A Chapter 13 bankruptcy in Virginia is designed for people with income to repay all or a portion of their debts over three to five years. During the three to five year period, creditors cannot begin or continue attempts to collect debts.
There are some benefits of Chapter 13 not offered by a Chapter 7 bankruptcy. A Chapter 13 allows homeowners a chance to save their home from foreclosure. Instead of foreclosure, under Chapter 13 debtors can catch up on their late mortgage payments over time. However, all payments due under the plan must be made on time during the Chapter 13 plan. Another benefit is that Chapter 13 allows debtors to make payments directly to a trustee, who will distribute payments to the creditors, meaning that debtors will not have any contract with creditors during the payment period. Chapter 13 also allows debtors to reschedule secured debts and extend them over the life of the repayment plan.
Once a debtor decides to file a Chapter 13 bankruptcy, he or she files a petition with the bankruptcy court in his or her area. Along with the petition, a debtor must file information about assets, liabilities, income, expenses, and other financial information. The debtor must pay filing fees at the time of filing the petition, although those can be waived in some cases. The filing of the petition will stop most collection actions against the debtor, although there are exceptions. Any foreclosure proceedings will also be stopped, and the debtor can bring the past-due payments current.
After the petition is filed, a trustee will be appointed to administer the case. The trustee will hold a meeting between the creditors and debtors after the petition is filed. After the meeting, there will be a hearing on the debtor’s repayment plan, which must be submitted with the petition or shortly after the petition is filed. Within 30 days after filing the case, the debtor must begin making payments to the trustee. The trustee will disburse fixed payments from the debtor to the creditors according to the plan. Creditors may not get full payments on their claims, depending on what type of claims are involved.
Once all payments have been made under the Chapter 13 plan, the debtor is entitled to a discharge. The discharge will release the debtor from all debts provided for in the plan. Some debts will not be discharged in a Chapter 13, such as debts for alimony or child support, some taxes, most student loans, debts from injuries because of the debtor’s drunk driving, and debts related to a criminal conviction.
If you are ready to be debt free, call (757) 340-3100. We will schedule a no cost, no obligation appointment so we can show you how to become debt free.