Chicago Chapter 13 Bankruptcy Lawyer

The Basics of Chapter 13 Bankruptcy

Chapter 13 bankruptcy in Illinois, also known as a wage earner’s plan, is designed for individuals with a regular income who wish to repay their debts. This process enables them to propose a repayment plan to make installments to creditors over three to five years, depending on their income level and the amount of debt. Debtors must also submit a repayment plan for court approval, which provides for payments of fixed amounts to the trustee on a regular basis. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less money than they are owed. The process begins with the debtor filing a petition with the bankruptcy court serving the area where they live. 

Eligibility For Chapter 13 Bankruptcy

In Illinois, to qualify for Chapter 13 bankruptcy, an individual must meet specific criteria concerning their financial status. First, the applicant must have a steady source of income. This income can come from various sources, such as employment, self-employment, regular rental income, social security benefits, or other consistent means. Second, there are debt limits set for eligibility. As of 2023, an individual’s unsecured debts, which include credit card debts, medical bills, and other loans not backed by an asset, must be less than $419,275. Similarly, their secured debts, which are tied to assets like mortgages and car loans, must not exceed $1,257,850. These limits are not static and are subject to periodic adjustments, reflecting changes in the economy and cost of living. 

If an individual’s debts exceed these limits, they might not be eligible for Chapter 13 but could consider other bankruptcy options, such as Chapter 7. It’s also important to note that these debt limits are cumulative, meaning they encompass all qualifying debts in both categories. Moreover, for Chapter 13 eligibility, the individual must also make sure that they have filed their federal and state income tax returns for the four tax years prior to their bankruptcy filing. Failure to have filed these tax returns can result in a dismissal of the bankruptcy case. Therefore, it’s paramount for individuals considering Chapter 13 bankruptcy to consult with our Chicago Chapter 13 Bankruptcy lawyer who can provide clarity and guidance in managing these requirements and making an informed decision.

The Cost of Chapter 13 Bankruptcy

Our Chapter 13 bankruptcy lawyer in Chicago can tell you that the cost of filing a Chapter 13 bankruptcy in Illinois can vary depending on several factors, including the specifics of the case, the attorney’s fees, and the court fees. Below is a breakdown of some of the costs you might incur.

As of 2023, the filing fee for a Chapter 13 bankruptcy in the United States is $313. This fee is standard nationwide and is paid directly to the court when you file your bankruptcy petition. In some cases, the court may allow you to pay the filing fee in installments if you are unable to pay the entire amount upfront. Before filing for Chapter 13 bankruptcy, you are required to complete a credit counseling course from an approved agency, which typically costs around $25 to $50. After filing, you must also complete a debtor education course, which also has a similar cost. Some agencies offer discounts or waive fees for individuals with financial hardship.

There may be additional costs for obtaining your credit report, mailing documents, or other administrative tasks. These fees are usually minor but can add up. If your case is particularly nuanced, requires additional motions or hearings, or if there are objections from creditors that need to be addressed, this could result in additional attorney’s fees and court costs. The cost of filing a Chapter 13 bankruptcy in Illinois can vary widely based on a number of factors. While the court filing fees are fixed, the attorney’s fees can range significantly, and there are additional costs for required courses and potential miscellaneous fees. It’s important to have a clear understanding of all the potential costs involved and to discuss fees and payment options with your attorney upfront.

Filing Your Chapter 13 Bankruptcy Petition

Filing a bankruptcy petition in Illinois marks the commencement of the bankruptcy process. This initial step involves submitting several key documents to the bankruptcy court. The primary document is the bankruptcy petition itself, a formal request for relief under the bankruptcy code. Accompanying this petition are several important schedules and statements, including:

Schedules of Assets and Liabilities. This includes detailed lists of your assets (everything you own that has value) and liabilities (all debts and financial obligations). Assets cover a wide range, from property and vehicles to bank accounts and personal belongings. Liabilities include all forms of debts, such as credit card balances, medical bills, loans, and other outstanding payments.

Schedule of Current Income and Expenditures. This schedule outlines your regular income sources and your monthly expenses. It helps in assessing your financial capacity to repay debts under a Chapter 13 plan.

A Statement of Financial Affairs. This is a comprehensive document that provides an overview of your financial history, including recent payments to creditors, income sources, lawsuits, and any transferred assets.

