A Chapter 13 bankruptcy lets you reorganize secured debts such as car or house payments and some unsecured debts. It lets you repay some creditors at a lower rate and some for a longer period of time or a lower interest rate. The plans usually last from three to five years, but there are a lot of factors that can change the length of time.

When a Chapter 13 bankruptcy payment plan is created, you stop paying your creditors. Instead, sending monthly payments to the trustee who is responsible for administering your bankruptcy. The length of the plan will be determined by several different things, with one of the most important being the average monthly income in your state. Your income will be compared to that number to determine whether a three-year plan or a five-year plan is more appropriate for you. If you earn more than the state median income you will probably have to file for a five-year plan, even if you can go shorter.  The longer your plan, the lower your monthly payment will be,

When you file for Chapter 13, you will have to attend a First Meeting of Creditors where you attest to all of your documents being right and a confirmation hearing. These are designed to present your plan and see if all of those who you owe money to agree to what you are proposing. If none of your creditors object, the process of setting up and getting your plan confirmed usually takes three or four months, and then the actual three- or five-year bankruptcy plan begins, though most people start making payments before the confirmation hearing is held.  If you want to and are able to, you can usually pay off your bankruptcy plan early. If, however, you experience a change in circumstances that makes your sticking to the payment plan a challenge, you can request a modification by filing for a remedy. Typical reasons that are considered valid include losing your job, having another child, or getting divorced. You can also file for a modification if your circumstances improve through a raise or a new job that allows you to pay faster. Once you’ve paid off your repayment plan, all of your debts are discharged.

Filing for Chapter 13 bankruptcy is a good way to regroup and get a fresh start when your debts have gotten out of control. For more information on whether it is right for you, contact our experienced attorneys today.