How Chapter 13 Bankruptcy affects Debt and Assets

Under Chapter 13 bankruptcy, you are required to follow a court-ordered payment plan over 3 to 5 years to clear off your debts. During this period, you need to be very austere with your spending. There are several restrictions you must impose on how you spend your money. The bankruptcy trustee will make sure that as much of your income as possible goes towards repaying your debt each month. You have to live very frugally according to a pre-determined limit of expenditure for essential needs like food, transport and accommodation.

So long as you are still under bankruptcy protection, you are not allowed to accrue more debt without permission from the bankruptcy court. For example, you have to obtain permission from the bankruptcy court to take up a car loan if you wish to buy a new car. This is to ensure that your ability to keep to your payment plan under Chapter 13 is not adversely affected.
Likewise, you cannot change the number of assets you own without permission from the bankruptcy court. This means you cannot simply give away any asset you have to charity or transfer it to another individual (like a family member) as long as you are still under bankruptcy. In the same way, you cannot sell your home even if it is to raise funds to keep to your Chapter 13 payment obligation. In order to sell a home while in Chapter 13 bankruptcy, you again need to get the bankruptcy court’s approval.

What if you overlooked these restrictions and went ahead to do something you were not allowed to without permission of the bankruptcy court? In such cases, sometimes your bankruptcy attorney can help you get the court approval even after the action was taken. For more information about these Chapter 13 rules, call us at (813) 200 4133 for a free consultation.

 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *