How chapter 13 bankruptcy works
Chapter 13 bankruptcy provides protection under the “Automatic Stay”!
Chapter 13 bankruptcy begins with you filing of a petition at the bankruptcy court serving the area where you live. Unless the court orders otherwise, you’ll need to file:
- Schedules of assets and liabilities,
- Schedule of current income and expenditures,
- Schedule of executory contracts and unexpired leases, and
- Statement of financial affairs
Chapter 13 personal bankruptcy – required documents
In order to complete the Official Bankruptcy Forms which make up the chapter 13 petition, statement of financial affairs, and schedules, you will need to gather the following information:
- A list of all creditors, amount still owed;
- The source, amount, and frequency of your income;
- A list of all your property; and
- A detailed list of your monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
A husband and wife may file a joint petition or individual petitions and the above detailed data must be gathered for both spouses. So financial responsibilities can be accurately assessed when only one spouse files, the income and expenses of the non-filing spouse should be included in your schedules and statement of financial affairs.
Once you file your chapter 13 petition, an impartial trustee is appointed to administer the case. The primary role of the chapter 13 trustee is to serve as a disbursing agent, collecting payments from you and making distributions of these funds to your creditors.
The automatic stay under Chapter 13 Bankruptcy
Filing chapter 13 “automatically stays” most collection actions against you or your property. As long as the “stay” is in effect, creditors generally cannot initiate or continue any lawsuits, wage garnishment, or even telephone calls demanding payments.
Creditors receive notice of the filing of the chapter 13 bankruptcy petition from the clerk or the trustee. Further, chapter 13 contains a special automatic stay provision applicable to creditors.
Specifically, after the commencement of a chapter 13 case, unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a “consumer debt” from any individual who is also liable with you. Consumer debts are those incurred by the consumer (you), as opposed to business needs.
If you are faced with (or threatened with) foreclosure of the mortgage on your principal residence, filing a chapter 13 bankruptcy petition can prevent an immediate foreclosure by virtue of the automatic stay!
Chapter 13 then gives you the right to cure defaults on long-term home mortgage debts by bringing the payments current over a reasonable period of time. Under state law, you are permitted to cure a default (catch up past due payments) with respect to a lien on your principal residence up until the completion of a foreclosure sale.
You must file a repayment plan with the chapter 13 petition or within fifteen days after filing the petition, unless extended by the court for cause.