2 Things You May Not Know About Chapter 13 Bankruptcy

Have you decided to move forward with using Chapter 13 bankruptcy to get yourself out of debt? If so, there are a couple of things about this legal process that you may not be aware of.

The Credit Counseling Requirement

Anybody using Chapter 13 is required to go through credit counseling before they submit their bankruptcy petition to the court. This can be done either online or in-person since the main requirement is that it is done by an approved credit counseling agency. Completing credit counseling will result in you getting an approval from the agency, which is then submitted with the petition.

However, there are a few reasons why this credit counseling requirement may be waived. If the bankruptcy trustee views your bankruptcy filing as an emergency situation that must be started immediately, you may bypass the need to go through credit counseling. In addition, the trustee may also make a determination if there are not enough approved credit counseling agencies that are able to provide the service. If this is the case with your bankruptcy case, then you can skip the process because it will take far too long to wait and go through counseling. 

The Inability To Follow The Payment Plan

Part of filing for Chapter 13 bankruptcy will be coming up with a repayment plan that must be followed over the next five years. This plan is designed with your current income and debts in mind so that you are capable of paying it back. Unfortunately, people do run into financial issues where things do not go as planned. They may suddenly lose their job and not have regular income coming in, or they may face unexpected large expenses like a medical bill. 

In this situation, you are actually able to request that the plan be modified. This will typically involve a lower payment each month, which must be approved by the creditors that you owe money. If this is not approved, you can actually have a hardship discharge approved by the bankruptcy court. This will discharge that unsecured debt, which is why it is in the creditor's best interest to approve a lower monthly payment so that they would still receive a portion of the debt that you owe them. There are some guidelines to a hardship discharge, and not all cases are approved due to things like simply losing employment and income.

To learn more about bankruptcy, contact a law firm in your area.