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Chapter 13 bankruptcy is also known as an “adjustment of debts” or “personal reorganization”. Unlike Chapter 7 under Chapter 13 bankruptcy debtors repay a portion of their debt over a period of 3 to 5 years.
At the end of the repayment period, remaining unsecured debts are eligible are discharged individuals or couples file a plan with the Court which details how you plan to pay off a portion of your past-due and current debts over a period of three to five years. Assets, such as your home and car, which might otherwise have been lost in the bankruptcy process, can be protected and certain arrears can be paid as part of the bankruptcy case.
By far the number one reason people choose to file a Chapter 13 bankruptcy is to stop a home foreclosure or prevent their car from being repossessed. Under Chapter 13, debtors may keep these items provided they establish a repayment plan that accounts for the arrears on these assets.
The amount you are required to repay is determined by a formula created by congress within the Bankruptcy Code which takes into account your income and certain of your regular household expenses. The value of your non equity assets are also important in determining a final repayment amount. The figure you and your attorney arrive after considering all of the above issues and crunching the numbers is the called the “Disposable Monthly Income,” and unless unusual circumstances exist, this is the amount you must repay to your unsecured creditors through your Chapter 13 bankruptcy plan.
As with a Chapter 7, you will need to attend a meeting of creditors about a month after filing your Chapter 13 bankruptcy petition. At the meeting of creditors you will meet your assigned bankruptcy trustee. Your bankruptcy trustee will review your bankruptcy petition, your bankruptcy schedules and your proposed repayment plan and will determine whether he or she will object to the confirmation of your plan. If the trustee or any of your creditors object to your proposed repayment plan, the Bankruptcy Court will schedule a hearing to allow a bankruptcy judge to decide the issue.
Once the Court approves the plan, debtors are required to make payments for the full length of the Chapter 13 case, which lasts between 3 and 5 years. Once all plan payments are made, the Court grants a discharge which eliminates much of the remaining unsecured debt not repaid under the plan.
An experienced bankruptcy attorney can help you to determine if a Chapter 13 bankruptcy is the right choice for your particular situation, and help you to navigate the many complexities of a Chapter 13 bankruptcy. The Law Offices of James Wingfield can help, to schedule a free initial bankruptcy consultation, fill out the contact information on this website, call 508-797-0200, or just email us today.