2009 was one of the highest years for bankruptcy filings in recent memory. There were more than 1.3 million consumer bankruptcies and over 89,000 business ones. Home mortgages were a big reason for the surge in bankruptcies. Nearly a fifth of U.S. homeowners are reported to be underwater, which means they owe more on their mortgages than their houses are worth. Foreclosure rates have been at record levels in the past couple years.
A Chapter 13 bankruptcy can be the best option to avoid a foreclosure if you are going to file for bankruptcy, but can truly afford the mortgage. A Chapter 13 protects your home. It is called an “income-earner’s” bankruptcy, because it enables a person with regular income to develop a plan to repay his or her debts. The highly detailed plan covers the next three to five years and must demonstrate how the person proposes to pay off creditors via a trustee appointed to oversee the bankruptcy estate.
Role of the Chapter 13 Trustee
When you file for a Chapter 13 bankruptcy, an impartial trustee is appointed to pay your creditors. You pay the trustee, and the trustee then ensures that your payments are allocated according to the plan that you accepted. You, the debtor, do not have any direct contact with your creditors after you file for a Chapter 13 bankruptcy.
In addition to disbursing your payments, the trustee is also involved in the evaluation of your case to determine your repayment plan. He or she will hold a meeting for you and your creditors approximately a month or two after you file for Chapter 13. You are placed under oath at the meeting and must answer questions regarding your financial affairs. It is important to answer them honestly and fully to provide your trustee and creditors with as accurate a picture of your financial life as possible. A Morris County bankruptcy lawyer can represent you at this meeting and help you through it.
Additionally, at the time a Chapter 13 bankruptcy is filed, the trustee takes control of all of your non-exempt property (property that can be used to repay your debts) via his or her control of your bankruptcy estate. When you Chapter 13 plan is confirmed, control of the property will be returned to you.
Working With Your Chapter 13 Trustee
The debtor should work closely with the trustee and provide him or her materials as quickly as possible. The following are some of the steps that a debtor should take to ensure a successful Chapter 13 bankruptcy:
- The debtor should provide his or her Chapter 13 trustee with a copy of the previous year’s tax return and any tax returns filed during the bankruptcy case.
- The debtor may not take on new debt without first consulting the trustee. The new debt could compromise the debtor’s ability to pay past creditors via the Chapter 13 plan.
- Once the Chapter 13 bankruptcy is filed, the debtor must begin making payments to the trustee. If the bankruptcy plan is confirmed by the court, the debtor should continue making regular payments to the trustee as provided for in the plan.
An experienced Morris County bankruptcy attorney can help you file for Chapter 13 bankruptcy and work closely with your trustee to get you back on the right financial track.