The Things You Need to Know About Reorganizing Your Debt in Bankruptcy
It happens to many of us at some point. An employer decides to close a location and we’re left without a job. A marriage falls apart and we’re now trying to meet our financial obligations with a single income. We get hurt or sick and either have substantial medical bills that aren’t covered by insurance or we’re unable to work for months or years. When bankruptcy seems clearly the best way forward, there are a couple options to consider—Chapter 7 liquidation or Chapter 13 reorganization. Here are some frequently asked questions about Chapter 13 bankruptcy filings, so you know what to expect and prepare accordingly.
What Is a Chapter 13 Bankruptcy Filing?
In a Chapter 13 bankruptcy proceeding, also known as a “debtor’s reorganization,” an individual or couple can seek to have their debt reorganized or restructured. This typically involves the negotiation of new terms with creditors. As a part of the process, creditors often agree to waive late fees and penalties and may be willing to reduce interest rates or extend the term of a loan. As a general rule, the period over which debt will be paid is three to five years.
What Happens to Your Property When You File for Protection Under Chapter 13?
When you file for protection under Chapter 13, you can typically keep all your property. You’ll simply have new payment terms or arrangements. This is one of the primary reasons some debtors opt to seek protection under Chapter 13.
How Are the New Payment Arrangements Determined in a Chapter 13 Bankruptcy?
When calculating your proposed payments under a reorganization plan, you’ll first work with your attorney to determine your disposable income, i.e., your total income minus your reasonable and necessary living expenses. Your lawyer will then work with you to prepare a plan to repay your creditors. The plan must be submitted to the court, which will hold a confirmation hearing where creditors may object to the provisions of the plan. The court may listen to objections, but it ultimately has the authority to approve or reject a plan.
What Is the Automatic Stay and How Does It Affect a Chapter 13 Debtor Reorganization?
The automatic stay goes into effect immediately when you file your Chapter 13 petition. It prevents your creditors from contacting you in person, by mail, on the phone, or over the internet in an attempt to collect the debt. Also, all legal proceedings related to the debt, other than those in bankruptcy court, are suspended by the automatic stay.
As long as you honor the terms of your payment plan, the automatic stay remains in effect until the end of the three-to-five-year period. If you violate the terms of your agreement, a creditor may petition the court to remove the stay.
How Are Your Creditors Paid in a Chapter 13 Bankruptcy Filing?
You typically won’t make direct payments to your creditors in a Chapter 13 bankruptcy proceeding. Instead, you make periodic payments to the bankruptcy trustee, who then distributes payments to your creditors.
Contact an Experienced Rockwall, TX Chapter 13 Bankruptcy Attorney
Let us help you take the right steps and make good decisions when filing for personal bankruptcy protection. At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County, and the surrounding counties.
