How Does Chapter 13 Bankruptcy Work?

How does Chapter 13 Bankruptcy Work?

By Cynthia Podis, Nashville Bankruptcy Lawyer

Chapter 13 Bankruptcy is a repayment plan that is facilitated by the Bankruptcy Court. You must list all of your debts and assets in the Bankruptcy Petition (forms that are  filed with the court). Once the Bankruptcy Petition is prepared and filed with the Bankruptcy Court, your creditors are notified by the Court of the filing of the bankruptcy and the date and time of the Meeting of Creditors. You begin making payments to the Chapter 13 Trustee to fund your Chapter 13 Plan. If you have a regular paycheck, the Chapter 13 plan payment is payroll deducted. If you receive Social Security Income or are self-­employed, you can use a direct pay service from your checking account to make your payment.

The Meeting of Creditors is your court date. This is where your bankruptcy lawyer proposes the Chapter 13 Plan of repayment to the Chapter 13 Trustee for approval of the court. Your creditors have the opportunity to show up and ask questions. Mostly car creditors or other secured lenders send a lawyer or representative to ask for proof of insurance on their collateral or ask for better treatment under the plan of repayment, such as a higher amount of interest, or monthly payment. The Trustee asks you and your bankruptcy lawyer questions about your Chapter 13 Plan.

When your Chapter 13 Plan is approved. You will make the Chapter 13 plan payments through the Chapter 13 Trustee who will then mail payments to your creditors. It is important to list everyone you owe money too in your Chapter 13 plan. You will continue to pay your living expenses, such as rent, electric, gas and water bills directly.

The Chapter 13 Trustee in Nashville offers a Financial Management Class that you schedule on the Trustee’s website at http://www.ch13nsh.com/debtored/ch13class.aspx

During your Chapter 13 plan, you cannot sell assets or finance anything on credit without permission from the Bankruptcy Court. It is important to keep your bankruptcy attorney up to date with your address, phone number and email address. If you change your employment, let your bankruptcy lawyer know so they can update the court with that information.

Chapter 13 Bankruptcy helps you keep a car or house if you are behind on the payments. If you have filed a Chapter 7 Bankruptcy in the last 8 years (or earlier), you may still be eligible for a Chapter 13 bankruptcy. You can file a Chapter 13 Bankruptcy even if you qualify for a Chapter 7 Bankruptcy.

Most clients file Chapter 13 Bankruptcy to keep items they cannot protect under Chapter 7 or to catch up on house or car payments. Clients file Chapter 13 Bankruptcy to allow them to get out from under the stress of overwhelming bills and set up a repayment plan that allows them to enjoy their lives while keeping their assets.

For more information visit www.BankruptcyNashville.com or call 615­399­3800 and schedule a free appointment with us! Podis and Podis, 1161 Murfreesboro Pike Suite 300, Nashville TN 37217

We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.

14 thoughts on “How Does Chapter 13 Bankruptcy Work?”

  1. I looks like Chapter 13 bankruptcy is a bit more complicated than I previously thought with paying to a trustee. A friend of mine was thinking about filing and then taking care of everything himself. It sounds like he might not be able to handle it, so I’ll have to suggest he get himself a lawyer to assist. Thanks for the awesome tips and info!

  2. I really didn’t know anything about Chapter 13 Bankruptcy before reading this. I thought that the only kind of bankruptcy was setting yourself back to zero by clearing all debts. However, this kind of bankruptcy seems much more forgiving, since it makes it easier to pay debts instead of erasing them and destroying your credit. Sure, there are some limitations that you mentioned, like not being able to finance using credit, but I’d much rather use Chapter 13 than another option if I was in debt. Thanks for the article!

  3. I did not know that utilities and rent would still be paid directly. Having a trustee to handle the chapter 13 plan is helpful in knowing who to pay what to. What would happen if payment was made late or not at all to the chapter 13 plan?

  4. I like that Chapter 13 bankruptcy is more of a repayment plan instead of wiping out debt. Are there any debts that are excuse under this plan? It is nice that wit this plan you can protect things that are not covered under Chapter 7. Thank you for the information!

  5. I think it would be really nice to know how chapter 13 bankruptcy really works before I ever have that come up as an option in my life. I think it is important to plan for these things and one way you can plan would be through making sure that you know what it is. I also think it would be smart to have a backup plan for that as well.

  6. My uncle recently applied for chapter 13 bankruptcy, but I didn’t know what that meant until now. I thought that it meant he personally had no more money. I know now that it is a debt still owed for his business ventures. It’s a good thing he had a good attorney! He still has to pay everything back. Thank you for the insights!

  7. So a chapter 13 allows you to still pay back you debt? Does this help your credit recover sooner, or does it not effect your credit? I think this would be good for my aunt. She is so behind on all her bills she needs some kind of help.

    1. Yes, you pay back in a Chapter13. It usually helps credit scores bounce back faster than a Chapter 7 or just paying bills late. Most of my clients see a 40 to 75 point jump in their credit scores after the first year in a Chapter 13. We would be happy to help your aunt if she is in the Middle Tennessee area. Thanks for your comment!
      Cindy Podis

  8. I appreciated your comment about if you have a regular paycheck, the Chapter 13 plan payment is payroll deducted. My sister has been having a really hard time financially since her husband passed away last year. Do most attorneys help their clients find out which chapter of bankruptcy would work best for them?

  9. Thanks so much for this Chapter 13 article. Everything I’ve been reading is about Chapter 7 and 11, but glad to finally find the Chapter 13 info I was looking for.

  10. Chapter 13 is my favorite. I’m also a bit partial to chapter 7, but does anyone like Chapter 11? I don’t think so. Loved the article. Keep it up!

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