The Chapter 13 Bankruptcy Process
Many people are reluctant to file bankruptcy, or to even consult with a bankruptcy attorney, because the process is unknown and seems frightening. So much so, in fact, that they are uncomfortable even asking for an explanation. For this reason, we will outline, below, exactly what happens when you file bankruptcy.
Once you have retained our firm you are free to so advise your creditors who keep calling your home at all times of day and night. They will generally stop calling you for a month while we prepare your papers. If the creditors call our office, we will confirm that you have retained us.
After we have filed your papers with the court, it is illegal for creditors to contact you or to continue any collection actions or lawsuits against you. By providing them with your case number, you will stop any residual calls.
Chapter 13 is designed to allow you to catch up on late payments to secured lenders (e.g., mortgages, car loans) and to pay your unsecured creditors without losing your assets. Before we file your case, we will calculate the amount you will have to pay each month to the bankruptcy trustee. He will then distribute this money to your creditors on a monthly or quarterly basis. Your first payment is due to the trustee when your case is filed, and must be made every month thereafter. This will prevent your case from being dismissed for not making payments. The payments are automatically taken from your checking account to make sure you do not default.
After your case is filed, you will have to keep making regular payments on all mortgages and equity loans, as well as car loans, leases and to any other secured creditors. You also must pay your real estate taxes, water, electric and gas bills, and all income taxes on time.
The first court hearing is held about a month after your case is filed. By that time you should have made your first payment to the trustee and your first post-petition regular payment on each of your mortgages. The trustee will then review the papers we have prepared for you, as well as your post-bankruptcy payment history. He or she will review your current pay stubs, your past tax returns, and your budget and consider whether it is likely that you can make the scheduled payments, and if the payments we propose are sufficient to meet bankruptcy code requirements.
The second hearing, held about one month after the first, will be with the Judge. If you have followed all the rules, the trustee will recommend court approval. After you make all scheduled payments (we usually arrange for you to have up to five years to make payments) you will receive in the mail a document entitled “Discharge of Debtor.” This should be saved, along with a copy of the papers you filed, to provide to creditors who bother you in the future.
If you don’t make scheduled payments to the trustee, he will ask the court to dismiss your case. If you don’t make payments to secured creditors, they will ask the court for permission to continue foreclosure and other actions to take your property away. Any of this will also increase your legal fees, so you are urged to take special care to make all payments when due.
If you have accurately provided us with all relevant information, we will carefully prepare your bankruptcy papers, and we will be at your side throughout the entire process, to enable it to be painless, and to allow you to start your life anew, without the burdens of past financial difficulties always following you.
Although Chapter 13 bankruptcy stays on your credit report for seven years after you receive a discharge, once the case is filed, you will be able to start building a new credit record. The key is to actively try to build a post-bankruptcy credit record but obtaining a secured credit card, a passbook loan, or paying on your car loan or lease. You can get a mortgage for a new home, under certain lending programs, after only one year, if you are making your plan payments on time. If you decide to sell your home, you may do so, with the trustee’s cooperation, provided you pay off the balance due under your plan, at the closing.
The bankruptcy process will bring you a keen awareness of your current living expenses, and what income you have available to meet these payments. Instead of using all your free earnings to pay never-ending credit card interest and late charges, you will be able to pay all your current living expenses with your current earnings, using the bankruptcy plan payments to meet your old obligations, which are gradually paid off. Secured creditors can’t take your home or car (provided you make the payment to the trustee plus the current monthly payment to the creditor), and unsecured creditors are paid without any additional interest or late fees.
Contact Our Staten Island Attorneys For Help With Debt Payment Plans
If you are overwhelmed by debt, our lawyers can help determine the debt relief option that is right for you. Contact us online or call 718-442-4424 to schedule an appointment to discuss your situation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.