Chapter 13 Exemptions

Experienced Bankruptcy Attorneys Advocating for People Throughout DuPage and Nearby Communities

Chapter 13 bankruptcy reorganizes the debtor’s assets and helps create a repayment plan for outstanding debt. Unlike Chapter 7 bankruptcy, debtors often retain their property in Chapter 13, with a few exceptions. A bankruptcy exemption can help you determine the amount of debt required in your repayment plan under Chapter 13 bankruptcy. An exemption is a way to protect certain property, typically essential items such as houses, cars, and household goods. At the Bankruptcy Center of Illinois, we help DuPage County debtors consider the best approach to filing for bankruptcy based on their particular financial situation.

Chapter 13 Exemptions

An exemption is a way to protect value in certain property that you own. For debtors filing for bankruptcy under Chapter 7, this is important because property that is not exempt may be sold to pay creditors. Chapter 13 provides for debtors to retain their property, however, debtors would be required to pay creditors the value of their exemption over time, through their repayment plan.

Chapter 13 bankruptcy is appropriate for those debtors capable of repaying most of their debt over a period of time. The first step when filing for Chapter 13 bankruptcy is to calculate income, property, debt, and expenses. Central to the repayment plan is the debtor’s disposable income which requires calculating monthly income and subtracting living expenses. The value of non-exempt property must also be calculated. Taking the disposable income number, the debtor multiplies this result by the length of time under the repayment plan. This is the number of months left in the repayment plan, often 36 or more.

Any exempt assets will be subtracted from the total value of assets. Certain assets may be partially exempt, as when the asset has more value than the exemption. Debtors pay the trustee an amount of money to pay off their unsecured debts. Any secured debts receive priority as they are attached to a specific asset.

Chapter 13 Exemptions and Repayment Plan Approval

Approval of a Chapter 13 repayment plan is critical. Creditors must receive the same or more in a Chapter 13 case as they would if the debtor filed under Chapter 7. In other words, if the Chapter 7 trustee could have sold property to benefit creditors in the Chapter 7 case, creditors should be able to receive that amount in a Chapter 13 case.

Some debtors receive a significant income and do not own non-exempt property. They will likely be able to gain approval of their plan to repay debt. For example, debtors may earn enough money to avoid liquidating assets under Chapter 7 but not enough to pay off debt while meeting living costs. These individuals may not have yet acquired substantial property or a home.

Other debtors face challenges receiving approval for their repayment plan when they do not have significant income and they do own non-exempt property. According to the good-faith requirement, debtors must contribute their disposable income to the repayment plan as well as the value of their non-exempt assets. Debtors with a lower income, such as minimum wage, that own a house and car may find that it is more beneficial to sell their assets and repay their debts. Selling their assets and filing under Chapter 7 may be another appropriate option.

Contact an Effective DuPage County Bankruptcy Attorney About Your Chapter 13 Exemptions

Chapter 13 bankruptcy allows debtors to keep their assets, so exemptions do not necessarily help them avoid losing assets. At the Bankruptcy Center of Illinois, our DuPage County exemptions attorneys are familiar with Chapter 13 exemptions. By clearly setting forth exempt property, debtors increase the likelihood of receiving approval for their Chapter 13 repayment plan. If you are facing financial difficulties and considering filing for bankruptcy, our skilled lawyers are here to assist. We can be reached by calling (773) 993-0024 or contacting us through our online form.