Chapter 13 Bankruptcy Process

The processes to be followed under Chapter 13 or the “bankruptcy rules” are defined by the Federal Rules of Bankruptcy Procedure and the local bankruptcy court. To qualify for Chapter 13 bankruptcy, one need to enjoy a continuous flow of disposable income, which is the income remaining after meeting the cost of essential requirements. The process begins with the debtor filing a petition for bankruptcy to the federal bankruptcy court under whose jurisdiction he falls under. When a petition has been filed, the court sends a Notice of Commencement of Case to the bankruptcy petitioner and the creditors within fifteen days of filing the petition. The filing of the petition results in the issuance of automatic stay that brings about an injunction order on the creditors from initiating or resuming collection actions against the debtor until further orders from the court.

The debtor is required to present the court with a schedule of his income and expenditure, assets and liabilities, list of creditors and a “statement of financial affairs.” The statement of financial affairs has to include details like the income from various sources, payments made to creditors within 90 days of filing, details of property seized or garnished, property transferred within two years before filing for Chapter 13, losses to property within one year or after filing, details of property transferred within a period of ten years prior to filing the petition to a trust, and lot more to judge the financial position of the debtor.

The bankruptcy petition must be followed by a proposed payment plan, with information on the way to fully pay the “priority claims” unless otherwise agreed by the creditor. The priority claims also include all payments like the taxes and the fees connected with the filing for bankruptcy. Once the petition is filed and is met with the approval of the Court, the court will appoint a bankruptcy trustee who oversees the plan and sends it across to the various creditors for their approval. If met with the approval, the debtor has to make the monthly payments to the trustee who allocates the funds amongst the various creditors at the amount agreed upon until the debts are discharged or the duration of the time frame.