What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is quite a bit different than Chapter 7 bankruptcy.  When people think of bankruptcy, they probably are thinking of Chapter 7.  Chapter 7 is known as “straight” bankruptcy, and it is relatively quick and straightforward to navigate.

Chapter 13 is much different than Chapter 7, but it still has the general benefits of bankruptcy.  Like any other bankruptcy, when the bankruptcy petition is filed with the court, something called the “automatic stay” goes into effect.  The automatic stay is like a door slamming shut on your creditors.  Once it is in place, your creditors cannot attempt to collect a debt in any way.  That means no more harassing phone calls and no more nasty collection letters.  If you have been sued by a creditor, the automatic stay will stop the lawsuit.  Not only that, but if you have a judgment against you, and the creditor is trying to enforce the judgment (either on your property or bank account), the automatic stay will stop the creditor from enforcing that judgment.

In our area, when people fall on hard times they may also fall behind on their mortgage.  In this situation, Chapter 13 can be used to catch up on the mortgage arrears and fend off foreclosure.   In fact, the main reason to file Chapter 13 is to save a home.  There are other reasons to file Chapter 13.  For instance, Chapter 13 is a useful tool to pay off tax debts, whether it be the IRS, the PA Department of Revenue, or any local taxing authority.

In short, Chapter 13 is best described as a household reorganization.  The chapter 13 debtor is paying money to his or her creditors on a monthly basis.  There is a “Plan” of reorganization that must be confirmed by the Chapter 13 Trustee.  That Plan can last anywhere from three to five years.  The amount paid back in the Plan depends upon the nature of the debt, how much debt there is, and the income of the debtors who filed the Chapter 13.  A good bankruptcy lawyer, well versed in the intricacies of Chapter 13, can guide you and educate you in this process.

Much like Chapter 7, you should only have to attend one hearing.  The hearing takes place some thirty to forty-five days into the case.  This hearing isn’t even in a courtroom and it is not in front of a judge.  In fact, the Chapter 13 hearings in our area take place at a local hotel.  A Trustee conducts the hearing and it shouldn’t even last very long.  If you have an attorney, he or she will accompany you and sit beside you during the hearing.

If you find yourself too deep in debt, and cannot possibly pay your bills, I can help.  If you are facing a foreclosure, utility shut off, or lawsuit, I can help.  Please call my office at (814) 240-1013 or email me at richarda@johnstownbankruptcy.com with your questions.  The first office consultation is free and payment plans are accepted.

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