What Happens During A Chapter 13 Bankruptcy Filing?

by : Kris Koonar

When you decide to file a Chapter 13 bankruptcy, the legal process grinds into gear. The petition, the document asking the court to bring you relief under chapter 13 of the United States Bankruptcy Code, is a simple two page form, signed by all debtors and the attorney. Once this form has been filed and the filing fee paid, you are given a docket number. From then on, all actions by creditors are under stay, except for those that are allowed by motion, in the bankruptcy court. Creditors can not demand money, take you to court over debt or foreclose or repossess your property.

A few days after this filing, you are required to submit a list of all your creditors and their addresses to the court. This document, the Matrix, must be followed within a week by the rest of the required paperwork, including schedules of assets and liabilities, income and expenses, your financial history and your plan for how you wish to reorganize all that under chapter 13, as well as the evidence that you will be able to complete the plan. After this process of initial submission of the Chapter 13 reorganization plan, you have the option of filing amendments to add creditors or modify the schedules or plans. Amendments may, however, involve the payment of additional fees to your lawyer, as well as extra fees to the bankruptcy court.

Unless your case has some contested issues which need to be heard before a judge, you will probably never have to appear in person. Instead, you will meet with a Chapter 13 Trustee, only one to three months after the initial filing of the petition. This is known as a 341 creditors meeting and everyone who is owed money will be invited to attend. At the meeting, the creditors will ask you questions about your financial situation. However, in most cases, few creditors ever attend and the guests are more likely to include only the big creditors and mortgage holders.

Your attorney will have to be at this meeting, to represent you and the person actually asking all the questions and coordinating the meeting will be the Chapter 13 Trustee. After this meeting, if there are no objections against it, all you have to do is to make sure you remit all the payments according to your plan and in a timely manner. Duration of time for making payments will depend upon your income and the size of your debt. By statute, all the reorganization plans must be between 36 and 60 months long. If you have enough income, the Trustee might demand that the plan be 36 months long and a larger portion of the available funds paid to unsecured creditors.

In general, if you have a little extra money one month, save it, rather than trying to pay a larger amount. If you miss a payment at a later date, you will not be given credit for any early payments made previously. However, if your income changes substantially, for a longer time, you need to inform the court and adjust your payments. Always make sure to pay on time. If you do not, one or more creditors or the Trustee will object and your case can be dismissed or converted to Chapter 7 and they may still foreclose with the permission of the court. Since you are already in a bankruptcy, one failed or late payment will leave you no recourse against losing your home. You will lose the protection of the court.