San Jose Bankruptcy Attorney explains the Chapter 13 bankruptcy process
San Jose Bankruptcy Attorney explains the Chapter 13 bankruptcy process.
There are two principal types of bankruptcy filings for individuals, Chapter 7, which is a liquidation process, and Chapter 13, a reorganization process. This article will explain the Chapter 13 process.
Chapter 13 bankruptcy is a reorganization plan that allows a debtor to repay his or her debts back over a period of time, typically three to five years. This type of bankruptcy filing is most commonly used by a debtor who does not have the current income to repay all of his or her debts in full. The debtor must present a plan to the court that shows that he or she has the income to repay the debts with the extended time period. Under a Chapter 13 bankruptcy filing, the following debts must be paid in full:
- Wages you owe employers
- Any taxes that you owe
- Any domestic support obligations
- Mortgage payments
- Car payments
As with a Chapter 7 bankruptcy filing, the debtor must take a credit counseling course and present proof of completion of that course must be presented to the court. The filing of the petition under Chapter 13 "automatically stays" most collection actions against the debtor, or the debtor's property, while a repayment plan is worked out under the supervision of the courts. As long as the "stay" is in effect, creditors generally cannot initiate or continue any lawsuits, make wage garnishments, or even make telephone calls demanding payments.
For example, by virtue of the automatic stay, an individual debtor faced with a threatened foreclosure of the mort1gage on his or her principal residence can prevent an immediate foreclosure by filing a Chapter 13 petition with the bankruptcy court. Chapter 13 then gives the debtor a right to cure defaults on long-term home mortgage debts by bringing the payments current over a reasonable period of time.
