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What are the basics of Chapter 13 bankruptcy?

A Chapter 13 bankruptcy filing in California is subject to specific rules regarding the disclosures made and the amount that must be repaid to creditors. Because a Chapter 13 bankruptcy is intended for those who are making a steady income to repay some of what they owe, debtors are ordered to make payments to the trustee of their case each month as the bankruptcy continues. These payments are calculated using the income and debt amounts disclosed when the petition is filed.

Readers in California may know that a Chapter 13 bankruptcy, in particular, allows a debtor to reorganize financially. This reorganization can occur because bankruptcy stops the collection efforts of creditors.

Also included in a Chapter 13 bankruptcy filing is the requirement to disclose all assets and debts to the assigned trustee. In one recent case that may be of interest to readers, a police official from another state filed for Chapter 13 bankruptcy. In his filing, he detailed his income of $5,689 per month, as well as the large amount of debt that he owed to 40 creditors. In fact, the man and his wife reported that they owed more than $480,000 to creditors when they filed.

As is the case with Chapter 13 here in our state, the debtor in the most recent case was ordered to pay the trustee a monthly amount. The trustee then uses the money to repay some of what is owed to creditors. Though this repayment may not be the full amount owed, additional amounts may be discharged once the bankruptcy is finalized.

Because the rules regarding the Chapter 13 process can be complicated, anyone considering personal bankruptcy would do well to consult with a legal professional who is fluent in bankruptcy law. There are numerous options for debt relief, but it's important to choose the one that is right for your particular situation.

Source: News-Journal, "Bankruptcy filing: Ormond Lt., wife in FBI probe, owe half-million dollars in debt," Lyda Longa, Dec. 12, 2012

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