In these hard times, you may have lost your job or other source of income, but the bills keep coming in. The rent or mortgage keeps coming due. And you still have to feed your family. You may be considering Chapter 13 bankruptcy, and wondering what it takes to file for it and whether you need a bankruptcy lawyer. Let’s look at what Chapter 13 bankruptcy is, and whether it might be right for you.
With Chapter 13, you retain control of your possessions like your house or your car (as long as you agree to keep making payments on them if you have a mortgage or car note), while agreeing to a payment plan on your debts for the next five years. So, the first thing you must do is take account of your debts and your income. Some debts, like taxes and mortgages, must be paid in full (for mortgages, “in full” just means whatever is due during that time, not the entire balance of the mortgage) over the course of the plan, while other debts can be paid in part and the balance written off. If, however, you do not have enough income to make payments on the mandatory items, Chapter 13 may not be right for you.
Next, you must list all of your assets. Many of those assets may be exempt from bankruptcy, but bankruptcy law is complicated in this area, and talking to a bankruptcy lawyer is the best way to determine what is exempt and what is not. If you have any assets that are not exempt, those could be sold by the bankruptcy trustee to pay your debts (though if they are not very valuable, the trustee may abandon those assets back to you).
Once you have listed all of your debts, income, and assets, you must take a course in credit management before you can file for Chapter 13. This is a federal requirement that is the same throughout the country. Once you take the course, you can pay the filing fee and file your bankruptcy.
After you file, you will have to meet with the bankruptcy trustee to work out your payment plan and for the trustee to decide what (if any) of your non-exempt assets the trustee will try to sell. Having an attorney at these hearings can be invaluable, because the attorney can advise you on how to properly answer the trustee’s questions and not run afoul of the bankruptcy law.
After the hearing, you will have to start making payments on your plan. You will have to pay a set amount determined by your debts and income each month for the next five years. But once you have made those 60 payments, most of the unsecured debts that you still have will be discharged, and you will have a fresh start.