Chapter 13 Bankruptcy Start to Finish

Chapter 13 bankruptcy is the bankruptcy option for people who do not qualify for Chapter 7 bankruptcy. While Chapter 7 bankruptcy wipes out the filers' debts by liquidating their personal and real property, Chapter 13 filers are allowed to keep their possessions and property.

Credit Counseling:

Prior to filing Chapter 7 or 13 bankruptcy, all debtors must receive credit counseling by a court-approved credit counseling agency. This can be done in person, by telephone or online. After completion, the debtors are given a numbered certificate that will be need to be provided to the bankruptcy court prior to filing for bankruptcy.

Means Test:

The means test determines whether the debtors can wipe out their debts or must repay a portion of what they owe. The means test formula determines whether the debtors have enough income, after expenses, to pay on their outstanding debts. People with larger incomes are often required to file Chapter 13 instead of Chapter 7. An attorney at the Cedarburg Bankruptcy Law Center will be able to determine which bankruptcy chapter the debtors can file.

Repayment Plan:

If the debtors are required to file a Chapter 13 bankruptcy, a percentage of their disposable income (income after bills) will be designated for a repayment plan. The bankruptcy trustee will determine the amount of money to be designated for repayment of debts. Every month the debtors will make a payment to the trustee. The trustee will then distribute the funds between the debtors.

Priority and Non-Priority Debts:

Priority debts are paid first because they are the most important. These include wages owed to employees, child and spousal support and certain tax debts. After these are paid, any remaining disposable income is applied to the debtors' unsecured debts, such as credit cards and medical bills. These debts may be lowered by the trustee.

Bear in mind, that a repayment plan must include the debtors' house payments, car loans and any arrearages that exist on those bills.

Debtor Education Course:

Prior to discharge of a Chapter 13, the debtors must take a debtor education course where they learn about managing their finances after bankruptcy.

Discharge of Debts:

Most repayment plans last from three to five years. After that time, all remaining debts are discharged by the bankruptcy trustee. Prior to discharging a Chapter 13 bankruptcy, the trustee makes sure that there are no arrears in child support or alimony. The trustee also checks to make sure that the debtors have completed a debtor education course.

A Chapter 13 bankruptcy will stay on the debtors' credit report for seven years. The filers will be able to apply for certain credit again after two months