Filing for Chapter 13 bankruptcy can be a great way to reorganize your debts and catch up on missed mortgage or car loan payments. To successfully complete a Chapter 13 and receive a discharge, you must make payments to a bankruptcy trustee for three to five years according to the terms of your repayment plan. Unfortunately, many Chapter 13 bankruptcies are dismissed prior to discharge because debtors fail to make regular plan payments. Read on to learn more about how to survive and complete your Chapter 13.
For more information on how Chapter 13 bankruptcy works, see our topic area on Chapter 13 Bankruptcy.
No matter what type of bankruptcy you file, it is extremely important to be honest in your paperwork. 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 even criminal prosecution. If you fail to disclose all of your obligations, any unlisted debts may not get discharged. In addition, this can lead to eligibility problems in the future if undisclosed creditors file claims in your case and push you above the Chapter 13 debt limits.
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 may 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.
To find out what the minimum payment in a Chapter 13 case would be, see this calculator.
Making timely plan payments is crucial to successfully completing your Chapter 13 bankruptcy. Because you are required to make a plan payment each month, stick to your budget so you have enough to cover your bankruptcy payment. If you make excessive purchases or otherwise fail to follow your budget, you may not have enough left to make your plan payment.
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 (for example your income gets reduced) during your bankruptcy, notify your attorney immediately. Your attorney may be able to modify and reduce your plan payment to make it more affordable for you.
If you don’t have an attorney, let the trustee know about your situation to see if he or she will agree to reduce your plan payment. However, in most cases, you will need to file a motion with the court to amend your plan.
(To learn more about amending your plan, see the Modifying Your Chapter 13 Plan.)
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 may 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.