The filing of a Chapter 13 bankruptcy case is a process that takes discipline, attention to detail and a strong effort to succeed. Chapter 13 involves repaying either all or a portion of your debt over a three to five-year period. We are talking about a long repayment plan; 36 to 60 months of consistent payments not only to the trustee which takes care of your arrearages, your secured debt enter other miscellaneous debt, but you also need to make regular payments to your utilities, your mortgage company going forward, and your food and your clothing and all the other things that can happen in life that require money.
You have to make sure that you budget properly once your Chapter 13 bankruptcy cases filed. Whatever you were doing before your Chapter 13 bankruptcy case in terms of budget obviously wasn’t working. There are some circumstances or exceptions such as job loss, illness, divorce whereby you were doing everything right and but for that certain event, everything would have been fine. However, in the overwhelming majority of cases that I see, the debtor is simply not budgeting properly towards debt. What I mean by that is they are overspending in terms of food, entertainment, transportation and other non-necessities and the creditors that really need to be paid such as mortgages, vehicles and other debtors, other creditors, are suffering.
The best thing to do after filing a Chapter 13 or even before you file a Chapter 13 is to sit down with your attorney and go through your budget. The budget, which is Schedules I and Schedules J of your bankruptcy petition, are the most important two schedules in determining what you have available to pay to your creditors, whether or not Chapter 13 is even a good idea for you and whether or not you’re going to qualify. When you sit down and do that budget, your attorney will show you exactly where your shortfall is or where your upside is. The attorney will also tell you approximately what you are spending in all those different areas such as food, clothing, utilities, insurance to see whether or not you can make some minor modifications to shore up some of those areas.
To make a Chapter 13 work going forward, you are going to have to stick with the budget or your income is going to have to improve. In many cases, incomes are not improving but success is available if the person curbs their spending. One of the best ways to make Chapter 13 work is to have your Chapter 13 trustee payment deducted automatically out of your wages. This can’t be done on every case because you have to be gainfully employed and not self-employed and have the payroll control come out of your wages. However, if you are working at a job and do you have the wages coming out of your pay, the Chapter 13 trustee will get paid provided you continue to stay employed. The remaining money is what you have available for your utilities, your outstanding mortgage payment, outstanding lease payment in any other day that you may have.
So the discipline that you need involves budgeting. It involves awareness of what you are spending, awareness of what’s coming in and the ability to stay employed and stay focused on the success of your Chapter 13 bankruptcy. If you vary from the budget, if you fail to stay employed, if you decide that the Chapter 13 trustee is just too difficult for you, then you are obviously not going to have success over a three to five year repayment plan. In those cases, you should consider another form of bankruptcy which is Chapter 7, also known as fresh start bankruptcy.
