Chapter 13 bankruptcy is a good tool for professionals or business owners who have too much debt. Unlike Chapter 7 bankruptcy, a Chapter 13 filing doesn’t involve asset liquidation and property exemptions.
When you file a Chapter 13 bankruptcy, you won’t have to worry about losing your property to repay your creditors. You can usually retain all of your assets and personal property. However, before the courts will discharge your unsecured debt, you will first need to complete a repayment plan.
Exactly how you establish this plan and what you pay depends on several different factors. Understanding how the repayment plan works can help you decide if Chapter 13 bankruptcy is the right kind for you.
You have to provide financial records and attend a creditors’ meeting
The trustee assigned to your case will oversee the creation of your repayment plan. You will provide them with information about your income and financial responsibilities. They will, in turn, provide some information to the unsecured creditors possibly affected by your filing.
At the creditors’ meeting, you will negotiate a repayment plan that allocates a certain amount of your disposable income to various creditors every month. The trustee is the one who receives the payments from you every month and distributes them to your creditors, so you only have to make one payment.
After you make the structured payments for at least three years, you will become eligible for a discharge of the remaining balances of those accounts. Understanding how the repayment plan works in a Chapter 13 bankruptcy may help you feel more comfortable in pursuing one.