Although the procedures in Chapter 13 bankruptcy are somewhat simple, it's important to understand what you are getting into when you file. In a Chapter 13 case, you make payments to the bankruptcy trustee for three or five years. You must file a lengthy set of official bankruptcy forms and attend a minimum of two meetings. When the case is over, you'll receive a discharge of some debts.
Most Chapter 13 filers hire an attorney to help navigate the Chapter 13 process and most bankruptcy courts strongly advise doing so. Even if you're represented by counsel, it's a good idea to understand what a Chapter 13 case will involve before you embark on the process.
You can learn more about how Chapter 13 works, including details about the repayment plan and what happens to your debts and property, in Chapter 13 Bankruptcy.
Here's what you can expect in a typical Chapter 13 from start to finish.
- You take and complete a credit counseling course. Within the six-months before filing for Chapter 13 bankruptcy, you must take a credit counseling course from an agency approved by the U.S. Trustee's office. The list of approved agencies is on the U.S. Trustee's website; click "Credit Counseling & Debtor Education" to see the list. You can learn about exceptions to this rule in The Credit Counseling Requirement in Bankruptcy.
- You'll prepare the bankruptcy petition and the proposed Chapter 13 plan. You must complete a large packet of forms consisting of the bankruptcy petition, schedules, and other required forms. In these forms, you'll be disclosing all of your property, debts, income, property transfers, and more. You must also draft and submit a proposed Chapter 13 repayment plan. The repayment plan is the crux of your Chapter 13 case. It's fairly complicated to come up with a plan that meets all legal requirements. This is one reason why many Chapter 13 filers hire an attorney. To learn more, see The Chapter 13 Repayment Plan.
- You file your bankruptcy petition, proposed plan, and other required documents. You or your attorney will file the bankruptcy papers along with your most recent tax return and proof that you've filed tax returns in the last four years.
- The court appoints a bankruptcy trustee to administer your case. The trustee is charged with reviewing your plan and ensuring it complies with the law, collecting payments under your plan and distributing them to creditors, and monitoring your monthly income and expense reports, among other things. Learn more in The Role of the Chapter 13 Bankruptcy Trustee.
- The automatic stay takes effect. Once you file your papers, bankruptcy's automatic stay goes into effect. The trustee will notify your creditors of your filing and the stay. The automatic stay prohibits most creditors from continuing with collection actions. A few exceptions to the automatic stay exist and some creditors might ask the court to remove the stay. Learn more in Bankruptcy's Automatic Stay.
- You make your first plan payment. Even though your plan will not yet be confirmed, you must begin making payments about one month after you file your papers.
- Attend the meeting of creditors. Also called the 341 hearing, the bankruptcy trustee conducts the meeting of creditors in a room other than a courtroom. The trustee will ask you a series of questions about your papers and finances. Creditors can ask questions too, and may object to your proposed plan. Find out more in What to Expect at the Meeting of Creditors.
- Attend the confirmation hearing. You or your attorney must go to one court hearing, called the confirmation hearing. This is where the court will address any plan objections made by either a creditor or the trustee. If all goes well, the court will confirm your plan.
- File or object to proofs of claim. Creditors file proof of claim forms so that they can get paid. You can object to a proof of claim. And if an important creditor doesn't file one, you might want to file one for the creditor yourself so that you can pay the debt as part of your case.
- Comply with plan requirements and payments. For the duration of the repayment period, you must make your plan payments and might have to submit certain documents, like income and expense statements.
- Complete a personal financial management class. You must complete a debtor education class before the end of the case. This is separate from the credit counseling required before bankruptcy and discussed in Step 1.
- The court grants a discharge and closes your case. When the repayment period ends, the court will grant a discharge. The discharge wipes out any remaining balance of qualifying debt. The court might hold a discharge hearing or choose to mail you the notice without holding a hearing.