Chapter 13 Bankruptcy

DuPage County Lawyers Protecting the Rights of Debtors

Sometimes debtors earn enough income to pay back most of their debt, but they need time and the right structure to do so. Under Chapter 13 bankruptcy, you can develop a repayment plan. This plan should provide for installment payments to creditors; it takes 3-5 years to complete a Chapter 13 repayment plan. If you hope to file for Chapter 13 bankruptcy, you should consult the DuPage County Chapter 13 bankruptcy lawyers at the Bankruptcy Center of Illinois.

Chapter 13 Bankruptcy

With Chapter 13 bankruptcy, you make monthly payments to a trustee. The trustee distributes the payments to your creditors. In order to file for Chapter 13 bankruptcy, you must have received credit counseling from an approved agency in the 180 days before filing. During credit counseling, you can develop a debt management plan.

You initiate your case by filing a petition with the bankruptcy court. With your petition, you should file a statement of financial affairs, a schedule of income and expenditures, a schedule of liabilities and assets, a schedule of executory contracts and leases, a certificate of credit counseling, and a copy of your debt repayment plan, along with other income information.

The Repayment Plan

Within 14 days of filing the petition, you will need to file a debt repayment plan with the court, unless you are granted an extension. The repayment plan needs to provide for regular fixed payments to the trustee, and it needs to be approved by the bankruptcy court. A Chapter 13 bankruptcy attorney in DuPage County can help you create an appropriate plan. When the trustee receives your payments, they will disburse funds to your creditors. Often, creditors get less than what they are owed, but all dischargeable debts in the paperwork are discharged.

Creditors’ claims may be categorized as priority claims, secured claims, or unsecured claims. Priority claims usually need to be paid in full. Taxes, for instance, are priority claims. Secured claims are secured by collateral, which creditors have the right to reclaim if you do not pay the debt. If you want to keep the collateral, the plan will need to provide that the secured claim gets at least what the collateral is worth. Creditors are not entitled to collect against unsecured claims unless you do not make your plan payments. Your plan does not need to pay creditors of unsecured claims in full as long as it allows for payment of all disposable income over the plan period, and the unsecured creditors get as much under the plan as they would get if you filed for Chapter 7 bankruptcy.

You will need to start making payments under your plan within 30 days of filing your case. At a confirmation hearing, the bankruptcy judge will decide whether the plan is appropriate. A DuPage County Chapter 13 bankruptcy attorney can help you prepare for the hearing. Creditors have a chance to object. During the life of the plan, you will not be able to incur new debts without consulting your trustee.

At the end of your plan, if you have made all the payments in a timely fashion, you will receive a discharge of your dischargeable debts.

Advantages of Chapter 13 Bankruptcy

Unlike with Chapter 7, you can save your home from foreclosure with Chapter 13 bankruptcy; you can stop foreclosure proceedings, and you get the chance to meet your obligation for any delinquent mortgage payments. The caveat is that you will still need to make timely mortgage payments as they are owed during the period of the Chapter 13 plan.

Another useful tool available in Chapter 13 bankruptcy is the ability to strip a second or third junior mortgage. If your home is not worth more than your first mortgage, you can remove the second mortgage from your home. You can strip a third mortgage as long as the home is not worth more than the amount of the first and second mortgage balances. Stripping junior mortgages reduces the cost of keeping your home.

Chapter 13 also allows you to cram down a car loan. This means that if your car is worth less than the loan used to obtain it, you can use Chapter 13 to propose to the lender that you pay only the replacement value of the car. Whatever is left unpaid will be treated as unsecured debts would be treated. Once you complete the plan, you own the car, and the unpaid balance is discharged.

Retain a Chapter 13 Bankruptcy Lawyer in DuPage County

Chapter 13 bankruptcy is an appropriate form of relief if you have significant debt, but your income is high enough to make monthly payments over three to five years. If you are interested in filing for Chapter 13 bankruptcy, you should contact the experienced attorneys at the Bankruptcy Center of Illinois. Call us at (773) 993-0024 or contact us via our online form.