Chapter 13 Bankruptcy can offer more options for individuals facing foreclosure, trying to reinstate their car loans, and prevent repossessions. While filing for bankruptcy under Chapter 7 of the federal code can completely wipe out certain debts, there might be a potential for liquidation of assets that you want to avoid. If you want to keep assets associated with secured debts and you can meet certain qualifying criteria, you may benefit from filing bankruptcy under Chapter 13.

A Chicago Chapter 13 bankruptcy lawyer can discuss this financial option in detail during a private consultation. If you think Chapter 13 is right for you, your knowledgeable bankruptcy attorney could walk you through every step of the process and help ensure that you meet all of the requirements.

The Scope of a Chapter 13 Repayment Plan

Chapter 13 bankruptcy plan provides for payment or partial payment of secured and unsecured debts. After declaring Chapter 13 bankruptcy, the bankruptcy stay stops all collection actions against the debtor.  The debtor can then propose a repayment plan detailing how they will pay creditors over time.  Often, these creditors are paid less than they are owed, and the debtor receives a discharge of the balance of their debt. It is important to consult with an experienced bankruptcy attorney who can help you propose a plan that the Court will approve. 

If the bankruptcy court approves a Chapter 13 repayment plan, the debtor would start making payments in accordance with the plan’s terms to a trustee, who would then transfer that money to any creditors who submit a proof of claim to the court. If a debtor adheres to the terms of their repayment plan for its entire duration, their property will not be at risk for repossession, foreclosure, or liquidation. 

Depending on a Chicago resident’s financial circumstances, their Chapter 13 repayment plan will require them to pay a portion of their debt, or an amount in excess of their projected disposable income. 

Who Qualifies to Declare Bankruptcy Under Chapter 13?

Individuals with regular income, and debts that are lower than $419,275 in unsecured debt and less than $1,257,850 in secured debt are eligible to file for Chapter 13 bankruptcy. 

Much like other forms of bankruptcy, anyone in Illinois who wishes to file under Chapter 13 must first seek credit counseling from an approved agency no more than 180 days prior to their initial filing date. A Chicago lawyer could help a debtor meet these prerequisites and make them aware of all their options before committing to Chapter 13 bankruptcy.

As soon as someone files for Chapter 13 bankruptcy, the bankruptcy court that receives the petition will issue an “automatic stay” order to all creditors that prohibits collection efforts for the entirety of the repayment plan, three to five full years after the initial filing date. A Chicago lawyer could explain how this stay works in greater detail and ensure they meet the prerequisite conditions to file for Chapter 13 bankruptcy.

Consider Working with a Chicago Chapter 13 Bankruptcy Attorney

While filing for bankruptcy can carry some risks, choosing to do so under Chapter 13 can allow you to repay your debts over a longer period of time and still maintain possession of valuable personal property.

A conversation with a Chicago Chapter 13 bankruptcy lawyer should be your first priority before declaring bankruptcy yourself. Call today to set up a meeting and discuss your unique situation.