Chapter 13 Bankruptcy Process
Chapter 13 bankruptcy is a very similar to the process of a Chapter 7 bankruptcy. However, there is one major difference. Because a Chapter 7 bankruptcy is a liquidation bankruptcy, a debtor will rarely have to make any payments to creditors. A Chapter 13 bankruptcy is a reorganization bankruptcy and requires that a debtor make monthly payments to a trustee to at least partially satisfy their debts.
This additional element of a Chapter 13 plan results in some additional steps listed below.
- Prepare bankruptcy paperwork: Our office will provide you a list of the documents we will need in order to file your bankruptcy paperwork. This typically includes recently filed tax returns, pay stubs, bank statements, and/or a list of creditors. In a Chapter 13 case, our office may also need mortgage pay stubs, statements showing arrears, and an appraisal performed by a licensed appraiser.
- Pre-Bankruptcy Course: Every debtor must complete a pre-bankruptcy credit counseling session with an approved credit-counseling agency. The process takes about an hour to complete and can be done on the phone or online.
- Chapter 13 Bankruptcy Filing: Once the paperwork is completed, the petition and schedules must be signed and filed with the court. Additionally, the debtor must file a bankruptcy plan that provides for the debtor to make a monthly payment to the trustee. Upon filing with the court, the automatic stay immediately goes into effect and stops any foreclosure, repossession of other creditor action. Also, debtors will obtain a date and time for the meeting of creditors and will be assigned a case number. For Chapter 13 cases, there are additional documents that may still need to be prepared or may be filed at the same time the petition is filed.
- Post-Bankruptcy Class: Once the paperwork is prepared and filed with the court, the debtor will also need to complete a personal financial management class. This class needs to be completed before the last plan payment is made.
- Post-Bankruptcy Documents filed with Court: One of the major changes in a Chapter 13 bankruptcy is that there is much more paperwork required by the trustee and the court. After filing bankruptcy, the debtor must begin making plan payments and payments on secured debt such as the debtor’s home. The payments must be tracked and reported to the trustee. Additionally, the debtor must also file any motions he is interested in pursuing. For instance, if the debtor wishes to strip the second lien on his property, this motion must be filed at this point prior to the confirmation hearing.
- Meeting of Creditors (341 Meeting): Every debtor must attend a meeting of creditors. Although creditors rarely show at the meeting, the meeting is primarily designed for the trustee to confirm the debtor’s identity and make sure there are no errors or omissions in the filing. Because the meeting is for a Chapter 13 case, the trustee will also request additional documents necessary to confirm the plan. These documents can typically be provided before the Confirmation Hearing
- Confirmation Hearing: The confirmation hearing is necessary for the trustee to make a recommendation about the proposed plan and for the judge to confirm or dismiss the case. Confirmation hearings are unique to Chapter 13 cases. Occasionally the judge may continue the hearing if there is an unresolved motion or the necessary documents have not been filed.
- Bankruptcy Discharge: A discharge in a Chapter 13 bankruptcy will not come until the debtor has completely finished the Chapter 13 plan. The plan will usually last between 36 and 60 months unless the debtor pays the entire debt before then. Upon discharge, the debtor will be relieved of any remaining unsecured debt.