelines can prevent that from happening. It can remove a lot of the stress and anxiety that comes with financial hardships.

When you turn in the payment plan some of the debt that you have can be absolved. You can strive to pay back a percentage of the money, but not the entire amount. When you look at all the bills together it can be overwhelming. Just knowing that the amounts have decreased because of the plan can assist you in getting back on track.

How to Pay

There are two options for how to pay back the money owed in chapter 13 bankruptcy. You can make checks out to a trustee who is handling the case. They take the funds and allocate them to each of the different creditors. In this case you will be responsible for making sure that the right amount of money is paid and that it is on time. You can also choose to have a payroll deduction. Here the money is removed before you have any access to it. For those that struggle to keep a budget or act responsibly with their money, this is a better option.