Chapter 13 bankruptcy is a common form of bankruptcy used by wage earners. It is essentially a repayment plan that allows you to keep your property, unlike Chapter 7 bankruptcy. However, you might wonder which creditors you will pay under Chapter 13 bankruptcy. This is something you should ask your attorney about to know the specifics, but there are some general guidelines that are followed.
Establishing Your Repayment Plan
Before your repayment plan is determined, you will need to meet with your creditors. It is mandatory for you to attend, but the creditors can choose to not attend. You might be nervous about attending, but the best way to overcome this is to know what to expect before you go.
During the meeting, you will need to disclose financial records. You will meet with your attorney and a trustee to discuss your financial records with the creditors. The trustee is responsible for determining the structure of your repayment plan, and this will be based on your current financial situation.
What Your Creditors Want
Your creditors want to maximize the odds that they will recoup as much of what you owe them as possible. They want to make sure that you are using your disposable income to pay your debts. Therefore, they will ask questions that are meant to make sure that you're not concealing any sources of income.
How To Make Your Payment
You do not have to pay the individual creditors. Instead, your payment each month will be made to your trustee. You may not have to pay all of your debts because your debts will be discharged after three to five years. You will make payments for three years if your income falls below the median income for your state and you will pay for five years otherwise.
If you qualify for a 3-year plan under Chapter 13, you can still choose the 5-year plan. You may do this because you're trying to make your house and car payments current. One of the advantages of Chapter 13 is that you may be able to save assets that you haven't paid off yet by catching up on your payments.
When Your Circumstances Change
If your circumstances change, you might also be able to change the length of your plan. However, you will always want to work with an attorney so you do not make a mistake that could cause you to look dishonest.