If you are in debt and need a way out, you could evaluate bankruptcy. If you discover that you would only qualify for Chapter 13, you should learn as much as you can about it before you decide to use it. Here are some crucial things to know about the way this branch of bankruptcy works.
You Find Relief Through an Automatic Stay
One vital thing to understand is the automatic stay you receive once you file for this branch of bankruptcy. The automatic stay prohibits your creditors from any form of communication with you. Through this order, you no longer receive phone calls from your creditors. You will also see an end to the letters they mail you or emails they send. They should not hound you or ask you for money that you owe. If they do, they are breaking the law.
Your Lawyer Works on a Repayment Plan
The purpose of a Chapter 13 case is to provide you with a plan to use for repaying your debts. To determine the amount you must pay, your lawyer will closely examine your income, expenses, and debts. Lawyers separate debts into two primary categories, which are priority and non-priority debts.
Your payment plan offers a way to pay off all your priority debts during the next few years. Priority debts include mortgage payments and arrears, child support payments, car loans, and IRS back taxes. During the repayment plan, the money you spend on these payments should catch up with every priority debt you have.
You Make Payments for Up to Five Years
You will have to continue making the payments for the plan for up to five years. Some people can obtain three-year plans, but most people have plans for five years. You must make every payment in the program. Failing to do so could result in a dismissal of your case.
The Trustee May Then Discharge Remaining Debt
The other debts you owe money on are non-priority debts. For example, you might have unpaid medical bills. If so, you probably will not pay these off with the plan, although some people do. If you still owe debts like this after you complete the program, the trustee may discharge the debts. Trustees generally do this when people follow through with their plans according to the agreed-upon amounts.
These are the principles of a typical Chapter 13 bankruptcy case. For more information, contact a resource that offers Chapter 13 bankruptcy services such as C. Taylor Crockett, P.C.