Chapter 13 bankruptcy, also called a wage earner’s bankruptcy, is one of two ways to file personal bankruptcy in the U.S. Unlike Chapter 7, it doesn’t involve selling properties to pay off creditors; rather, it allows you to pay them over time through a repayment plan. Needless to say, the filing process also differs between the two, as do the qualifications. Here’s a look at what goes on in a wage earner bankruptcy and what you need to get approved.
Before you can approach the bankruptcy court, you have to take a credit counseling class. This is provided by the Trustee’s Office or one of its approved organizations. You can also start looking for a bankruptcy lawyer around this time, or if you already have one, they can help you complete the class and start to file Chapter 13 bankruptcy.
Once you’ve taken the class, you can start gathering the paperwork needed to file Chapter 13. Along with the credit counseling certificate, you will need the following:
-A debt repayment plan—this is made during the credit counseling session
-Last year’s federal tax return, and any filed or unfiled filed during the bankruptcy
-A Statement of Financial Affairs
-A statement of your income and expenses
-A list of your assets and liabilities
-Proof of income
-A list of creditors, debts owed, and nature of debts
Other specific requirements may be imposed depending on your case. Your bankruptcy lawyer can tell you more about the required documentation once they’ve gone over your situation.
Bankruptcy Trustee and the Means Test
As soon as you file Chapter 13 bankruptcy, you will be assigned a trustee who will take over your case. He or she will administer the means test, which will determine whether or not you qualify for a wage earner bankruptcy. To qualify, your debt must not exceed a certain limit, and you must be making enough to make the payments under your repayment plan.
Two to six weeks after you file Chapter 13 bankruptcy, you will be asked to attend a meeting of your creditors, presided by the trustee. Both the trustee and creditors may ask you questions regarding your debt and finances, and the information you’ve provided will be verified against the wage earner bankruptcy requirements. Afterwards, the repayment plan will be finalized and declared in court. Creditors for unsecured debt are given 90 days after the meeting to file their claims, after which you can start making your payments.