Surprising Facts About Bankruptcy You Need To Know

Posted on: 19 May 2016

A Chapter 13 bankruptcy can help you pay off some debts and get rid of others. Most people know the basics of a bankruptcy filing, but there are some facts that might surprise you. To ensure you are fully prepared to file for a Chapter 13, here are some things you might not know. 

Your Creditors' Best Interests Dictates What You Pay

When you file for Chapter 13 bankruptcy, you are required to submit a proposed repayment plan to the court. The plan should detail how much you plan to pay the trustee over the course of a three- to five-year span to take care of your debts. 

Your proposed repayment plan could be rejected by the court. If the plan is not considered to be in the best interests of your creditors, it will not be approved. In other words, the court wants the largest payment possible because it believes your creditors are entitled to be repaid in a reasonable amount of time.

The court will review your income, expenses, and outstanding debts. After subtracting expenses, such as a mortgage loan or rent, from the income, the remaining funds are considered disposable income. The court will then calculate a minimum amount you must pay each month. If your plan does not meet that amount, it will be denied. 

You will need to submit a new proposed repayment plan or risk your bankruptcy being dismissed.

You Might Have to Make Payments While Waiting Confirmation

Some people mistakenly believe that when they file for bankruptcy, they do not have to pay on their debts until the court has reviewed their petitions and approved or denied them. In actuality, the court might refuse to approve your petition if you have not made payments. 

Personal property debts, such as your home, can depreciate over time. As a result, the lien that the creditor has on that property decreases in value. To protect the creditors, the court might require you to continue to make payments on those debts while waiting for the bankruptcy to be approved. 

Depending on the state in which you live, you might have to make the payments to the trustee in your case. The trustee would then record the payment and disburse the funds to the appropriate creditors. 

It is important to make the payments as dictated by the court. If you do not, the court could choose to deny your bankruptcy. For further assistance, contact a local bankruptcy attorney, such as Stuart R Whitehair Attorney.