Debt Payments with Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a good option for debtors that have reliable and regular income for at least six months prior to filing for bankruptcy. In addition, Chapter 13 bankruptcy, unlike Chapter 7 bankruptcy, allows a debtor to keep all of her assets, but without repaying her debts at full value.

Filing For Chapter 13 Bankruptcy

First, determine if you are eligible to file for Chapter 13 bankruptcy. The most important eligibility requirement for a debtor that wishes to file Chapter 13 bankruptcy is that the debtor has steady income that can be documented for at least six months, prior to filing for bankruptcy. Chapter 13 is a repayment plan that is agreed upon between the debtor and the bankruptcy trustee. The bankruptcy court must be assured that the debtor has income with which to make monthly payments before the bankruptcy trustee will approve the debtor for Chapter 13 bankruptcy. If the debtor can show her income is regular, then the debtor may be eligible to file for Chapter 13 bankruptcy.

Filing for Chapter 13 bankruptcy has many benefits. For instance, a debtor who files for Chapter 13 bankruptcy can keep her assets, like her home or personal business. Also, because you are in a repayment plan, filing for Chapter 13 bankruptcy may be better for your credit score than filing for Chapter 7 bankruptcy. In addition, the debtor can discharge debts in a Chapter 13 bankruptcy that would be non-dischargeable under other Chapter 7 bankruptcy like civil judgments.

Repayment Plan

As stated above, Chapter 13 bankruptcy is a repayment plan. Your repayment plan is submitted with your bankruptcy petition and must be approved by your bankruptcy trustee. Payments are made by the debtor monthly to the bankruptcy trustee, who then distributes payments to the debtor’s creditors. Direct deposit may be available to some debtors. If the debtor does not make payments, the bankruptcy trustee has the authority to dismiss the debtor’s bankruptcy case or have the bankruptcy converted to a Chapter 7 liquidation bankruptcy. While payments are made to the bankruptcy trustee, the debtor can maintain possession of property. However, the debtor agrees to not create more debt during the course of the repayment plan unless the debtor first receives approval from the bankruptcy trustee.

Getting Legal Help

If you are considering filing for Chapter 13 bankruptcy, contact an experienced bankruptcy attorney. An attorney will explain the bankruptcy process to you and answer any questions that you have about filing for bankruptcy.