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Photo of attorneys Shelley Slafkes and Bruce Levitt
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Understanding How Chapter 13 Works

On Behalf of | May 10, 2017 | Chapter 13 Bankruptcy

Most people who file for bankruptcy have been struck by an unexpected event that caused severe financial challenge. Illness or injury and medical bills may have eaten right through all your savings and extra income, or unemployment may have stopped you in your tracks. Whatever the case, bankruptcy can act as a powerful financial tool for getting back on track-especially with the help of an experienced attorney from a law firm like Levitt & Slafkes, P.C..

Chapter 7 v. Chapter 13

The most common types of personal bankruptcies filed are Chapter 7 and Chapter 13. While Chapter 7 generally allows for the discharge of almost all debts within three to six months, there are many reasons you may want to file for Chapter 13 instead. First, there is little choice in the matter if you can’t pass the means test, showing that your income is lower than the median household income in your state. Second, you may not want your non-exempt property sold off to pay creditors, as in a Chapter 7. Last, you may be concerned about foreclosure of your home or repossession of your vehicle. While such threats can be temporarily delayed in Chapter 7, if you file for Chapter 13, you may be able to stop foreclosure or repossession altogether.

What to Expect in Chapter 13

Once you file, the automatic stay will put an immediate halt to all collection activity. This may be quite a change from what you’ve been experiencing over the last months, or even years. The stay will be in effect for the duration of your bankruptcy, usually lasting three to five years, as you repay creditors. A trustee will be assigned to your case, and then a repayment plan will be created, generally allowing you to keep your property and possessions. You will have to attend the Meeting of Creditors (also known as the 341 Meeting), where you answer routine questions about your finances from the trustee, as well as giving any creditors who show up the chance to ask questions. There will also be a Confirmation hearing, where the trustee approves your plan.

Creditors will submit all their claims, and after that, you begin making payments to the bankruptcy trustee, using all your disposable income (calculated after all necessary expenses). The trustee is then in charge of making sure that all your monthly payments go to the creditors as designated, including larger payments like that of your mortgage or car. You may even be able to include some business debts in your repayment plan.

You will have to attend a financial counseling course at the end, and after that-if the repayment plan is complete-you will receive your discharge.

Questions About Bankruptcy? We’re Here to Help!

The experienced attorneys at Levitt & Slafkes, P.C. can answer all your questions regarding bankruptcy issues. Contact us today so one of our attorneys can evaluate your case and discuss the best options available to you. We are here to help! Call us at 973-323-2953, or contact us online to schedule a free consultation.