Nearly 1.2 million Americans filed for bankruptcy in 2012. Of those, 70 percent filed under Chapter 7 of the bankruptcy code, meaning that although their assets had to be sold off, they were able to walk away from most of their debts within a matter of months. The remaining 30 percent filed under Chapter 13 Bankruptcy, which is a longer process — three to five years, typically — but allowed them to keep their homes and cars. In a Chapter 13 Bankruptcy filing, also called a reorganization bankruptcy, consumers wind up paying back part or all of their outstanding debts by way of a strictly controlled payment plan.

Chapter 13 Bankruptcy Reorganization Filing Process

The process of filing for bankruptcy under Chapter 13 begins with an appointment with a government-approved credit counselor, who will help you determine how to proceed. This meeting covers all aspects of your financial life. While many people want to avoid the drawn-out process of Chapter 13, others prefer the sense of stability that comes along with remaining in their home. One benefit of a Chapter 13 Bankruptcy Reorganization filing in Bakersfield is that it stops a foreclosure in progress and allows you to catch up on mortgage payments.

Once it’s determined that you’ll be filing under Chapter 13, you’ll work with a court-appointed bankruptcy trustee to develop a monthly payment plan. Rather than paying money to lenders, you’ll pay the trustee directly, who will then disburse payments to your creditors. Although creditors will almost always receive less money this way, they will prefer this approach to receiving nothing under a Chapter 7 filing.

It is sadly common for those who file under Chapter 13 to fail to successfully complete their payment plan, which can lead to having to convert to Chapter 7. But if you do complete your Chapter 13 payment plan, as well as a mandatory post-bankruptcy course, the goal is to emerge from bankruptcy as a wiser consumer. By slowly rebuilding your credit, you can also develop the habits crucial to avoiding bankruptcy in the future.

If you have questions about the bankruptcy process, schedule a free consultation with D. Max Gardner, a dedicated Bakersfield Bankruptcy Attorney at The Law Offices of Young Wooldridge, LLP.