by: Kathleen Michon, J.D.
Although the procedures in Chapter 13 bankruptcy are fairly 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. Among other things you must file a big packet of papers and attend 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 (unlike Chapter 7 where debtors have an easier time going it alone). Even so, you should understand what a Chapter 13 case will involve before you embark on the process.
(To learn about how Chapter 13 works, including details about the repayment plan and what happens to your debts and property, see our Chapter 13 Bankruptcy topic area.)
Here’s how a typical Chapter 13 case goes, from start to finish
- You take and complete a credit counseling course. Within the six-months prior to 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 at www.usdoj.gov/ust; click “Credit Counseling & Debtor Education” to see the list. There are a few exceptions to this rule. To find out more, see The Credit Counseling Requirement in Bankruptcy.
- You (or your attorney) prepare the bankruptcy petition and the proposed Chapter 13 plan. You must prepare a large packet of forms which consists of the bankruptcy petition, schedules (which list all of your property, debts, and other financial information), and other required forms. 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 topic area.
- 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, collect payments under your plan and distribute them to creditors, monitor your monthly income and expense reports, among other things. To learn more, see The Role of the Chapter 13 Bankruptcy Trustee.
- The automatic stay takes effect. One you file your papers, bankruptcy’s automatic stay goes into effect. The trustee will notify all of your creditors about your filing and the stay. The automatic stay prohibits most creditors from continuing with collection actions. There are a few exceptions to the automatic stay, and some creditors may ask the court to remove the stay. To learn more, see Bankruptcy's Automatic Stay.
- You make your first plan payment. Even though your plan has not yet 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 meeting of creditors is hosted by the bankruptcy trustee. It’s not a court hearing and it’s not held in 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. To learn more see, 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 addresses and creditor or trustee objections to your plan. If all goes well, the court will confirm your plan.
- File or object to proofs of claim. Creditors file proofs of claim so that they can get paid. You can object to a proof of claim. And if an important creditor doesn’t file one, you may 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 may 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 prebankruptcy credit counseling required in Step 1).
- The court grants a discharge and closes your case. When the repayment period ends, the court will grant a discharge. It may hold a discharge hearing or it might mail you the notice without holding a hearing.