How to file Chapter 13 bankruptcy

Hopefully, if you’re reading this, you’ve looked into different ways to resolve your debt woes before jumping straight to bankruptcy. For most people, these debt relief options include debt settlement, debt management, and even debt consolidation if your finances aren’t too far gone. But if you’re considering Chapter 13 bankruptcy, we’ve got you covered. Here’s how to file Chapter 13.

Most debt experts consider bankruptcy an option of last resort because of the long-lasting impact it can have on your credit. And Chapter 13 has the added impact of the filer not being able to apply for credit or seek financing for the duration or their supervised repayment plan, which for most is a five-year period.

Related article: Bankruptcy: The differences between Chapter 7 & Chapter 13

If you’ve done the research, including talking to credit experts, and bankruptcy is, in fact, your only solution, then it’s time to understand just how the process works.

How to choose a bankruptcy attorney

As with many debt relief solutions, you can file for bankruptcy on your own, but it’s not essy and the likelihood that your DIY efforts will fail are pretty high.

“I have talked with people who left something out of their bankruptcy process that then had to be paid, and far in excess of what it would have cost to hire an attorney,” said Michael Bovee, co-founder of Resolve.

While it may be tempting to do it yourself to save money, you really are better off relying on a professional who will represent you at all court hearings and make certain all appropriate documents are prepared and filed. Also keep in mind that most attorney fees in a bankruptcy case can be included in the filing, which means your attorney gets paid from your payment plan, not up front and out of pocket.

Do you qualify for Chapter 13?

The type of bankruptcy you qualify for will depend on how much debt you have and whether you have the income to repay some or all of those debts. If your debts are too high, you may not qualify for Chapter 13 (learn more about the types of bankruptcy). If you do not have reliable income, or sufficient income, to pay back your debts, you also may not qualify. This could actually be a positive since you could qualify for Chapter 7 if your income is not sufficient. Chapter 7 does not include a repayment plan, but instead forgives your debts, though it remains on your credit report for 10 years instead of seven years as Chapter 13 does.

Your bankruptcy attorney will be able to review your financial situation with you and help guide you to the appropriate filing.

Filing your Chapter 13 paperwork

Again, you can do this yourself, but most debt experts agree you’re better off relying on your bankruptcy attorney to file these forms for you. Using an attorney will help ensure everything is completed correctly and all the necessary forms are filed with the court. Once the court has approved your case, it will be handed over to a trustee, who will oversee your repayment plan for the next three or five years. A filing fee will also be required at the time you submit your documents.

Around the same time, you’ll provide the trustee overseeing your case with proof of income and other financial documents showing your ability to successfully begin a repayment plan.

Complete the necessary courses

Before the court will approve your bankruptcy case, you must take an approved credit counseling course (these vary by state and are usually available online). Likewise, before your case is discharged by the court, you will be required to take a class on personal financial management.

Related article: What is bankruptcy counseling and do I need it?

Chapter 13 hearings

If you don’t have an attorney, you must represent yourself in front of the court to review your case and hear any concerns from creditors about the case (this rarely happens, but it’s something you need to be prepared for). If all is in order, the court will approve your repayment plan.

Make your payments

Once your case is approved by the court, you will begin submitting your monthly payments to the trustee assigned to your case. The trustee will then distribute your payments to your creditors. Keep in mind that your payments must be on time and in full or you risk your case being dismissed. Should this happen, you will lose all protections provided under your bankruptcy case and your creditors are free to seek restitution for the full amounts you owe, including taking you to court to get their money.

Your case is discharged

If you successfully complete all the payments in your repayment plan, the court will confirm your case and discharge it. This is the point at which you will begin to see your credit scores improve slightly as your bankruptcy case begins to weigh less and less. It is also possible at this point for you to qualify for new credit accounts, though you are unlikely to receive the best terms available.

Related article: 6 steps to rebuild your credit after bankruptcy