In a Chapter 13 bankruptcy, the debtor pays off some or all of their debt through a 3-to-5-year payment plan. This is different from a Chapter 7 bankruptcy, in which the debtor’s assets are collected and used to pay creditors, while any remaining debt is immediately discharged. For more information about the differences between Chapter 13 bankruptcies and Chapter 7 bankruptcies, eligibility requirements for Chapter 13 bankruptcies, and the situations in which Chapter 13 bankruptcies are preferable to Chapter 7 bankruptcies, check out our article: When Does It Make Sense To File A Chapter 13 Bankruptcy Rather Than A Chapter 7 Bankruptcy.
What Do I Have To Do Before Filing Chapter 13 Bankruptcy?
You are required to take a court-approved credit counseling class before filing a Chapter 13 bankruptcy. These classes can be taken online for a nominal fee. Once you have completed the class, you will receive a certificate of completion. The certificate must be filed along with your Chapter 13 bankruptcy petition.
How Do I File My Chapter 13 Petition and Schedules?
You initiate your Chapter 13 bankruptcy by filing your Chapter 13 petition with the appropriate local court. The Northern District of Illinois Bankruptcy Court serves the Chicagoland area. In addition to your petition, you will file schedules that detail your assets, liabilities, income, and expenses. You will also file a payment plan and a list of your creditors. It is important to list all of your creditors in a Chapter 13 bankruptcy. If you do not include a creditor, then that creditor’s debt will not be discharged. Once your case is filed, the clerk’s office will notify your creditors that the case has been filed. As soon as the case is filed, the automatic stay takes effect. Creditors cannot take any collection actions against you while your case is pending.
How Do I File My Chapter 13 Repayment Plan?
Within 14 days of filing your Chapter 13 petition, you must file a repayment plan that details how you plan to repay some or all of your debts over the next 3 to 5 years (the duration of the plan depends on your income). According to the plan, you will pay the Chapter 13 Trustee a fixed sum on a monthly or biweekly basis. The Trustee then distributes the payments to your creditors. The Chapter 13 Trustee is a lawyer appointed to oversee your case, review your plan, ensure that the bankruptcy is being filed in good faith, and ensure that the creditors are being treated fairly. You are required to start making payments to the Trustee within 30 days of filing your petition, even if your repayment plan has not yet been approved.
What Is The Meeting Of The Creditors?
Once you file your petition, you and your creditors will receive notice of the date and location of the Meeting of Creditors. This is a meeting between the debtor, the trustee, and any creditors that choose to attend. Most often, creditors do not attend. The Meeting of Creditors will be held within 60 days of the filing date of your petition. At the meeting, you will answer questions, under oath, from the Trustee regarding your finances and the terms of your plan. Tax returns and pay stubs must be provided to the Trustee prior to the meeting.
What Happens At The Chapter 13 Confirmation Hearing?
Within 45 days of the Meeting of the Creditors, a hearing will be held before the court to determine whether the Trustee recommends the confirmation of the repayment plan. Creditors will have the opportunity to object to the plan. If the Trustee recommends confirmation, and no creditors object, then the judge may confirm the plan without calling the case for a hearing. If the court refuses to confirm the plan, then the debtor has the option of filing a modified plan. Some debtors file multiple amended plans before one is confirmed. Again, even though the plan is not confirmed, the debtor is still obligated to make payments to the Trustee. If the case cannot go forward as a Chapter 13, then the debtor has the option to convert to a Chapter 7 bankruptcy.
When Do I Get My Chapter 13 Discharge?
The debtor will continue to make payments under the plan to the trustee until the plan has run its course. Before receiving a discharge, the debtor must complete a financial management course, which can be taken online. The debtor being current on all domestic support obligations is another prerequisite to discharge. Any debts covered by the plan will be discharged, even if the plan did not provide for them to be paid in full.
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