Making the decision to file for Chapter 13 bankruptcy is not easy. It will affect your credit, your personal and business reputation, and even your own image. On the other hand, it can greatly improve your quality of life in the short term, as the persistent letters and calls from debt collectors stop. In Chapter 13 bankruptcy, you make an agreement to pay off your debts in part or in full over a period of three to five years. Here are four critical things to know if you are almost ready to apply.
1. Understanding of paperwork
Chapter 13 bankruptcy paperwork is complex and can be overwhelming. From the beginning, it is important to be accurate, honest, and complete when completing all forms. On average, the documentation, including the petition, schedules, and payment plan, can be over 40 pages long. You will need to provide detailed information about your assets, debts, expenses, income, and complete financial history. If something is missed, you will run into problems later and will be asked to fill out additional paperwork and pay even more fees. More importantly, if you omit a creditor, that debt may not be discharged and your case could be dismissed if you cannot make an amendment.
2. Understanding of tax and internal maintenance debts
Under a Chapter 13 bankruptcy, you will be required to pay all tax debts you have from the previous three years, in addition to all tax debts where the government has filed a bond on your property. You will have the option of spreading those payments over time, and the only way to discharge tax debts is to request an individual assessment of your specific situation. For domestic support obligation debts, which include alimony and child support, you must keep those payments current or your plan will be canceled.
3. Understanding the importance of your budget
To be successful, you must create and stick to a realistic budget. If your budget can’t consistently support your repayment plan, then you should consider other options than bankruptcy. To calculate your budget, remember that your ability to make payments is based on the amount of your disposable income. That disposable income is what you will have to pay back to your plan each month. If you stay committed to your budget for the next three to five years, you can expect to be successful.
4. Understanding the consequences of late payments
Finally, it is important to know that if due to hardship you cannot finish your payment plan and you fall behind in payments, your bankruptcy trustee may make modifications to your plan, or the judge may allow you to cancel all your payments. debts based on your difficulties. Examples of what qualifies as a hardship are losing your job due to circumstances beyond your control or suffering from an illness.
Armed with these important tips, your Chapter 13 bankruptcy should proceed smoothly.