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How does Chapter 13 bankruptcy work?

Many Tennesseans have heard of Chapter 13 bankruptcy. And a number of them have wondered if it might be right for them. But few really know what it is or how it works -- at least beyond the basics. Today's post will address the steps for filing a Chapter 13 bankruptcy petition.

Someone considering filing for Chapter 13 will need to file a petition, usually in the area where they live. That petition should include a variety of information. That information includes a schedule of assets and liabilities, a schedule of current income and expenditures, a credit-counseling certificate and evidence of wages received in the previous 60 days, if any. It should also include a list of the petitioner's creditors, living expenses and sources of income.

Once the information has been assembled and brought to a court, the next step is to pay the filing and administrative fees. Currently the filing fee and other administrative fees add up to about $200. If that number is too big to pay at once, the court is empowered to allow a petitioner to pay it in installments.

Once the petition is filed, the bankruptcy court will file an automatic stay that puts a halt to all collection efforts. If a petitioner hears from a creditor after filing a petition, the creditor could face consequences.

Three to seven weeks after petition is filed, a trustee will meet with the petitioner's creditors. During that meeting, the petitioner will have to answer questions under oath. They also formulate a repayment plan that establishes reasonable payments.

Once that has been worked out, the parties will bring the plan to a judge who will review it and hopefully approve it.

Once the plan is approved, the petitioner will begin making payments for a period of time. Once that time is complete, any debt remaining is forgiven.

Source: FindLaw, "How Chapter 13 Works," Accessed Sept. 22, 2015

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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