Chapter 13 Bankruptcy

People who earn a large income or who want to protect valuable property will file for Chapter 13 bankruptcy. In exchange for debt relief, these filers pay their remaining available monthly income - after any regular monthly bills and necessities - to creditors over the course of a three- to five-year repayment plan.

Chapter 13 filers must meet certain requirements including limits on secured and unsecured debts, and be able to prove to the court that they have enough available income, on a regular basis after paying their monthly bills, to pay into a repayment plan.

Once you receive a certificate of completion for mandatory credit counseling from an agency approved by the United States Trustee’s Office, you’ll file the official bankruptcy forms with the court clerk and pay a filing fee. The first counseling session helps evaluate whether you have enough income to repay creditors. You’ll also take a second “debtor education” course once you’ve filed your case.

Following the filing, you must create a repayment plan on an official form that you’ll present to creditors and the court that must take into account each of your debts. Any creditors and the bankruptcy trustee have the opportunity to object to it. If there are no objections or you’re able to make changes to everyone’s satisfaction, the court will likely approve (confirm) your plan at a confirmation hearing. However, you cannot wait until confirmation to start making your monthly payment, as payments must begin the month after you file.

Once confirmed in a Chapter 13 case, you must complete the three- to five-year repayment plan successfully before receiving a discharge of debts from the court.