What is a Chapter 13 Bankruptcy and how does it work?

Chapter 13 is one form of bankruptcy in which you obtain relief from your creditors and submit a plan to pay your debts over a period of generally not less than 36 months and not more than 60 months.  The Court prohibits your creditors from trying to collect any money or taking property from you during the time you are in your Chapter 13 case.  You must make a regular payment by Official Bank Check, Cashier's Check, or Postal Money Order to the Chapter 13 Trustee within 30 days after filing your plan and payments must be for the period of time designated in your plan.  Your first "plan payment" must be delivered to the Trustee within 30 days of the filing of your case.  Thereafter, your plan payments are generally made by payroll deduction from you paycheck at work.  The money collected by the Chapter 13 Trustee is disbursed to your creditors according to the plan after it is confirmed by the Court.

You will attend the First Meeting of Creditors about 6-7 weeks after you file.  If the trustee is satisfied with your payment plan, he or she will recommend its approval by the judge.  A few weeks after the First Meeting of Creditors, the judge normally confirms (approves) your plan if no creditor opposes it and the trustee has recommended it.

When a creditor or the trustee objects to a plan, the judge usually holds a hearing within a few months to determine whether your plan should be approved over the objection.  It is also possible for you to resolve the objection before the judge's hearing by amending the plan to satisfy the objection.  If your plan is confirmed, and you make all the payments called for under your plan, you will receive a discharge of any balance owed on all dischargeable debts at the end of your case.