What is Chapter 13 bankruptcy?

How is Chapter 13 different from Chapter 7 bankruptcy?

A Chapter 7 or “full bankruptcy” lets you get rid of (or discharge) debts without paying them. This is also referred to as a "fresh start" bankruptcy.

A Chapter 13 plan allows you to pay all or part of your debts over time. You make payments you can afford.

A bankruptcy lawyer can explain the difference more fully and determined if you qualify or would be best served by a Chapter 7 or Chapter 13 bankruptcy.

Is Chapter 7 or Chapter 13 better?

Your lawyer will tell you what kind of bankruptcy is best for you. In some cases, only a Chapter 7 will work. But in many cases, a Chapter 13 is better. In some cases, you may have to file Chapter 13 instead of Chapter 7.

Do you have property that can be taken away (repossessed), if you don’t pay? Then Chapter 13 usually works better. In most cases, Chapter 13 lets you keep what you bought while you pay for it. It lets you pay your debts at a rate you can afford. In some cases, you can have lower payments or pay less than the full debt.

With a Chapter 13 bankruptcy you make one payment each pay period or each month. This way you pay all or part of your debts. While you pay, your creditors can’t take your property or your pay check. 

Be sure to consult with an attorney who is experienced with bankruptcy.

What happens when you file a Chapter 13?

You must give your attorney a list of ALL your debts. You must also give your lawyer a list of everything you own. You must tell your attorney everything about your money situation. A bankruptcy attorney will tell you about the two kinds of bankruptcy, Chapter 7 and Chapter 13.

Before you file a Chapter 13, you and your lawyer work out a payment plan. The attorney prepares your Chapter 13 papers (the petition and other papers).

You read and sign the bankruptcy petition and Chapter 13 Plan.  You must swear under oath and penalties of perjury that as far as you know the information is correct.  Failure to disclose all information to the bankruptcy court could be a criminal offense.

Your lawyer files the petition with the court.

The court notifies every creditor listed in your petition that you have filed a Chapter 13 bankruptcy. The Court also notifies them when to come to the creditors’ meeting.

You and your attorney must attend the creditors’ meeting. There, the Chapter 13 trustee will ask you questions. This is to make sure your petition is  complete and correct. Your creditors may also ask about your debts and what you own.