Those interested in declaring bankruptcy without giving up most of their assets often file chapter 13, which requires that a portion of the debt owed be paid off over time. This is often best for people with regular income and nonexempt property that they wish to keep, as it involves creating a payment plan that satisfies their creditors. Of course, there are strict rules in place in order to qualify for this type of bankruptcy. They include showing evidence of the ability to pay off debt monthly, taking credit counseling, and being able to prove that secured and unsecured debts are not over the maximum limit allowed for chapter 13 bankruptcy.
One of the first chapter 13 bankruptcy rules is often credit counseling. This step not only lets the debtor know what most likely comes next for their financial situation, but also lets them know if they are even eligible for this form of bankruptcy. Those eligible include individuals with jobs, and sole proprietors with regular monthly income that will allow them to pay back at least a portion of their debts every month. The chapter 13 bankruptcy rules establish specific limits for both unsecured debts, and secured debts that can vary over time.
Once eligibility is determined, the debtor must submit a petition to his or her area's bankruptcy court to show an intention to declare this type of bankruptcy. According to chapter 13 bankruptcy rules, the documents required to be submitted with this petition include a list of assets and liabilities, financial statements that show income, the names of both unsecured and secured creditors, and the total property, real estate, and debt. In addition, all monthly expenses must be added up so that the amount available to pay creditors each month can be decided.
As soon as the bankruptcy is filed in court, creditors are notified so that they will not continue to harass debtors for their money. At this point, a trustee takes over, and the debtor must submit a proposed repayment plan to him within about two weeks of filing, according to chapter 13 bankruptcy rules. The plan will need to be approved by the trustee, creditors, and court before payments can be begin, and they are usually made at least monthly for up to five years until the debt is paid off. Chapter 13 bankruptcy rules require that all monthly payments be made to the trustee, rather than to the creditors, so that he can disburse the payments among each creditor every month as agreed.
