Our approach to handling Chapter 13 bankruptcy cases in Chicago at Therman Law Offices, LTD is both comprehensive and personalized. We recognize the stress and uncertainty that accompanies financial distress and are dedicated to demystifying the bankruptcy process for our clients. From the initial consultation to the final discharge of debts, our team is committed to navigating our clients through each step with clarity and empathy. This includes detailed assistance in filing the bankruptcy petition, preparing the necessary documentation, devising a feasible repayment plan, representing our clients at creditor meetings and confirmation hearings, and ultimately working towards the successful completion of the bankruptcy process. By choosing Therman Law Offices, LTD, individuals in Chicago can find not just legal representation, but a partner committed to helping them achieve a fresh financial start through Chapter 13 bankruptcy.
How does Chapter 13 Bankruptcy work in Illinois?
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. Along with the petition, the debtor must also file:
Eligibility For Chapter 13 Bankruptcy in Illinois
In Illinois, to qualify for Chapter 13 bankruptcy, an individual must meet specific criteria concerning their financial status. Firstly, 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. The essence of this requirement is to ensure that the individual has the financial capacity to adhere to a repayment plan. Additionally, 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.
These criteria are designed to make Chapter 13 a viable option for those who can realistically manage a structured debt repayment plan. 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, depending on their circumstances. 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 ensure 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 crucial for individuals considering Chapter 13 bankruptcy in Illinois to thoroughly assess their financial situation and debt levels to determine if they fall within the set guidelines. Consulting with a bankruptcy attorney can provide clarity and guidance in navigating these requirements and making an informed decision.
Filing 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.
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 critical step in ensuring 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. Once you have completed the payments under your plan, the court may discharge any remaining eligible debts, releasing you from the obligation to pay them. However, it’s important to note that certain types of debts, like some taxes, alimony, child support, and student loans, typically cannot be discharged in bankruptcy.
How much does a Chapter 13 bankruptcy cost in Illinois
The cost of filing a Chapter 13 bankruptcy in Illinois can vary depending on a number of factors, including the complexity of the case, the attorney’s fees, and the court fees. Here’s a breakdown of some of the costs you might incur:
Court Filing Fees
As of 2023, the filing fee for a Chapter 13 bankruptcy in the United States is $313. This fee is standard across the country 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.
Credit Counseling and Debtor Education Courses
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.
Potential Additional Costs
If your case is particularly complex, 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.
Is Chapter 13 bankruptcy a good idea
Deciding whether to file for Chapter 13 bankruptcy is a significant decision that depends on your individual financial situation, goals, and the specific laws of your jurisdiction. Chapter 13 bankruptcy offers several benefits, but it also has drawbacks. Here are some factors to consider when evaluating whether Chapter 13 bankruptcy is a good idea for you:
Pros of Chapter 13 Bankruptcy:
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.
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.
Protection for Co-Signers
Chapter 13 can provide protection for any co-signers on your debts, which is not available in Chapter 7 bankruptcy.
Opportunity to Save Assets
If you have nonexempt 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.
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.
Cons of Chapter 13 Bankruptcy:
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.
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.
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.
Not All Debts Are Discharged
Certain debts, such as student loans, most taxes, and child support, cannot be discharged in Chapter 13 bankruptcy.
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.
When is Chapter 13 Bankruptcy a Good Idea?
Chapter 13 bankruptcy may be a good option if:
- You are behind on mortgage payments but want to keep your home.
- You have co-signers on your debts that you wish to protect.
- You have valuable nonexempt assets that you want to keep.
- You have a regular income and can afford to make payments toward your debts.
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 crucial 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.
How many times can you file Chapter 13 in Illinois
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:
No Absolute Limits, But Timing Matters
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 Chapter 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.
Good Faith and Abuse of the Bankruptcy System
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.
Impact on Credit
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. If you are considering filing for Chapter 13 bankruptcy, especially if you have filed before, it is important to consult with a bankruptcy attorney to discuss your options and ensure that you are taking the best course of action for your financial future.
What debts Cannot be discharged in Chapter 13
Chapter 13 bankruptcy provides individuals with a way to reorganize their debts and create a repayment plan over a period of three to five years. While it can lead to the discharge of a significant portion of an individual’s debts, there are certain types of debts that cannot be discharged in a Chapter 13 bankruptcy. It is important to be aware of these exceptions to make an informed decision about filing for bankruptcy.
Non-Dischargeable Debts in Chapter 13:
Certain Tax Debts
While some older tax debts can be discharged in Chapter 13, recent income tax debts (typically those from the last three years) and certain other types of tax debts are not dischargeable. In addition, any tax liens on your property will remain after the bankruptcy, even if the personal liability for the tax is discharged.
Child Support and Alimony
Domestic support obligations, including child support and alimony, are not dischargeable in Chapter 13 bankruptcy. You are required to stay current on these obligations during your bankruptcy, and any arrears must be paid in full through your repayment plan.
Student loans are generally not dischargeable in Chapter 13 unless you can prove that repaying the loans would impose an undue hardship on you and your dependents, which is a difficult standard to meet.
Debts from Fraudulent Acts
Debts incurred through fraud, including debts from purchasing luxury goods or services on credit within 90 days before filing for bankruptcy or taking out cash advances within 70 days before filing, are not dischargeable.
Debts for Personal Injury or Death Caused by Drunk Driving
If you caused an accident resulting in personal injury or death while driving under the influence of alcohol or drugs, any debts arising from the incident cannot be discharged.
Certain Criminal Fines and Restitution
Fines, penalties, and restitution resulting from criminal activity are not dischargeable in Chapter 13 bankruptcy.
Certain Condominium or Cooperative Housing Fees
Fees or assessments owed to a condominium or cooperative housing association for periods after the bankruptcy filing date are not dischargeable.
Debts Not Listed in the Bankruptcy Petition
Debts that were not properly listed in your bankruptcy schedules may not be discharged.
Debts from Willful and Malicious Injury
Debts arising from willful and malicious injury to another person or property cannot be discharged.
While Chapter 13 bankruptcy can provide significant debt relief, it is crucial to understand that not all debts can be discharged. Some debts, such as domestic support obligations, certain tax debts, student loans, and debts from fraudulent acts, will remain after the bankruptcy. Before deciding to file for Chapter 13 bankruptcy, it is important to consult with a bankruptcy attorney to understand how your debts will be treated and to determine the best course of action for your financial situation.
Frequently Asked Questions About Chapter 13 Bankruptcy
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. The average payment can vary widely from one individual to another. Some might pay back all of their debts, while others might only pay back a small portion.
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. If your car is worth less than what you owe, or if your loan is more than 910 days old, you might be able to “cram down” the loan and pay only the current value of the car.
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.
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Expert Legal Guidance with Therman Law Offices, LTD
Embarking on the journey of Chapter 13 bankruptcy can be a daunting process, filled with legal complexities and crucial decision-making. In the vibrant city of Chicago, where the economic landscape is as diverse as its communities, finding a reliable and experienced legal partner is key to navigating this challenging path. We at Therman Law Offices, LTD stand out as a beacon of support and expertise, offering personalized and strategic guidance to help individuals regain control of their financial future.