Filing for Chapter 13 bankruptcy is a complex process that requires you to file a lengthy set of forms (including a feasible repayment plan) with the court and attend multiple hearings. To propose a plan that the court will confirm (approve), you must be knowledgeable about bankruptcy laws as well as your local court’s rules and procedures. Because Chapter 13 bankruptcy is very complicated, it’s usually in your best interest to have an attorney help you with your case.
To learn more about how to find a good bankruptcy attorney, see our topic area on Getting Help With Your Bankruptcy.
What Is Chapter 13 Bankruptcy?
A Chapter 13 is a type of personal bankruptcy that allows individual debtors to reorganize their debts and catch up on certain obligations such as their mortgage or car loan payments. When you file for Chapter 13 bankruptcy, you propose a plan to pay back some or all of your debts over a three- to five-year period.
How much you must pay and whether your plan is feasible depends on numerous factors such as:
- your income and expenses
- the amount of property you own, and
- the types of debts you have.
For more information on how Chapter 13 bankruptcy works, see our Chapter 13 Bankruptcy topic.
The Chapter 13 Bankruptcy Process Is Complicated
If you want the court to confirm your Chapter 13 bankruptcy, you must:
- file the correct forms with the court
- propose a repayment plan that satisfies all requirements under the law
- attend all mandatory hearings such as the meeting of creditors (also called the 341 hearing) and the Chapter 13 confirmation hearing, and
- prove to the court that you can afford to make your proposed plan payments.
Because Chapter 13 bankruptcy is typically a lot more complicated than a Chapter 7, even some bankruptcy attorneys (if they normally only handle Chapter 7 cases) may not have the necessary expertise to guide debtors through a Chapter 13.
This means that it’s extremely difficult for self-represented debtors to successfully file for Chapter 13 bankruptcy on their own. In fact, studies show that less than 1% of debtors who file for Chapter 13 bankruptcy without an attorney manage to get their cases confirmed by the court.
What Do You Want to Accomplish in Your Chapter 13 Bankruptcy?
As we discussed, getting the court to confirm your Chapter 13 repayment plan is a difficult task. But it can be even more complicated if you want to modify some of your debts in bankruptcy.
If you can satisfy certain requirements, Chapter 13 bankruptcy might allow you to:
- remove wholly unsecured junior liens from your house through a process called lien stripping, and
- reduce the principal balance on certain secured debts (such as a car loan) with a cramdown.
However, if you want to take advantage of lien stripping or a cramdown in Chapter 13 bankruptcy, you will need to file additional paperwork with the court. This can make the bankruptcy process more complex and increase the likelihood that you will need an attorney.
Consult a Bankruptcy Attorney
For the reasons stated above, it’s typically in your best interest to hire an attorney to file your Chapter 13 bankruptcy. Even if you are not sure about hiring a lawyer, consider talking to a knowledgeable bankruptcy attorney in your area before filing your case.
Most attorneys offer free consultations and can provide you with valuable information regarding your bankruptcy. If you are concerned about the cost of hiring an attorney, keep in mind that you can typically pay the bulk of your attorney fees through your Chapter 13 repayment plan.
For more information, see How Do Bankruptcy Lawyers Get Paid?
Of course, it always makes sense to learn as much about the Chapter 13 bankruptcy process as you can. Becoming knowledgeable about Chapter 13 bankruptcy can help you decide if you should file and make the process go more smoothly. For a comprehensive guide to Chapter 13 bankruptcy, get Nolo's Chapter 13 Bankruptcy, by Stephen Elias and Kathleen Michon.