You’ve done it. You’ve filed for Chapter 13 bankruptcy. You’ve decided to get out of debt and revamp your financial life, all while keeping your assets and your home. It’s a big step, and one you should be congratulated on. But it’s also just the first step. To be successful and get your debts discharged, you must pay back your creditors over a three-to-five-year period. It’s not easy, but it is worth the effort. To get through this difficult time, keep these tips in mind:
Get used to living on a strict budget. During the time you complete your Chapter 13 plan, you’ll pay back your creditors with your disposable income. Keep the end in sight and use the time to learn how to carefully manage your finances. By the time your Chapter 13 plan is completed, you’ll not only have paid off your debts, you’ll probably find you can live well on less.
Consider payroll deduction. You’ll have to make regular payments to your Chapter 13 trustee. Being late or inadvertently missing a payment can put your bankruptcy case in trouble. You can avoid those potential problems by having the payments automatically deducted from your pay.
Communicate with your trustee. Your Chapter 13 trustee will send you reports and proofs of claims. Don’t ignore the documents or put off reading them until later, as there is often time-sensitive information. Read everything carefully, and don’t hesitate to call your trustee if you have any questions. You may also receive mail or calls from creditors who either don’t know about your bankruptcy or are violating the automatic stay (the injunction that stops collection efforts). If a creditor contacts you, call your attorney right away.
Keep all documents. If there’s ever a discrepancy about a payment, it’s up to you to show proof. Make copies of every payment you make to your trustee and your mortgage company.
Rebuild your credit. Though Chapter 13 filing can stay on your credit report for seven years, you can rebuild your credit reputation during that time. Make all payments on time, including your mortgage, your trustee payments, and any current bills. Consider getting a secured credit card. You may also want or need to get a new unsecured credit card or loan during this time. It’s not impossible; in fact a University of Iowa study found that over 96% of consumers received credit card offers in the first year after filing for bankruptcy. But though it’s possible, it may not be wise. Consult with your attorney before accepting any credit offers or taking out any loans.
If something happens, tell your attorney. Maybe you lost your job, incurred a big medical bill, or had your car break down. Things happen. Don’t try to fix the issue on your own by taking out loans or missing payments. Tell your attorney. There may be options that can help you to successfully complete your Chapter 13 plan.
When you filed for Chapter 13, you took the first step toward financial solvency. Of course you want to complete that process. With a bit of care and dedication, you can see it through. You can congratulate yourself on a job well done, and look forward to your new debt-free life.