- 1). Make a list of all your property and debts. This must be complete, as failure to list property or debt can result in an audit by the court or the IRS. Also document your income for the past seven years even if you are self-employed, as the court will need to know your income to work out a payment plan. It is helpful to divide property into necessities and into luxuries. Luxury items (generally worth more than $1,000) can be forcibly sold off under Chapter 13 bankruptcy, but necessities such as a place to live, appliances, most cars, and tools used for work can be kept. You will need to consult your state's bankruptcy regulations for specifics on what can and cannot be kept.
- 2). Obtain the current value of your property that is financed. The current market value for cars can be obtained from Kelley Blue Books, and your house's value can be surmised from a professional appraiser or your real estate tax bill.
- 3). Compute the difference between the value of the loan on a car or a house and the current market value. The difference between these two figures is what is "crammed down," as the court will have you pay back only what the property is actually worth, not what the financed value is. However, if a car was bought within 30 months of declaring bankruptcy, then that auto loan cannot be crammed down. Also, some secured debts on non-car property purchased within a year of filing Chpater 13 might not be able to be crammed down.
- 4). Make a payment plan to see how much you can afford to pay monthly on a three- to five-year repayment plan (three years if your income is less than the state median income, five years if it's more than the median). Make sure to include your living expenses as well.
If your income does not allow for you to make even these reduced payments, the court will forcibly sell off your property and/or withhold your pay. The court will try to make the payment plan feasible; however, the creditors' attorneys will lobby hard to be repaid. - 5). File for Chapter 13 bankruptcy with the help of a bankruptcy attorney. Given the complexity and rapid change in this area of law, there is simply no feasible way for a non-attorney to file Chapter 13. The attorney will ask a lot of personal questions about how you live, how much you make, how much you spend on food and going to the movies. Do not get offended, because all of these questions will be asked in the court and by your creditors' attorneys.
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