Chapter 13 bankruptcy offers individuals a path to financial freedom while keeping their assets. The process comes with specific responsibilities to ensure a successful outcome.
Understanding Chapter 13 bankruptcy obligations can help filers navigate the complex bankruptcy process more confidently and efficiently.
Complying with the repayment plan
One of the primary responsibilities of a Chapter 13 bankruptcy is sticking to the repayment plan approved by the court. This plan outlines how the filer will repay their debts over time. Failure to make the agreed payments can result in the dismissal of the bankruptcy case, resulting in loss of bankruptcy protection.
Attending mandatory meetings and hearings
Filers must attend all mandatory meetings and hearings, including the meeting of creditors and a confirmation hearing. The meeting of creditors allows creditors to ask questions about the filer’s financial status and the proposed repayment plan. The confirmation hearing is where the court decides whether to approve the repayment plan.
Submitting regular income documentation
The court requires income proof. This typically submitting pay stubs and tax returns to the bankruptcy trustee. These documents allow the trustee to verify that the debtor’s income supports the repayment plan and that all disposable income is used towards repayment.
Maintaining regular tax filings
Filers are required to stay current on their tax filings during the bankruptcy process. All federal and state tax returns must be filed for four years before filing for bankruptcy. Failure to maintain up-to-date tax filings can lead to a case dismissal or the court refusing to discharge the debts.
The principal goal of this type of bankruptcy is to provide a structured repayment plan to the filer, allowing them to repay all or part of their debts over three to five years. It offers protection against the seizure of their assets, such as their home or vehicle, provided they fulfill their repayment obligations under the plan.