The word “bankruptcy” has a lot of stigma attached to it, but the truth is, bankruptcy is very common. It’s easy to be able to purchase items, take out loans, etc. when you have regular steady income from a job, but once that job is gone, the income disappears and you can’t make the payments you were once able to make with ease. What can you do without having to lose your house, car, or home furnishings? Chapter 13 Bankruptcy is one option.
Chapter 13 Bankruptcy is different from a Chapter 7 Bankruptcy. Chapter 13 allows you to create a “Plan” with a United States Standing Trustee that will allow you to pay your creditors and wipe your slate clean. Most people are usually able to keep their homes and vehicles, although it differs by case. Whereas a Chapter 7 bankruptcy is a complete dissolution of your assets. You can lose your home, car and anything else of value. This article will discuss Chapter 13 Bankruptcy only.
It is possible to file for bankruptcy without an attorney, although this is not recommended. Court forms are available from your local Bankruptcy Court. However, these can be tricky and navigating through the Court system is very complicated, so you’ll probably want an attorney by your side to explain what is happening. Make sure you check out my article on selecting and finding the right bankruptcy attorney in Michigan, this is an important decision! Assuming you’ve read that article and now have your attorney nailed down, you’ll need to collect all of your bills, mortgage documents, loan documents, ownership papers, bank statements, pay stubs, and anything else your attorney tells you to collect. Bankrupt debtors are checking most reviews for bankruptcy lawyer san diego for the hiring. The filling of the documents will be under the laws for winning of the case.
Take all of these documents in to your attorney where s/he will begin to fill out your bankruptcy Schedules. These Schedules talk about your income, assets, bills and debt. They will help your attorney come up with a payment Plan for your case. Your payments will be made to a Trustee on a regular basis (determined by the Court), usually bi-weekly through a deduction in your paycheck (or if that isn’t possible, by a deduction from your bank account). The Trustee will use those funds to pay your creditors, such as your credit card companies and your mortgage. Other payments you’ll have to continue making yourself, such as insurance policies, as determined by your Plan.
You will first have to go to a Section 341 Meeting of Creditors. This is the first Court appearance where any of your creditors will have the option to come to the hearing and make comments (they rarely do). At this meeting, you’ll meet with a Trustee attorney and your attorney where they will review your Schedules. The Trustee will make any suggestions needed to “tweak” your Plan before you go to the next hearing, your confirmation hearing. At your confirmation hearing, your Plan will get confirmed with a payment amount and Plan length.
You’ll make these payments for 3-5 years. During that time, if you get a raise, get laid off, have another child, etc., you’ll be able to modify your Plan payments so they can fit within your budget. It’s very important to tell your attorney immediately if you are laid off or unable to make the Plan payments anymore, otherwise your case can be dismissed. During that 3-5 year period, your spending will have to be controlled. If you want to purchase anything above $1,000.00, you’ll need permission from the Court. If you need to sign a new lease, get a loan, sell a major asset, you’ll need permission from the Court system to do so.
You do NOT want your case dismissed! Please take the time to read my article on obtaining a bankruptcy discharge. If your case is dismissed, it’s as if the bankruptcy never happened. All of your creditors will come after again, sometimes even assessing late fees on all of your payments. Don’t let this happen to you!
Finally, once all of your payments have been made (assuming you haven’t missed any payments, paid too little, etc.) your case will start becoming ready for a discharge. This means your slate is “wiped clean”. Exactly what you wanted in the first place. This process can sometimes linger in the Court system while all parties in your case collect their final payments and close out your case, during this time make sure you continue making your payments. Any extra money you send to the Trustee will be refunded, so those payments aren’t just going to be lost. You’ll want to start rebuilding your credit score (see my article on rebuilding your credit after bankruptcy) once your case is successfully discharged. Good luck!
Tips: Keep in touch with your attorney! Let them know if your address/phone number changes, if you get laid off, get a new job, get married, have a baby…etc. These all affect your Plan! Remember, you want a discharge, NOT a dismissal. One is good, one is very very bad, see above. Make sure you send your Trustee all of your tax returns and tax refunds, these become property of your bankruptcy while you are making payments. Do NOT get your refund check and run out and spend it! People doing this is the #1 reason why cases are dismissed from the system, don’t let that happen to you!