Reorganizing Your Debt Through Chapter 13 Bankruptcy
Chapter 13 of the Bankruptcy Code allows you to lower most of your monthly bill payments and put a stop to creditor harassment. When you file for Chapter 13 bankruptcy, the court issues automatic stay protection for you. This means that almost all creditors are legally forbidden from collecting debt from you, and it puts a stop to foreclosure and repossession efforts. By reorganizing your debts and negotiating with creditors, Chapter 13 bankruptcy allows you to consolidate your debt, reduce the total amount you owe and pay off your debt with a single payment over three to five years.
Chapter 13 Bankruptcy Versus Chapter 7 Bankruptcy
The key difference between Chapter 7 and Chapter 13 bankruptcy is that Chapter 7 is a discharge of your debt that may involve liquidating some of your assets and Chapter 13 is a reorganization of your debt to reduce monthly payments that allows you to keep your possessions. Although not everyone not everyone qualifies for Chapter 7 bankruptcy, it is the more common of the two.
In order to qualify for Chapter 7 or “liquidation” bankruptcy where debt is discharged, you must pass a “means” test. The means test compares your household income against the median income of households of the same size in Illinois. If your household income is at or below the median income, you qualify for Chapter 7 bankruptcy. If your household income is above the median income, it usually means you will have to file for Chapter 13 bankruptcy instead.
Navigating Chapter 13 Bankruptcy
The Chapter 13 bankruptcy process is very straightforward. As soon as you file, the court issues an automatic stay which stops foreclosure proceedings, repossessions and creditor phone calls. The court then assigns a bankruptcy trustee who is responsible for making sure your paperwork is accurate. You will have 15 days to provide the court with financial information concerning your debts and assets. When that is completed, we work together to create a realistic payment plan based on your income and living expenses.
The amount of money you will pay back is determined by the type of debt you have. Priority debt, such as most tax debt, spousal and child support must be paid back in full. Secured debt, such as your mortgage, must also be paid back in full. Unsecured debt such as credit cards and personal loans may be reduced based on your disposable income and information about your financial situation provided in court documents.
The process ends with a meeting between you, your trustee and any creditors who choose to attend. Typically, very few creditors attend these meetings, and meetings where no creditors show up are not unusual. After this meeting, you begin your payment plan.
To Learn More About Chapter 13 Bankruptcy, Contact DebtPros
If you are ready for a fresh start, contact DebtPros by calling 312-883-5422 or filling out our online contact form. We will review your financial situation and determine if Chapter 13 is right for you.