Tips for Going Through Chapter 13 Bankruptcy

Five tips on how to successfully complete your Chapter 13 bankruptcy and obtain a discharge.

Filing for Chapter 13 bankruptcy can be a great way to reorganize your debts and catch up on missed mortgage or car loan payments. It will also allow you to:

  • pay off nondischargeable tax and support arrearages, and
  • pay what you can afford on other bills while avoiding wage garnishment.

But completing a Chapter 13 and receiving a discharge isn’t easy. You’ll have to pay all of your disposable income to a bankruptcy trustee for three to five years according to the terms of your repayment plan.

It’s likely not surprising that the court dismisses many Chapter 13 bankruptcies before completion because debtors fail to make regular plan payments. Read on to learn how to survive and finish your Chapter 13 case.

For more information on how Chapter 13 bankruptcy works, see Chapter 13 Bankruptcy.

Complete Bankruptcy Paperwork Truthfully

When you complete your Chapter 13 petition and schedules, make sure to disclose all of your income, expenses, assets, and liabilities accurately. If you hide assets or misrepresent information on your bankruptcy paperwork, it can result in dismissal of your case or criminal prosecution, which could subject you to up to $250,000 in fines, twenty years in prison, or both.

Also, if you fail to disclose all of your obligations, any unlisted debts might not get discharged. This can lead to eligibility problems if undisclosed creditors file claims in your case and push you above the Chapter 13 debt limits.

Propose an Affordable Repayment Plan

Before you can receive a Chapter 13 discharge, you must complete all your required plan payments. If you propose a plan you can’t afford, you will not be able to pay it off. As a result, make sure to budget appropriately when submitting your plan proposal.

But if you have a lot of obligations that must be paid back through your plan (such as mortgage arrears or priority debts), you might not have as much control over your monthly plan payment. In that case, talk to a knowledgeable bankruptcy attorney to determine whether Chapter 13 is in your best interest.

Learn more about a Chapter 13 repayment plan.

Stick to Your Budget

Making timely plan payments is crucial to successfully completing your Chapter 13 bankruptcy. Because you are required to make a plan payment each month, you’ll need to stick to your budget to have enough to cover your bankruptcy payment. If you make excessive purchases or otherwise fail to follow your budget, you might come up short when it’s time to pay your plan payment. Reviewing the expenses you’ll need to take into account on Schedule J: Your Expenses might help.

Understand Circumstances Can Change

Nobody’s life remains the same for the duration of their bankruptcy. The good news is that you can ask the court to amend or modify your Chapter 13 plan at any point. If your circumstances change during your bankruptcy—for example, your income gets reduced—notify your attorney immediately. Your attorney might be able to modify and reduce your plan payment to make it more affordable for you.

Keep in mind that reducing your payment is only possible if you’re paying something toward your nonpriority, unsecured creditors, such as credit card balances, medical bills, and personal loans. If you aren’t, then it’s unlikely that adjustments are possible. Also, know that you will need to file a motion with the court to amend your plan.

Learn more about amending your plan in Modifying Your Chapter 13 Plan.

Provide All Required Documentation

You will typically be required to provide certain financial information, such as tax returns, to the trustee on an annual basis. Failure to do so could result in dismissal of your case. Be sure to provide all required documentation to the trustee in a timely manner during the life of your bankruptcy.

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