In these troubled economic times, more and more people are considering filing bankruptcy as a way of relieving themselves of excessive debt. Not many people know that they can file for bankruptcy under either Chapter 7 or Chapter 13 of the Bankruptcy Code and, should someone be contemplating filing bankruptcy, they should first consult with a Milwaukee bankruptcy attorney to determine exactly which chapter they should file under.
If a debtor wishes to obtain relief from his debts while still retaining ownership of all his assets then Chapter 13 bankruptcy is for him. The basic idea is that the debtor pays a set amount to his trustee every month, which is then distributed among the debtor's creditors in terms of the debtor's Chapter 13 Repayment Plan. The debtor would not be obligated to sell any of his assets and would not lose his house or financed car as long as he keeps current with the payments to be made in terms of the Plan.
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To file under Chapter 13, the debtor will have to prove that he has sufficient disposable income to afford the monthly payments that he must make in terms of the Plan. In this context, disposable income is defined as the amount that the debtor has left every month after he has paid all of his reasonable monthly living expenses out of his monthly income. Should he be able to make his proposed payments, his bankruptcy attorney would then assist him with completing and filing the bankruptcy petition, schedules and certificate of credit counseling required for a Chapter 13 filing.
Once the bankruptcy petition has been filed, an automatic stay comes into existence, which means that creditors can no longer contact the debtor directly to ask for payments. The debtor would then have to attend the section 341(a) meeting along with his attorney, where he will be questioned by his court-appointed trustee. After the meeting is concluded, the debtor should immediately file his Repayment Plan and begin his payments, so that he can fulfill his obligations in terms of the Plan and obtain a Chapter 13 discharge as soon as possible.
The debtor must, however, continue to make his mortgage payments, on time and in full, outside of the Plan, as well as any relevant leased car payments. All other debts will be paid in terms of the Plan, including mortgage arrears, financed vehicle costs and past due taxes owed. Furthermore, creditors cannot add interest to the claimed amounts and, if anything is still owing after the Plan has been fully implemented, it must be written off. A Chapter 13 Plan should take between 36 and 60 months to fully implement, after which the debtor will be able to obtain a discharge.
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