Chapter 13 bankruptcy is an interest-free repayment plan that allows you to combine your debts and repay all or part of them while protecting you from creditor harassment. It is an excellent alternative for debtors in Massachusetts whose financial problems cannot be helped by a Chapter 7. It often provides much greater protection to debtors who own significant assets or have income that would not be exempt in a Chapter 7. For example, if you own a home and foreclosure is on the horizon, or the finance company has threatened repossession, a Chapter 13 Bankruptcy filing will stop them in their tracks and you can then pay off the back balance gradually. Chapter 13 bankruptcy in Massachusetts is also a great option when you have a regular income but you still find yourself unable to pay all your bills at the end of the month.
Do I qualify?
In order to qualify for a Chapter 13 Bankruptcy, you will need to meet two general income requirements. First, you must have a regular source of income. Second, you must have sufficient disposable income. Put another way, you must have at least some income left over to distribute to creditors after you subtract your living expenses from your net monthly income.
How does it work?
There are specific and complex procedures involved in filing a Chapter 13 plan. First, your lawyer will need to prepare a detail financial summary of what and whom you owe, what your assets are, your monthly living expenses and income. Your attorney must also prepare a comprehensive proposal for repayment. Often a plan will call for different percentages of repayment for different classes of creditors. All of the items submitted must be prepared on court approved forms.
Once you file your petition and plan, the court will issue an Automatic Stay order, barring all creditors from taking any further collections or legal action against you, including foreclosure or garnishment. The court will set a date for a hearing. This hearing is called the ‘Meeting of Creditors.’ You and your creditors will be notified of the time, date and place of this meeting, and you will be required to attend this hearing with your attorney and answer questions under oath about your financial matters.
The trustee appointed in your case will run the meeting. It is the trustee’s job to verify that the financial information you give. The trustee will then decide whether he can recommend to the judge that your plan be confirmed. At the meeting, the trustee may question you about your income, expenses, property, past earnings and the schedule of repayment.
The court will also notify you of the date of the confirmation hearing. At the confirmation hearing, the judge will determine whether your plan should be confirmed and allowed to proceed. The creditors may attend this hearing and offer any objections they may have. Your presence at the confirmation hearing is often not required. Once your plan is confirmed, you will simply make one payment a month to the trustee who will make payments to your creditors according to the schedule set out in the plan. You will start living your life again.
What will Chapter 13 Bankruptcy do for me?
Many of the benefits derived from a Chapter 13 bankruptcy cannot be obtained through the filing of a Chapter 7 Bankruptcy. Some of the many benefits that may be reaped from a Chapter 13 bankruptcy are as follows:
- You can stop a finance company from repossessing your car and make the back payments over a period of time.
- You can stop foreclosure proceedings against your property and pay off the back balance gradually. Such an extension is also available on back taxes.
- If your monthly payments on contracts are too large, you may be able to lower the monthly payment and possibly the interest rate.
- Depending on your circumstances, you may be able to pay the unsecured creditors far less than 100% of their claims with no interest after the date of filing.
- In most instances, you can stop any more interest from continuing on unsecured debts.
- You may be able to keep property that would have otherwise been given to your creditors in a Chapter 7.
- You may be able to stop collection activities against a person who cosigned a loan for you.
- You might be able to force a creditor to take back its collateral in full satisfaction of the claim.
- You can end further obligations to creditors whose services you have not fully received, such as from health clubs, dance studios, correspondence courses, leases, etc.
- For debts incurred before you filed your bankruptcy petition, no one can bother you, sue you, garnish your wages, or repossess property without court approval.
- You may be able to void certain liens against your household goods and against some other personal items.
- You can sometimes pay extra into the plan to get it paid off sooner.
- If there is a major change of circumstances, you can propose changes to your plan that would help you complete it.