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Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” affords you the opportunity to restructure your debt into manageable monthly payments over a specified term – typically three to five years. Most Chapter 13 cases are used to help you catch up on your mortgage or restructure your car payments. However, Chapter 13 can also eliminate your general unsecured debt at a reduced amount and repay real estate or certain government debt, such as tax debt. Unlike in Chapter 7 bankruptcy, none of your property is in jeopardy of being sold or liquidated in a Chapter 13 bankruptcy.
To qualify for Chapter 13 bankruptcy, you must have regular income and show the bankruptcy court the ability to meet your repayment obligations. You must also complete a credit counseling course 180 days prior to filing and have not had a prior dismissed case for willful failure to respond to a court summons or other rare dismissals. Unlike Chapter 7, you are not required to pass the “means test” and can even file after previously receiving a discharge in another bankruptcy case. Lasty, you must also meet certain debt limit requirements which change every year. Our experienced bankruptcy lawyers can advise you on all the conditions for bankruptcy edibility and compliance to see if you qualify.
A chapter 13 case begins by filing a petition with the bankruptcy court. Within 15 days of filing, you must submit a proposed repayment plan. This repayment plan will lay out how each creditor will be paid. Secured, priority, and general unsecured debts are all typically treated and repaid differently. For instance, you may propose to pay your unsecured creditors back at a fraction of the amount owed while repaying mortgage arrears in full to save your house.
The next step will be attending a meeting of creditors. In practice, creditors rarely show up to these meetings but are allowed to attend to ask you questions about the petition you filed. During the meeting your attorney will be there with you and the local Chapter 13 trustee will review your petition to determine if there are any inconsistencies that need to be addressed.
After the meeting there will be a court date for your confirmation hearing. At this hearing, the bankruptcy judge will review your proposed plan and determine if it complies with the bankruptcy code. This hearing is also for creditors to object to your plan if they disagree with their treatment in the case. If your case is confirmed, your primary obligation going forward is to continue making your monthly payments to the Chapter 13 trustee who will pay your creditors based on the confirmed plan.
Once all creditors are paid according to the plan, you will receive a discharge order. Because numerous issues can arise in a Chapter 13 bankruptcy, it is important to retain an attorney who practices in Chicago and is familiar with the local trustee preferences and tendencies.
Immediately upon filing your bankruptcy petition, your creditors are prohibited by law from harassing you or seizing your assets. Instead, they must abide by the bankruptcy laws and seek repayment by going to court or filing a proof of claim. This affords you the much-needed breathing room you need to get your financial affairs in order.
Chapter 13 bankruptcy offers numerous advantages and can help prevent:
Chapter 13 can also reduce the principal balance on your vehicle if it was purchased more than 910 days prior to filing, the amount of your general unsecured debt, and interest rate on your car note. This all depends on retaining an experienced attorney who knows how to properly file a repayment plan with your best interests in mind.
Chapter 13 bankruptcy costs the same, no matter what law firm you choose. The Northern District of Illinois has set a “no look” fee, meaning, all attorneys can charge the same for a Chapter 13 case. In Chicago the standard fee is $4,500 which is paid inside the bankruptcy case. This flat fee will secure representation throughout your whole case which can last up to five years. This includes preparing all your paperwork, attending court, fending off any creditors, or any other issues that may arise in your case.
If you think Chapter 13 may be the best option for you, call us now for a free consultation. During the consultation, our bankruptcy lawyer will work closely with you to examine your specific circumstances and determine which option is best for you.