Chapter 13 Bankruptcy Haverhill

Since the 2005 introduction of the Bankruptcy Abuse Prevention and Consumer Protection Act, Chapter 13 has grown in popularity. Initially designed for the working individuals with consistent income, Chapter 13 is commonly called the "wage earner's plan." Chapter 13 is much different from Chapter 7 in that it gives individuals the opportunity to pay down debts over time, ultimately restoring relationships with creditors. Debtors create a payment plan that outlines how debts will be paid within a five year period. An added benefit is that during the repayment period, creditors cannot make new efforts to collect payment. This statute reduces the day-to-day frustrations of being in outstanding debt. However, if the debtor fails to make his or her payments as agreed in the plan, the court may dismiss the case or convert it into a Chapter 7 liquidation claim.

How it Works

All applicants must first file a petition with the local court. These forms should include list of assets, liabilities, current income, expenditures, all financially-binding contracts, unexpired leases, and all other things regarding financial affairs. The debtor must go through credit counseling and have proof showing that they have done this. Filing jointly as a married couple is acceptable.

After the appropriate forms have been filled out, an impartial trustee is appointed to administer the case. This person evaluates the case objectively, serves as the payment disbursing agent to the creditors, and informs the creditors that a bankruptcy petition has been filed, initiating an “automatic stay.”

Within eight weeks, a mandatory meeting is set up between all interested parties, including the creditors, the trustee and the debtor(s). The nature of the applicant's financial situation is discussed at length during this meeting. Judges are not in attendance. Be sure to consult with your attorney and also the trustee prior to the meeting to expedite the process.

Chapter 13 Protections

An “automatic stay” is immediately in effect once the petition has been filed, preventing creditors by law from trying to make collections on debts. Chapter 13 bankruptcy also protects co-debtors and can be used to stop foreclosure proceedings. The individual is then given a chance to bring the past-due payments current over a reasonable period of time.

The Repayment Plan

Applicants must submit a repayment plan within 15 days after the petition is filed. Three kinds of claims are usually identified in the plan: priority claims, secured claims, and unsecured claims. Priority claims involve taxes and associated bankruptcy fees that must be paid first. Secured claims involve debts attached to property liens. Unsecured claims refer to all other forms of debt. Only priority claims must be paid in full.

Payments, as outlined in the plan, should begin within thirty days of filing. Plans may be modified before or after their confirmation. The debtor is allowed to make payments through payroll deductions. This is useful as it increases the chances that payments will be made on time. As you begin your road back to financial health, your credit rating will be restored eventually.

All of the information provided is not meant to be substituted for legal counsel. It is meant to provide only information rather than be the sole source of advice.

If you have any questions for our Haverhill bankruptcy lawyers, don't hesitate to call us at 561-353-2500.

Portions reprinted from the office of the US Department of Justice.