Chapter 13 bankruptcy is a common way for individuals to restructure their debts and get their finances under control. The goal of Chapter 13 is to create a payment plan that's executable within your financial means. It is a process, though, and there are some necessary steps to filing and completing it.

Assessing Eligibility

You should determine whether you're eligible before you file. Otherwise, there's a risk that you might not be eligible.

Contact a Chapter 13 bankruptcy law group and ask them to assess your situation. A Chapter 13 filing is a wage earner's plan, and that means you need to have sufficient income to pay a reduced amount if the court allows it. A Chapter 13 bankruptcy lawyer will need to see at least your last few years of tax filings. If your income recently changed, such as due to a reduction in work hours, you should also provide recent pay stubs so a Chapter 13 bankruptcy attorney can assess whether you're still in good enough financial shape.

Also, it's a good idea to discuss whether Chapter 13 is right for you even if you're not eligible. If you don't have major non-exempt assets or any significant outstanding unsecured loans on things you care to keep, you might be better off filing for liquidation if you're also eligible on that front.

Credit Counseling

Presuming a Chapter 13 bankruptcy law firm thinks you're likely eligible to file, you'll start the process by taking credit counseling classes. Fortunately, there are often online courses that allow you to do this without too much disruption. The course provider will certify that you completed counseling.

Also, you'll have to propose a non-binding repayment plan based on what you learning through the counseling process. Do not worry, though. This plan is pro forma, and it won't affect your petition for relief as long as you properly file it.

Proposing a Restructured Payment

The thick part of Chapter 13 bankruptcy is the restructuring of payments. You need to list every creditor that you're seeking relief from. Also, you need to identify the assets and the remaining balances owed on the accounts. If you have an outstanding car loan, for example, that's something you'd probably want to restructure.

Essentially, your creditors are taking a haircut on the balances owed. Your creditors also have the right to object at a Meeting of the Creditors, but this rarely carries weight in personal bankruptcies. Otherwise, you wait for the judge to rule. If the judge rules in your favor, you'll have between a few years to make the payments or file Chapter 7. Reach out to a Chapter 13 bankruptcy lawyer for more information.