Filing for bankruptcy will often be beneficial for your personal finances and your state of mind if you have significant debt you are struggling to pay off. However, it is understandable to be nervous if you are unfamiliar with the process. Our experienced Chapter 13 bankruptcy attorneys will help with that. Call us to learn about how a Chapter 13 bankruptcy works in Edison.

What is Chapter 13 Bankruptcy?

Chapter 13 is a personal bankruptcy plan for individuals or married couples with regular income. You would file a Chapter 13 bankruptcy if you do not qualify for a Chapter 7 under the income-based means test. If that test shows you have disposable income left over every month after paying all your expenses, then you most likely cannot file a Chapter 7. Under a Chapter 13 bankruptcy, you repay that monthly disposable income to your unsecured creditors.

A Chapter 13 can be a good solution to catch up on arrears on mortgage payments, real estate taxes, and car payments. By filing a Chapter 13 bankruptcy, you get the benefit of the automatic stay, which stops creditors from trying to collect from you, and then you file a plan of reorganization which lays out how you will repay those arrears over time.

You have up to 60 months to complete a Chapter 13 bankruptcy plan and our Edison attorney can explain how the process will work.

Debtors Who Could Benefit

People who are behind on mortgages, taxes, or car payments will benefit from a Chapter 13 filing, as well as those who have accumulated an amount of credit card debt or personal loans but whose income does not allow them to pay it on a timely basis. In many cases, it is for people who have had some major life event that caused them to fall behind on these various payments, such as job loss, divorce, or a major health issue. They may have a loss of income, an increase in expenses or medical debt, and they cannot meet their monthly obligations.

Chapter 13 bankruptcy can help even those people who are able to make their payments but are struggling to find their way out of debt they incurred. We often find that payments in a Chapter 13 bankruptcy are lower than minimum payments on credit cards and pay off the debt in a much shorter time.

A Chapter 13 bankruptcy gives you a fresh start by halting your creditors from pursuing you and setting up an affordable plan. A Chapter 13 bankruptcy client deals with all their debts in one place, with a single payment, and allows the person or couple to move forward.

Court Proceedings in a Chapter 13 Bankruptcy

One question that a lot of people in Edison have about how a Chapter 13 bankruptcy works is: will they have to appear in court at any point?

In a Chapter 13 bankruptcy, there are two required court proceedings to know about. The first one is the Section 341(a) Meeting of Creditors which is held by the Chapter 13 Trustee. This is the only time the debtor must appear in the case and is conducted via a zoom video conference. In a 341 meeting, the trustee goes through the petition with you, ask questions about your income, expenses, and assets, and they discuss the Chapter 13 plan of reorganization. While creditors are invited to attend, it is rare for any creditors to appear or ask questions.

Any other court hearing would be handled by your bankruptcy attorney.

Confirmation Hearing

In a Chapter 13 bankruptcy case, the other required hearing is known as the Confirmation Hearing. If you have an attorney, the attorney will appear at these hearings. During the case, we inform you of any issues involved in your bankruptcy plan or advise on any additional documents needed before we get to the confirmation hearing. In the confirmation hearing, we take the proposed plan of reorganization plan to court and present it to the judge. The trustee gives his or her recommendation as to whether the plan should be confirmed as it is or if they are seeking any modifications to the plan. If all the bases are covered, the court will confirm your plan of reorganization.

Once the plan is confirmed, then the monthly payment amount is set in stone, and as long as you can make that payment each month and complete the plan, you will ultimately get your debt discharge. During this time, your creditors are still stopped from collecting from you and even if you miss a payment, you typically have an opportunity to catch up or propose a change – or modification – of your plan.

Other Court Proceedings

There could be other court proceedings that come up during a Chapter 13 bankruptcy, but those are all on a case-by-case basis. If, for example, you fall behind on your mortgage after you file for bankruptcy, the mortgage company cannot just start a home foreclosure process. They would first have to file a motion for relief from the automatic stay and ask the judge to allow them to go back to state court and start a foreclosure due to the debtor not making their mortgage payments. While we do not anticipate that happening, there are certain occasions where it can.

One of the benefits of Chapter 13 bankruptcy is the opportunity to respond and work things out with creditors or the trustee if you do fall behind during the case.

Talk to an Edison Attorney to Learn More About How a Chapter 13 Bankruptcy Works

Once you learn how the bankruptcy process works, you will feel more confident in deciding if this is the right choice for you. The successful advocates at Gillman, Bruton & Capone are at your side every step of the way.

Call us and set up a free case evaluation, where our team can further explain how a Chapter 13 bankruptcy works in Edison.