Choosing to file for Chapter 13 bankruptcy can be a very daunting process.

Not only is the choice to seek a bankruptcy overwhelming, but choosing whether a chapter 7 or a chapter 13 bankruptcy is right for you can be confusing, as well. Having a full understanding of your options and qualifications will give you the opportunity to make an informed decision about your financial future.

What is Chapter 13 Bankruptcy?

In a chapter 13 bankruptcy – unlike a chapter 7 bankruptcy – you are able to keep your property.  However, you will have to create a repayment plan, which will describe in detail how you will pay each of your creditors.  Because of the planning aspect of a chapter 13 bankruptcy, it is often nicknamed the “reorganization bankruptcy”.

The main reasons to file a chapter 13 bankruptcy are:

  • To avoid a foreclosure or repossession, protect an asset that would otherwise be liquidated in a chapter 7 bankruptcy
  • If you make too much money to file a chapter 7 bankruptcy
  • To consolidate debts that would otherwise be liquidated in a chapter 7 bankruptcy.

What is required for the requisite repayment plan?

The most important part of a chapter 13 bankruptcy is the detailed debt repayment plan that you will create.  There is no required format for this repayment plan, but your bankruptcy lawyer can help you define a repayment plan that will be acceptable.
In this repayment plan you will need to repay 100% of “priority debts” – like child support, alimony, wages owed to employees, and some tax obligations – because they’re considered to be most important. Your plan will also need to include secured debt payments on a regular basis – like auto loans and mortgage loans. You will also need a plan for getting up to speed on any debts that you’ve fallen behind on. The plan must also include any further disposable income that you have available. This income will go toward unsecured debt – like credit cards or medical bills.

Will I qualify for a Chapter 13 Bankruptcy?

To qualify for a chapter 13 bankruptcy, you must:

  • Be an individual or business with an income that is neither too irregular nor too low to pay back your current debts.
  • Have a debt burden that is low enough to allow you to afford your payment obligations.
  • A debt burden that is “too high” is defined as debts that exceed $1,149,525 in secured debt and/or $383,175 in unsecured debt.
  • Not have filed another petition for bankruptcy in the last six months.
  • Have first received credit counseling from an approved counseling agency within the last six months. Your bankruptcy attorney can direct you on how to find and setup time with an approved pre-bankruptcy credit counseling agency. More information is also available on the Department of Justice website.

What does the Chapter 13 Bankruptcy process look like for me?

The process of filing for a chapter 13 bankruptcy is very straightforward. The following sequence is typically followed:

  • First, you will need to contact a qualified bankruptcy lawyer. An expert lawyer will make sure that you have the clearest path to a new financial future.
  • Second, you’ll need to provide your bankruptcy lawyer with the following information:
  • Personal Identification Information
  • Proof of Income
  • Asset Information
  • Credit Bills & Details for Each Debt
  • Investment Details
  • Asset Sale Details
  • Your attorney will help you, along with federal agents, to create your repayment plan and have it approved by the Department of Justice.
  • Once you’ve agreed to and proven you can follow the plan, your creditors will also agree to the terms, releasing you from potential collections, repossessions, and wage garnishment.
  • Finally, once you have paid off the debts that were laid out in your bankruptcy plan, your bankruptcy will be discharged and you’ll be free to begin your new financial life.

To learn more about the chapter 13 bankruptcy support provided by Chang Legal in the Chicago area, contact us today at contactus@changlegal.com or call 847.907.4971.