A Schedule of Executory Contracts and Unexpired Leases. This includes information about any ongoing contracts or leases, like car leases or service agreements, that are still in effect.

A Copy of Your Most Recent Tax Return. This helps the court assess your financial situation more accurately.

Filing Your Petition

After filing the petition, you need to create a repayment plan. This plan is a detailed proposal outlining how you intend to pay back your debts over the next three to five years. The plan must specify fixed payment amounts that you will make regularly, typically on a monthly or biweekly basis, to a court-appointed trustee. This trustee oversees the distribution of these payments to your creditors. 

Approximately a month following your petition filing, the trustee will arrange a meeting of creditors. Your attendance is mandatory at this meeting, where creditors and the trustee can ask questions about your finances and the proposed repayment plan. This meeting is a fundamental step in confirming that all parties are aware of the plan’s details and its feasibility. Following the meeting of creditors is the confirmation hearing, held in court. At this hearing, the judge will decide whether to approve your repayment plan. Creditors may raise objections if they believe the plan doesn’t meet legal standards or is unfair to them. If approved, you will begin making payments according to the confirmed plan. The final step in the process is the discharge of debts.

Filing Multiple Times

Filing for Chapter 13 bankruptcy can provide individuals with a way to manage and eventually discharge their debts, but there are limits and rules regarding how often you can file. These rules are set at the federal level, so they apply in Illinois as well as in the rest of the United States. Here’s what you need to know about filing for Chapter 13 bankruptcy multiple times:

There is no absolute limit to the number of times you can file for Chapter 13 bankruptcy. However, there are time restrictions that apply between discharges:

• If you received a discharge under Chapter 13, you must wait two years from the date of the first Chapter 13 filing before you can receive a discharge in a subsequent Chapter 13 case.
• If you received a discharge under Chapters 7, 11, or 12, you must wait six years from the date of the first filing before you can receive a discharge in a subsequent Chapter 13 case, unless you paid all your unsecured debts in full in the first case, or you paid at least 70% of your unsecured debts and the plan was proposed in good faith and was your best effort.

If your previous Chapter 13 case was dismissed (meaning you did not receive a discharge), you might be able to file again right away. However, if you had more than one case dismissed in the previous year, the automatic stay (the protection against creditors that prevents them from collecting debts) in your new case may be limited to 30 days or eliminated entirely unless you can prove to the court that your new case was filed in good faith. Even if you meet the timing requirements, a court may deny your bankruptcy filing if it appears that you are abusing the bankruptcy system. For example, repeatedly filing for bankruptcy to delay a foreclosure or eviction without any intention of completing a repayment plan could be seen as bad faith and could lead to your case being dismissed.

It’s also important to consider the impact of multiple bankruptcies on your credit. Each bankruptcy filing appears on your credit report and can significantly affect your credit score. Multiple bankruptcies can make it more difficult to rebuild your credit and can affect your ability to obtain credit, housing, or employment in the future. While there are no strict limits on the number of times you can file for Chapter 13 bankruptcy in Illinois or elsewhere in the U.S., there are timing restrictions and other considerations that can affect your ability to file and your ability to receive a discharge. Additionally, frequent bankruptcy filings can have long-term effects on your credit and financial stability. 

Pros and Cons of Chapter 13 Bankruptcy

• Pro: Debt Repayment Plan

Chapter 13 allows you to consolidate your debts into a single repayment plan, making it easier to manage your finances. You can pay off your debts over a three-to-five-year period based on your income and ability to pay.

• Pro: Home Foreclosure Prevention

One of the most significant benefits of Chapter 13 is that it can stop foreclosure proceedings and give you a chance to catch up on missed mortgage payments through your repayment plan.

• Pro: Protection for Co-Signers

Chapter 13 can provide protection for any co-signers on your debts, which is not available in Chapter 7 bankruptcy.

• Pro: Opportunity to Save Assets

If you have non-exempt assets that you would lose in a Chapter 7 bankruptcy, Chapter 13 allows you to keep these assets as long as you pay their value over the course of your repayment plan.

• Pro: Discharge of Remaining Unsecured Debts

At the end of your repayment plan, most remaining unsecured debts (like credit card debt and medical bills) will be discharged, meaning you are no longer legally required to pay them.

• Con: Impact on Credit

Chapter 13 bankruptcy remains on your credit report for seven years and can significantly lower your credit score, making it more difficult to obtain credit in the future.

