If you are facing financial trouble, then as a debtor evaluate the numerous options that lie before you to tide over the situation. Any individual who has a continuous and regular income flow, and has debts less than amount fixed by law can explore the option of filing for Bankruptcy under Chapter 13.
As a preliminary step, the debtor has to file a petition for Chapter 13 to the federal bankruptcy court along with the defined documents and the filing fee. The fees include $235 as the filing fee and $39 as the miscellaneous administrative cost that needs to be remitted within the stipulated time frame. The documents that a debtor has to pay before the court are a schedule of assets and liabilities, current income and expenditures, executory contracts, and unexpired leases.
Details of exempt assets, if any, also need to be filed. The debtor has to explain in detail the best approach of meeting his outstanding debts that has to be submitted before the Court for its scrutiny. When the petition is filed, the Court will issue an automatic stay that places a stop over any redemption action taken by the creditors. When the Court calls for a meeting with the creditors within 20-50 days of filing the petition, the debtor has to make himself present for the same. Consumer credit counseling has been made mandatory for the debtor filing for bankruptcy under Chapter 13 from the year 2005 to entitle him for the same.
The bankruptcy court will appraise the income and outstanding debts standing to the account of the debtor and if satisfied, will sanction the approval for Chapter 13. Where the current monthly income of the debtor is less than the state median, then he is to follow a three year plan of repayment, but where the current monthly income is greater than the existing state median, the plan will be for five years. The Court will appoint a Trustee who is to distribute the money received every month from the debtor to the creditors at the agreed rates.
But, a debtor has to be fully aware of the repercussions Chapter 13 holds over his credit report as it gets reflected negatively for the next ten years. Always seek this option as a last resort when the other options fail to make an impact.
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