Everyone goes through tough financial times occasionally. An unexpected car repair, an illness that requires days off work or a rare splurge may set you back for a few weeks. Unfortunately, for many, even the slightest bump in the road can cause their budgets to crumble, leaving them struggling to stretch their paychecks further each week. Soon, the money coming in no longer covers the bills, and creditors begin to demand their payments.
If you are in the situation of facing a mountain of debt you can't pay each month, you may be giving serious consideration to filing for bankruptcy. When your priority is to keep your home, Chapter 13 may be the option that best fits your circumstances. You may have many questions about how this process works and what is expected of you.
Filing for bankruptcy
Briefly, Chapter 13 is a reorganization of your qualifying debts. You create a three-to-five-year payment plan and present it to your creditors. If the Tennessee court approves your plan and you make your payments faithfully, the court may order the remaining debt discharged at the end of the term.
Your first step is to determine if you qualify for Chapter 13. Among other things, this includes completing a program of credit counseling and obtaining a certificate. When you file for bankruptcy with the courts, you will include this certificate along with these additional documents:
- A detailed list of your liabilities, assets and expenses
- Proof of all sources of your income for the last 60 days and information from your employer about any expected raises or bonuses in your future
- Financial contracts and leases which are still active
- Information about any government educational loans
- Copies of the most current tax returns you have filed
- The required fee for filing
Once you have submitted this information, an automatic stay goes into effect, which stops most of your creditors from seeking payment or taking collection actions, including foreclosures and wage garnishments.
The court will appoint a neutral party to be the trustee. This person's responsibility is to collect your monthly payments and disperse them to your creditors. You and the trustee will meet with your creditors within a few weeks after you file, and the creditors will have the opportunity to question you under oath about your finances and the plan you have proposed.
After you, your trustee and your creditors have reviewed your plan and your creditors have had a chance to object to any parts of it, you will meet with a judge. If the judge approves your plan, you will begin implementing it with the hope of emerging debt free with a brighter future.