A chapter 13 bankruptcy case is a whole different animal than a chapter 7 case. A chapter 7 case allows you to liquidate your debts and eliminate the need to repay most, if not all of your unsecured debt. But in a chapter 13 case you are required to pay back at least a portion of unsecured debt and you do it by coming up with a chapter 13 plan. The plan will set forth your proposal on how much you intend to pay back to each creditor. The plan will include the amount of debt you are offering to pay and will designate an interest rate. If the Court approves your chapter 13 plan you will make a plan payment to the chapter 13 trustee and the trustee will disburse monthly payments to your creditors.
This method of repayment of debt is similar to debt consolidation, and can last up to five years. A typical chapter 13 bankruptcy timeline is as follows:
- The case is filed and a plan proposed. Shortly thereafter a meeting of creditors is held, at which time a creditor can object to the way you intend to treat their debt in the plan. The creditor must file a written objection to the plan, and then show the Court why the treatment you offer is not legally acceptable.
- The time to argue about the plan treatment is at the confirmation hearing, and it is at this time that the Judge assigned to your case will listen to what the creditor is asking for by way of repayment, and will also hear your offer. After both parties offer their position to the Judge, a decision on repayment to be included in the plan will be made.
- Once a final decision on how much is to be repaid to a creditor is made, the Court will enter an order confirming the plan. The order confirming is the blueprint for the case and the payments to creditors will be made pursuant to that order.
- Some debts, like your house payment, are permitted to be paid directly to the lender while remaining debts are paid by the trustee to each creditor. The way the trustee makes these payments is by accepting your monthly plan payment and remitting funds to the creditors according to the terms of the order confirming the plan.
The payments to the trustee can last up to five years, and while this might seem like a long time it can come in handy if you are looking to lower your payments. The longer you are able to structure repayment, the lower your payments are likely to be to the trustee. For more information about how a chapter 13 works, call us today.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.