If you need relief from your debt but do not qualify for Chapter 7 bankruptcy, you might want to use Chapter 13. Chapter 13 is much different than Chapter 7, though, and you will need to learn how it works before signing the documents. Here is a breakdown of some essential things to know about how Chapter 13 works to help you decide if you want to choose this form of debt relief.
You Create a Repayment Plan
The first thing to know about Chapter 13 is that it requires a repayment plan. When you file, you will work with your bankruptcy attorney on this plan. The plan consists of a schedule that you must follow. It includes a monthly payment amount that you must pay. It also includes a breakdown of where the payment money goes each month. The payment plan lasts for at least three years but might last up to five years.
Your Repayment Plan Covers All the Priority Debts
As you create the repayment plan, your attorney can help you separate your debts by priority debts and nonpriority debts. Your repayment plan must include payments on every priority debt you have. It may or may not include payments to nonpriority debt creditors.
You Make Payments Every Month
Each time you make a payment, you send it to the bankruptcy trustee. The trustee takes this money and pays the creditors according to your schedule. You must not skip any payments, as doing so can jeopardize your case.
You Report Changes to the Trustee
With Chapter 13, you must keep in touch with the trustee throughout your entire plan. Anytime you experience a financial change in your life, you must tell the trustee. For example, if you switch jobs and have a different income, the trustee needs to know. If you encounter an unexpected bill, you must also tell the trustee. Changes in your finances might affect your payment amount.
Your Case Ends
If you continue making the payments for the three- to five-year period, your case will end when you make the last payment. Successfully completing your plan is vital if you want relief from all the debts that you owe.
When you feel overwhelmed with debt that you cannot pay, you can seek help for it. Turning to a bankruptcy attorney is one option, and you can contact a law firm to learn more about both branches.