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About Chapter 13 Bankruptcy
Chapter 13 is the reorganization bankruptcy because it allows the debtor to reorganize their finances in such a fashion that their creditors get paid, even if only a little bit. It is similar to the Chapter 11 reorganization that is used by Donald Trump or other big businesses, but it is geared for the little-to-midsized guy.
Essentially, Congress said that if you make ‘too much money’ (as in you ‘fail’ the means test discussed in Chapter 7) and you don’t qualify for one of the few, highly specific exceptions to the means test, then you have the ability to pay back some of your debts, and you should do so, for a period of 3 – 5 years, depending on your income.
Now, there is nothing that says you can be forced into a Chapter 13 bankruptcy… thankfully slavery is utterly and completely prohibited in this country now. However, if you (1) need to file for bankruptcy protection for whatever reason, and (2) you don’t qualify for Chapter 7 relief, then a Chapter 13 is most likely the only way to go.
Being ‘in’ a Chapter 13 means being in a 3 – 5 year payment plan, where you have to adhere to a reasonable budget and make monthly payments to the bankruptcy trustee. The amount of the monthly payment is determined by your disposable monthly income (essentially, this is calculated by taking your net monthly income minus your monthly expenses).
The trustee then makes payments to your creditors in order of priority. For example, if you owe the IRS a small amount of money, they will be the first ones paid by the trustee. There are a number of levels of priority, and essentially credit cards and other unsecured creditors are at the very bottom of the totem pole. Some debts (the ones with the high priority, must get paid through the plan, and the rest of the debts are discharged upon completion of your plan period.
Chapter 13 Bankruptcy – Process Overview
1. Schedule a free consultation with Andrea to discuss which Chapter is right for you.
2. Provide Andrea and Steve with the information necessary to complete a full plan analysis.
3. Receive and review the Chapter 13 plan proposal Andrea put together. Schedule a phone call or meeting with her to discuss what it means for you.
4. Work with your Chapter 13 Bankruptcy Attorney in Mesa Andrea and Steve in preparing your petition, schedules and statements.
5. Take “Credit Counseling” class with one of the accredited agencies, online, over the phone, or in person.
6. Review a daft of your petition and schedule a signing appointment.
7. Review and sign your petition, schedules and statements with Steve and Andrea.
8. Your petition is filed. ALL of your creditors MUST stop contacting you.
9. Andrea lets you know the date and time of your creditors meeting.
10. The trustee assigned to your case sends you a letter requesting additional information from you.
11. Your creditors meeting takes place approximately 30 days after your petition was filed.
12. Your first plan payment is due within 30 days of filing your petition and every month thereafter.
13. Take “Financial Management” class with one of the accredited agencies, online, over the phone, or in person.
14. The trustee issues his recommendations. Both Andrea and Steve work closely with you in complying with the trustee’s requests and recommendations.
15. Your Chapter 13 plan is confirmed. You are making monthly payments every month for the duration of your plan period.
16. Once your plan period has been completed, your discharge is entered and your case is closed.