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What happens after one files for Chapter 13 bankruptcy?

For some people in Louisville who earn an adequate income, but still find that they have more debts than what they can pay back, filing for Chapter 13 bankruptcy is an option they may want to consider. They may wonder though, what happens after they initially file for Chapter 13 bankruptcy.

In general, after a person files for Chapter 13 bankruptcy, he or she has 15 days to submit to the court a repayment plan for the court's approval. This plan must include fixed, regular payments that will be made to the bankruptcy trustee. The trustee will then use these funds to pay back the person's creditors, per the terms of the repayment plan.

Through the repayment plan, the debtor is obligated to repay any priority claims in full, except if the creditor agrees otherwise. These include items, such as court costs and taxes. Secured claims, which have collateral attached to them, and unsecured claims, which are not attached to any collateral, are also addressed through the repayment plan. But, in some situations, it may not be necessary to pay these claims in full.

Once there is the meeting of creditors, within 45 days a confirmation meeting needs to be held. At this meeting, the court will determine whether the proposed repayment plan will work and is in line with the Bankruptcy Code. Creditors will be told of the hearing at least 25 days in advance, so they can object to the plan if they want.

After the court approves the repayment plan, the bankruptcy trustee will begin making distributions, per the terms of the repayment plan "as soon as is practicable." If the repayment plan is not approved by the court, the person may submit a modified plan. Alternatively, the Chapter 13 filing may be converted to a Chapter 7 filing, and the debtor's assets will be liquidated to pay back his or her debts.

This is only a brief overview of what happens after a person files for Chapter 13 bankruptcy. Since there are many steps involved, and the Bankruptcy Code is complex, a person may not want to file for bankruptcy alone. Instead, he or she may want to seek professional help when filing for bankruptcy, to ensure all paperwork is properly completed and filed on time.

Source: FindLaw.com, "Chapter 13: Repayment Plan and Confirmation Hearing," accessed on Feb. 13, 2017

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