Many people get confused about which option is best when it comes to bankruptcy in North America.You can either file for Chapter 7 or Chapter 13 as an individual.It's important to understand each option before making a decision.There is a guide on how to file for Chapter 13 bankruptcy.
Step 1: Do you want to file for bankruptcy?
There are a number of things you can do if you are in financial trouble.Your last resort should be bankruptcy.Chapter 13 bankruptcies are used to stop home foreclosures.Again, this should be your last resort, so try working with your creditor to find a different solution before filing for bankruptcy.If you file for bankruptcy, you will destroy your credit score.It is possible that your score may be reduced by hundreds of points.It will stay on your credit report for 10 years, and will reduce your ability to get new credit or loans during this time.It's a good idea to file for bankruptcy if you're being sued, or your assets are being repossessed.
Step 2: Determine if Chapter 13 is the right option.
Chapter 13 is designed for people with a regular income who want to pay off their debts but need a certain amount of time to do so.In Chapter 13, the debtor repays their debts in full or in part over a period of three years.They can repay their debts over a period of five years.Anyone can apply for Chapter 13 if their debts are less than a certain amount.Corporations, partnerships, and those who have had a bankruptcy petition dismissed in the past 180 days can't file under chapter 13.Chapter 13 allows you to keep your money.A Chapter 7 filing can force you to sell your possessions, such as non-essential vehicles, boats, and expensive electronics.You should file for Chapter 12 if you are a farmer or fisherman.
Step 3: Understand what happens to your assets.
Chapter 13 deals with secured debt in a different way than Chapter 7.Your mortgage payments and payments on a new car cannot be discharged, but your car loan can be modified down to a set rate of 5.25 percent.An older car can be "crammed down" to its true value, freeing you of paying any interest on the loan, but you still have to pay back the car's value.Unsecured debts, like credit card debt and medical bills, are paid back according to your ability to pay.All of your income will be paid to your debts during the repayment period.During the repayment plan, attorney's fees incurred during the trial are paid off.
Step 4: Know which loans are not being discharged.
Your primary resident mortgage loan cannot be reduced or discharged in a Chapter 13 filing.As a part of your repayment plan, mortgage payments will be increased to cover missed payments.Child support and alimony cannot be discharged because of tax debts.Depending on your situation, some tax debts may be spread out or modified.Chapter 13 does not allow the discharge of student loan debts.You may be able to get a break from student loan payments under your repayment plan.Chapter 7 bankruptcy is the only option if you want to discharge your student loans.You may have a hard time getting the court to discharge the debt.
Step 5: Should legal counsel be retained or not?
Chapter 13 is very complex.It is advisable to hire an attorney.Up to 100% of the claim can be paid by a bankruptcy plan, which can pay as little as ten cents on the dollar.Your attorney can help design a plan that is favorable to you.Most "pro-se" filings are unsuccessful.Less than 2% of Chapter 13's that were filed without a lawyer in Colorado in 2012 were confirmed.If your case is dismissed rather than confirmed, you could end up homeless.You won't be able to file again for 180 days, giving you more time to pay your debts.If you don't have a lawyer, you'll have to spend a lot of time researching the law and representing yourself.The immediate cost to you is reduced by the fact that your legal fees are spread out over your repayment period along with your other debts.
Step 6: Attend credit counseling.
Credit counseling is required before you can file for Chapter 13 bankruptcy.This needs to be done with a court-approved agency.You need to work through the counseling to get your credit counseling certificate.Attach this certificate to your petition.
Step 7: A petition can be filed.
You have to file a petition in your home district.You have to file schedules of assets and liabilities along with the petition.The schedule of exempt assets is also filed.You can find the forms online at http://www.uscourts.gov/forms/bankruptcy-forms.The forms should be filled out with your attorney's help.By state the filing requirements will be different.You can either work with your lawyer or take the time to research individual filing requirements for your state.The process of filing a petition is lengthy and involves a lot of forms.Make sure you take the time to complete each one correctly.
Step 8: You should pay your fees.
There are a number of fees when filing for bankruptcy.A court filing fee of $310 is required.Most legal actions are stayed once the petition is filed.This means that most of your debts will not be able to be continued.To make sure your creditors are aware of the stay on your assets, you need to complete a creditor mailing list during your petition filing.
Step 9: A plan of repayment is needed.
Your repayment plan is a plan to repay all or some of your debts over a period of five years.Up to 15 days later, this can be filed with the petition.It is best to get legal assistance when creating a plan.If you want to keep your house and car, you have to factor in paying secured debts.It is possible that these payments will increase so that you can pay off past due payments over the course of your plan.Your repayment plan must be five years long if your income is over the median.Your plan can be between three and five years if it is less.Successful plans commit all disposable income to pay off debt.
Step 10: Attend a meeting.
It is usually held 20 to 40 days after the petition is filed.The meeting is an important part of the process, as it allows your creditor to ask questions about your assets and financial situation.Make sure you don't exaggerate your financial situation during the meeting because you are under oath.Your case will be thrown out if you miss this meeting.
Step 11: Attend the hearing.
A judge will determine if your plan of repayment is feasible after this hearing, which will be held in court.They can object to confirmation when they are informed of the hearing.This happens when payments in the plan total less than what they would be in a Chapter 7 liquidation or when the debtor's plan does not commit all of his or her projected disposable income for three years.
Step 12: Make your payments.
If your payment plan has not been approved by the court, you must make your payments within 30 days.If your plan isn't approved, you can change it to a Chapter 7 liquidation.Chapter 7 should be the final option.You may be required to attend a financial planning course by the judge before your debts can be discharged.Make sure you complete these courses as soon as possible.
Step 13: You should discharge your debts.
At the end of the repayment period, if you stay current on all of your payments, your debts will be eligible for discharge.If your plan worked and you paid less than 100 percent of your debts, the rest will be discharged in full.Student loan or income tax debt are not included.