The Bankruptcy Process: Chapter 13

After you file the forms to start a Chapter 13 bankruptcy case, you will have to attend court hearings, get your repayment plan approved, and meet some other requirements, explained below. Chapter 13 bankruptcy lasts from three to five years, depending on your debts and income. During this time, you’ll have to make the payments required by your plan and provide financial information to the trustee every year. Once you’ve completed the repayment plan, you will receive your discharge and your case will be closed.

Here are the steps involved in a typical Chapter 13 bankruptcy, from start to finish.

1. Complete mandatory credit counseling. You must receive credit counseling during the six-month period prior to filing for Chapter 7 bankruptcy. This requirement was added when the bankruptcy laws were overhauled in 2005. You must get the counseling from an agency that has been approved by the United States Trustee's Office. If you don't get credit counseling and file a certificate of completion with the court, your case will be dismissed. (To learn more about this requirement, see What Happens During Prebankruptcy Credit Counseling.)

2. File your bankruptcy forms. To start you case, you must file a bankruptcy petition, schedules, and other forms detailing your financial situation (income, debts, property, etc.) You must file your most recent tax return and proof that you’ve filed returns for the last four years. You will also have to submit a Chapter 13 repayment plan, laying out how much each of your creditors will receive in your case. The repayment plan is the key to a Chapter 13 bankruptcy case, and drafting one that the court and creditors will accept is complicated; this is why many Chapter 13 filers hire a lawyer.

3. The trustee takes over. The court will immediately appoint a bankruptcy trustee to take charge of your case. The trustee will send your creditors notice that you’ve filed for bankruptcy and give them an opportunity to object to your repayment plan. The moment you file your papers, the automatic stay will go into effect, which will put a stop to most creditor collection efforts for the duration of your case. (To learn more, see What Does a Bankruptcy Trustee Do?)

4. Make your first payment. About a month after you file your papers, you’ll have to make your first payment under your repayment plan. The court won’t have approved your plan yet; if it doesn’t get approved, the trustee will eventually return your money, less administrative costs.

5. Attend the meeting of creditors. At this meeting, the trustee and any creditors who show up can ask you questions, under oath, about your bankruptcy forms and repayment plan. Creditors can also object to your plan at the meeting. You can modify your plan and refile it in response, if you wish. (To learn more about what happens at this meeting, see The Meeting of Creditors in Bankruptcy.)

6. Attend the confirmation hearing. The court will address any objections creditors have raised to your plan (they must file these objections in advance). Hopefully, the court will approve your plan at this meeting.

7. Deal with creditor proofs of claim. Creditors must file a proof of claim form within a few months after the creditors’ meeting, in order to be paid. You may need to file a proof of claim for a creditor, if the creditor doesn’t do it and you want to pay the debt as part of your Chapter 13 plan. You may also need to object to a creditor’s claim, if the creditor claims you owe more than you do, for example.

8. Make plan payments and meet record-keeping requirements. You’ll have to make your monthly plan payments to the trustee. During your repayment period, you’ll also have to give the trustee annual income and expense statements, if the trustee, the court, or a creditor asks for them. The trustee will also send you statements showing how much you’ve paid and how much is still due each creditor, among other things.

9. Take a debtor education class. Before you can receive your discharge, you must complete a personal financial management course and file a form with the court.

10. Receive your discharge. When your repayment is period is over, you will get your bankruptcy discharge. The court may schedule a discharge hearing or it may mail you the notice of discharge.

To learn more about how Chapter 13 works, see our Chapter 13 Bankruptcy area. To find filing information for your state, see Bankruptcy in Your State.