When you choose to pursue a Chapter 13 bankruptcy, you are committing to what is known as a wage earner’s plan. Unlike a Chapter 7 bankruptcy, under a Chapter 13 bankruptcy you are agreeing to pay back at least some of your debts, and in some cases all of them. The plan spells out altered terms for repayment: in some cases, your debt is lowered, in other instances the interest rate is reduced or you are given more time to pay the debt, thus allowing you to submit lower payments. Helping you create this payment plan, which must be approved by the court, is one of the most valuable contributions that a bankruptcy attorney will make, but it is not the only one.

When you hire an attorney to help you with a Chapter 13 bankruptcy, their first step will be to help you determine whether you qualify for the Chapter 13 debt limit. The current limits under which a person can reorganize are $1,184,200 in secured debt and $394,725 in unsecured debt. Once your eligibility is confirmed, your attorney will prepare and file a Chapter 13 bankruptcy petition, which will automatically stop your creditors from pursuing collection actions against you. For many debtors, this “automatic stay” provides tremendous emotional relief.

It is at this point that you and your attorney will examine all of your assets, income, expenses and debts in order to create a plan that will work for both you and your creditors. The plan will be discussed at a 341 meeting, during which you will need to answer questions about both your current finances and your repayment plan under oath. Adjustments may be made at this meeting. You will also be required to take a financial management class about 30 days after your attorney submits your bankruptcy petition.

Finally, your attorney will represent you at a hearing with a judge. During this hearing, the judge will review your plan, hear any arguments against your plan from your creditors, and either confirm it or deny it and request that adjustments be made or that you opt for a Chapter 7 bankruptcy. Your attorney will help you make arrangements for your payments to be made through payroll deduction, and the court will discharge any debts as per the terms of your plan.

If you need more information on filing for bankruptcy and what path is best for you, contact Reinherz Law to set up an appointment to discuss your situation.