• Con: Time-Consuming

A Chapter 13 bankruptcy case can last between three to five years, during which you will be on a strict budget as you make payments toward your debts.

• Con: No Immediate Debt Relief

Unlike Chapter 7 bankruptcy, which can discharge most debts quickly, Chapter 13 requires you to complete your repayment plan before most debts are discharged.

• Con: Not All Debts Are Discharged

Certain debts, such as student loans, most taxes, and child support, cannot be discharged in Chapter 13 bankruptcy.

• Con: Requires Steady Income

To qualify for Chapter 13 bankruptcy, you must have a regular income and sufficient disposable income to make payments on your debts.

Chapter 13 bankruptcy may be a good option if you are behind on mortgage payments but want to keep your home, or if you have co-signers on your debts that you wish to protect. If you have a regular income and can afford to make payments toward your debts, it may also be a good idea. 

Chapter 13 bankruptcy can provide a path to financial stability for individuals with a steady income who are struggling with debt. However, it is not a one-size-fits-all solution, and it has significant financial consequences. It’s important for you to weigh the pros and cons and consider alternative debt relief options. Consulting with a bankruptcy attorney can provide clarity on whether Chapter 13 bankruptcy is the right choice for your specific situation.

Chicago Chapter 13 Bankruptcy Infographic

Chicago Chapter 13 Bankruptcy Statistics

According to the American Bankruptcy Institute, just under 400,000 people file for bankruptcy in the United States each year. There are approximately 157,000 Chapter 13 filers and 225,000 people who file for Chapter 7. Another 5,000 Chapter 11. To learn which type of bankruptcy would benefit you the most, contact a qualified Chapter 13 bankruptcy lawyer with our team.

Chicago Chapter 13 Bankruptcy FAQs

What is the average payment for Chapter 13?

The average payment for a Chapter 13 bankruptcy depends on a variety of factors, including your disposable income, the amount of your debts, and the value of your nonexempt assets. Payments are determined based on a means test, which assesses your income and expenses to determine your ability to pay back your debts. 

What would disqualify me from Chapter 13?

Several factors could disqualify you from filing for Chapter 13 bankruptcy:

• Insufficient Income. You must have a regular income and sufficient disposable income to cover your repayment plan.
• Debt Limits. As of 2023, your secured debts must be less than $1,395,875, and your unsecured debts must be less than $465,275. These limits are periodically adjusted for inflation.
• Previous Bankruptcies. If you had a bankruptcy case dismissed within the past 180 days due to your willful failure to appear before the court or comply with orders of the court, or you voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens.
• Failure to Complete Credit Counseling. You must complete credit counseling from an approved agency within 180 days before filing.

Can I keep my car if I file Chapter 13 in Illinois?

Yes, you can usually keep your car when you file for Chapter 13 bankruptcy in Illinois. Chapter 13 allows you to include your car loan in your repayment plan, and as long as you continue to make payments and stay current on your repayment plan, you can keep your vehicle. 

How many months does Chapter 13 last?

A Chapter 13 bankruptcy lasts between 36 and 60 months (3 to 5 years), depending on your income and the specifics of your repayment plan. If your monthly income is less than the state median, your plan will generally be for three years unless the court approves a longer period “for cause.” If your monthly income is above the median, the plan will generally be for five years.

Therman Law Offices, LTD, Chicago Chapter 13 Bankruptcy Lawyer

8501 W Higgins Rd Ste 420, Chicago, IL 60631

Let Our Professionals Guide You Toward a Fresh Start

Embarking on the journey of Chapter 13 bankruptcy can be a daunting process, filled with legal complications and integral decision-making. In the vibrant city of Chicago, where the economic climate is as diverse as its communities, finding a reliable and experienced legal partner is paramount to managing this challenging path. With a 99 percent success rate, we at Therman Law Offices, LTD stand out as a pillar of legal support and knowledge, offering personalized and strategic guidance to help individuals regain control of their financial future.

Chicago Bankruptcy Lawyer Google Review

“I couldn’t be happier with the services I received at Therman Law. They took care of all of my needs in a timely manner, were easy to get in touch with, and answered all of my questions. Mr. Therman, Anthony, and Kelly all worked diligently to confirm I relieved a fair settlement in a reasonable amount of time! Absolutely recommend!!” – Jen H.