Filing Chapter 13 Bankruptcy

Help filing Chapter 13 bankruptcy, best plans and confirmation tips for lower payments

In the past, Chapter 13 provided debtors with the opportunity to reorganize their debts through completing partial repayment plans ranging from three to five years. After the new law Reform Act of 2005, all plans must last five years aft the effective date. Chapter 13 protects debtors with an automatic stay, and allows debts to be paid only from "disposable income."

All plans must be confirmed by the Court to become enforceable against creditors. The process of confirmation requires an extensive review by a Trustee and the Court. After confirmation, regular payments must be made to avoid dismissal. For most debtors, after the 2005 Reform Act, Chapter 13 remains as the most viable option when filing.

Benefits of filing Chapter 13 bankruptcy

Once a case is filed, an automatic stay (similar to a federal injunction) prohibits all included creditors to collect, foreclose, repossess, or harass debtors in connection with any debt listed with the case. Even the IRS must stop levy and seizure proceedings to obey the automatic stay provided by 11 U.S.C. Sec. 362.

The plan may reduce interest charges, extend payment schedules, and most importantly, allows for the discharge of remaining balances upon the completion of plan. For instance, if the debtor's disposable income permits only the payment of 10% of the balance owed on credit cards, the remaining 90% of balances owed will be eliminated when the plan is complete. In the most basic sense, Chapter 13 requires the payment of all disposable income to the Court, through a Trustee, for a period of 5 years. After 5 years all general unsecured debts are considered paid in full, unless paid off sooner.