Chapter 13 bankruptcy is one of two common branches of bankruptcy, and this branch is often better for people who have debts that would not qualify for discharge through Chapter 7. If you decide to file for Chapter 13, here are three important tips that will help you get through your bankruptcy case.
You Will Have a New Budget
One benefit of filing for bankruptcy is the instant relief you will experience after filing. While Chapter 13 bankruptcy is very different than a Chapter 7 case, both branches offer automatic stays. The bankruptcy court orders the automatic stay once it receives your filing documents, and the automatic stay stops creditors from contacting you in any way.
Before you can file for Chapter 13, your attorney will help you file the necessary documents and will create a repayment plan for you. This plan will consist of payments you must make to the bankruptcy trustee, and the trustee will use this money to repay your debts according to the schedule in the plan.
The payments you must make will become your new budget, and your lawyer will determine what the payment amount is by looking at your income, bills and debts.
After making your payments to the trustee each month, you should have enough money left for all your basic needs, including gas, food and entertainment; however, you probably will not have a lot of extra spending money. This will become your new budget and lifestyle for the next three to five years, and you should find a way to make this work.
You Will Have to Learn New Spending Habits
Once you begin the bankruptcy case, you will need to do everything you can possibly do to stick with the plan. While this may mean that you will have to give up certain types of expenditures, you should remember that the plan is only temporary. The longest amount of time a plan lasts is five years, and many people have repayment plans for only three years.
One of the best things you can do during your repayment plan is learn how to better manage your spending. You will have to make every payment to the trustee, which means this should be the most important bill you pay each month. After paying it, you will have to learn to live on whatever money is leftover, even if it is a lot less than you are used to.
Missing payments to the trustee is something you should avoid at all costs. If you miss a payment, the trustee can dismiss your case, which could leave you in the same position you were in before you filed.
The benefit of going through a three to five-year repayment plan is that you might develop better spending habits that you will continue utilizing even after you complete the plan. If so, you could avoid falling into debt in the future.
You Might Experience Changes in Your Plan
At any time during your repayment plan, the trustee may decide to modify your plan. Trustees typically modify plans only when necessary, and this generally occurs if changes happen in your life. For example, if you get a better-paying job, the trustee might increase your payments. If you incur a new medical bill, the trustee might also increase your payments to account for this.
As you work through your plan, it is your responsibility to notify the trustee when any financial changes take place.
If you currently have too many debts and not enough income, contact W. Mack Rick, P.A. Attorney at Law. Our law firm offers bankruptcy services and will help you determine which branch to file. We can also help you through the entire bankruptcy process to make it as simple as possible.