Everything You Need to Know About Chapter 13 Bankruptcy Chicago

Chapter 13 bankruptcy in Chicago allows a debtor to make payments on outstanding debt over a period of up to 60 months. The Chapter 13 bankruptcy process requires completion of various schedules and petitions and can be a complex procedure. Therefore, it is important to choose a bankruptcy attorney in Chicago who has the experience, compassion, and work ethic to see you through the process.

Chapter 13 vs. Chapter 7

Many people considering chapter 13 bankruptcy in Chicago ask our bankruptcy attorneys what the difference between these two types of filing is. Very simply, chapter 13 bankruptcy in Chicago includes a repayment plan. The repayment plan commits the disposable income of the debtor to regular scheduled payments over a three to five year period.

Why File for Chapter 13 Bankruptcy in Chicago?

• Chapter 13 Stops Foreclosures and Repossessions. Many people have gone through loss of job, divorce, or illness which has made them fall behind on their obligations with their mortgage company or car payments. Chapter 13 bankruptcy can help you keep your property while managing a more affordable payment plan.
• Too Many Assets: If you have too much equity in your house, or you have assets that exceed the protected or exempt amounts, you may be able to keep your assets and pay your debts back through a consolidation bankruptcy.
• Income is Too High: Some people also file for Chapter 13 bankruptcy in Chicago because they have too much income to qualify for a Chapter 7 bankruptcy filing.
• Previous Chapter 7 Filing: If you have filed a chapter 7 bankruptcy in the preceding eight years, you are not eligible to file again. Chapter 13 bankruptcy is your only option.

A bankruptcy attorney is your best resource for determining whether you should file for chapter 13 bankruptcy in Chicago.

How Does Chapter 13 Bankruptcy Work?

1. The bankruptcy attorney files Chapter 13 bankruptcy plan when the bankruptcy petition is filed. The plan will propose to pay a certain amount of money per month to the Chapter 13 trustee, based on the debtor's income and certain allowable expenses.
2. Creditors review the plan and offer objections.
3. Chapter 13 Bankruptcy plan is confirmed and trustee begins collecting payments from the debtor and distributing funds to creditors according to the plan.
4. When all payments are made and disbursed to creditors according to the plan, a discharge will be issued eliminating any remaining unsecured debt that is dischargeable.

Why Chapter 13 bankruptcy over another debt consolidation plan?

Many debt consolidation companies attempt to negotiate with your creditors or offer settlements which can ultimately be rejected. However, Chapter 13 bankruptcy is a consolidation plan regulated by Federal Law and the Bankruptcy court. Once a plan is confirmed, the creditors will be required to accept payments according to the terms of the plan or not get paid at all. In most cases, Chapter 13 will stop all interest on unsecured debt allowing you to pay just pennies on the dollar.

Chapter 13 also provides you protection from those creditors that are in the plan. In most cases, they cannot seek payments from you outside of the bankruptcy or may be subject to fines and penalties if they do.

What Else Do I Need to Know About Chapter 13 Bankruptcy?

One very important thing to remember about Chapter 13 bankruptcy in Chicago is that you must be working or have a consistent source of income for your repayment plan to be approved by the court. Not only must you be able to pay for your monthly living expenses, but you must also be able to make a payment to the court to consolidate your debts. You must continue to make your payments to the trustee over the 3-5 year period.

If payments are not made to the trustee in a timely manner, the case may be dismissed. If mortgage payments are not kept up to date, the mortgage lender may ask to be removed from the bankruptcy and attempt to collect the debt outside the bankruptcy case. Likewise, if taxes are not maintained on real property, or if insurance is not maintained on any homes or vehicles, those creditors may ask to be removed from the bankruptcy and may be allowed to collect the debt while the bankruptcy case is still open.

While filing and completing a Chapter 13 bankruptcy can be a complicated process, the bankruptcy attorneys at Chang & Carlin, LLP can help you successfully complete a Chapter 13 plan.