Chapter 13 bankruptcy – the how, what, and when.

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Chapter 13 bankruptcy – the how, what, and when.

If you’re like most people, the term “Chapter 13 Bankruptcy” is probably something you’ve heard of but know little about. However, when bills start to add up and finances are headed downhill, you may find that the different types of bankruptcy and their meanings suddenly start to matter a lot! To help you determine whether a Chapter 13 bankruptcy is right for you and your situation, we’ve broken down the most important things you need to know. 

Who is Eligible for a Chapter 13 Bankruptcy?

A Chapter 13 bankruptcy is open to almost everyone in Philadelphia. Unless you have a tremendous debt load or tried to file too recently, every Philadelphian can seek out Chapter 13 bankruptcy. If your unsecured debts are more than $394,725 and secured debts are more than $1,184,200 then you will not be able to file a Chapter 13 bankruptcy. Likewise, if you filed for a Chapter 13 bankruptcy but had it dismissed because you didn’t appear in court or didn’t follow your plan, you can’t file again within 180 days. Unless you are given an exception by a U.S. trustee or bankruptcy administration, you must also have completed some approved credit counseling within the past 180 days before filing. 

The Chapter 13 Process Explained

A Chapter 13 bankruptcy begins by filing a petition to proceed. The courts will also want a very detailed account of your financial situation.

Inclusive of:

  • Your assets and liabilities along with your current payments
  • Your income and monthly bills including food, clothing, utilities, and car payments
  • Any potential changes in income or expenses within the next few months/years
  • Any executory contracts or unexpired leases 
  • Recent tax returns
  • A statement that explains your entire financial situation
  • A list of those you owe money along with the details about their claims
  • A list of all your property 

You will also need to file your repayment plan along with your bankruptcy petition. Or within the next 14 days.

After you file, the courts will appoint you a trustee that oversees the case. This trustee will be in charge of collecting payments and sending them to your creditors once your bankruptcy is complete. One of the best benefits of Philly Chapter 13 is that you will no longer directly deal with your creditors. Then, 21-50 days after your bankruptcy petition is filed, your trustee will hold a meeting of creditors. In this meeting, you will come together with creditors for an informational session. Your trustee and creditors will ask you and your spouse questions about your finances. This is where a bankruptcy lawyer comes in handy. Neither you nor your spouse can skip this meeting! From here, the next step is to take the case before the judge. 

Mandatory Courses and Filing Fees for Chapter 13 Bankruptcy

Before you can file for bankruptcy, you will need to attend some credit counseling courses within 180 days before filling. You will have to prove that you attended this course with a certificate. If you created a debt repayment plan during your counseling, this will need to be presented when you file as well.

When you file for bankruptcy, there will be some fees. There is a $235 filing fee for your case along with a $75 miscellaneous administration fee. If your current financial situation makes it impossible to pay these fees, the courts may allow you to make payments within the next 120 days in as many as four payments. If that is still impossible for you to meet, the courts can increase your payment plan to 180 days. 

Custom Chapter 13 Repayment Plan

When you file for a Chapter 13 bankruptcy, you aren’t doing away with all your debt. Instead, you’re just taking back control by setting up payments that are more manageable. The repayment plan you will present to the court will need to show how you can pay off your debts using a three to five-year plan. 

While debts with secured loans, such as mortgage and car payments will need to be caught up with or paid off in full, things like credit cards can be paid only in part. In other words, your credit cards will be wiped away completely at the end of the repayment period, even if you don’t get them paid off. 

How a Chapter 13 Case Ends

Within 45 days after meeting with the creditors, the bankruptcy judge will have a hearing where they decide if your current repayment plan is legal and sensible. The creditors are able to make objections if they feel the repayment plan is unfair. The courts can then choose to confirm the plan, ask for the plan to be modified, or dismiss the case. 

Once your plan is in place, you will have to stick to it and be diligent about making your payments. After the time your plan is complete, you should be up-to-date on your secured debts and your bankruptcy will then be over. You can start on a fresh foot and begin to rebuild your credit. 

Advantages and Disadvantages of Chapter 13 Bankruptcy

A Chapter 13 bankruptcy in Philadelphia comes with many pros and a few cons.

Here are some of to consider:

  • It Stops Creditor Harassment and Collections Activities. If you are behind on some payments, you may find yourself being hounded with harassing calls from collection agencies. Once you have filed, this will stop.  
  • Stop a Foreclosure, Repossession, and/or Eviction. When you file for bankruptcy, a “stay” is immediately put in place, meaning that you can’t be kicked out of your home. While your landlord or debtor may fight this in court, it still buys you more time in your home and a chance to work out a plan to stay there. 
  • Wipes Out Credit Card Debts and Most Other Unsecured Debts. While you may have to make some payments on your unsecured debt, once the 3-5 year repayment plan is finished – they are completely wiped away. 
  • Wipes Out Secured Debt, but It Might be at a Cost. If you’re unable to catch up on payments during 3-5 years, you may have to give up some of your property that is tied in with a secured debt. 
  • Doesn’t Touch Child Support, Alimony, Most Students Loans, or Taxes. Bankruptcy doesn’t do away with all types of debt. If you are behind on child support or alimony, it may not help to lower these payments. However, it can provide you with additional income in other areas of your life to make your payments more manageable.

The Final Verdict on Chapter 13 Bankruptcy 

A Chapter 13 bankruptcy is a respectable way to get back in control of your finances and still maintain your property as you get caught up on your payments. While the Chapter 13 bankruptcy process can seem challenging, a good attorney will help you understand how it works and guide you through the steps. Contact us today to learn more about how a Chapter 13 bankruptcy might affect your life and to discover if it’s the right financial step for you to take next! 

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