Hint: It’s not the petition. Of course, you need a petition to begin the bankruptcy process and lay out some basic information regarding your financial situation, but that isn’t what’s at the heart of a Chapter 13 bankruptcy.
The most important part of a Chapter 13 bankruptcy is the repayment plan. This document will govern your finances for the next three to five years. This plan outlines how much each of your creditors will receive in payments each month, and the court must approve it. You will make your payment to the trustee and not directly to your creditors. The trustee will then disburse the funds in accordance with your court-approved plan.
Timing and deadlines
Unless the court gives you an extension of 15 days after the date you filed your petition, your plan must accompany your petition when you file for Chapter 13. As for your payments, you will make them on a regular basis through payroll deduction or directly from you. If you fail to make payments on time or not at all, the court may convert your case to a Chapter 7 or dismiss it entirely. The court may also dismiss your case if you fail to file a plan within one of the deadlines outlined above. Therefore, it is crucial that you meet the deadlines of the court and your plan.
Of course, a confirmation hearing must take place before your plan goes into action. Within 45 days of your meeting of creditors, a hearing will take place to determine whether the court will confirm your plan. The hearing will take place no earlier than 25 days after the meeting of creditors, however, because your creditors must receive at least 25 days’ notice of the hearing. They may file an objection to your plan within that time.
If no creditor objects and the court approves, your plan will take effect. In the alternative, the court may send you back to modify your plan, which will also go through the approval process. At this time, you or the court may convert your case to a Chapter 7.
Structuring your plan
The order in which your creditors are paid depends on what type of debt you owe to each of them. Debts fall into one of three categories:
Your plan must provide for full payment of any priority claims such as taxes. Secured debts are those for which the lender holds some collateral, such as your mortgage lender and your auto lender. They do not necessarily require payment in full before the plan ends, but any payments on which you are delinquent must be current by the time the plan ends. Unsecured debts such as credit cards go to the bottom of the list and may not receive payment at all, depending on the circumstances.
Obtaining the right help
This article provides only a cursory look at how the payment plan works. Considering the fact that your financial future is at stake, it may be beneficial to consult with an experienced Tennessee bankruptcy attorney before beginning the process. Even though your repayment plan is the heart of your bankruptcy, you are also bound by and responsible for other deadlines, documents and court filings. Missing just one document or deadline could jeopardize the whole process, but fortunately, you can enlist the appropriate help to increase your chances of success.