Chapter 13 bankruptcy, also called “reorganization bankruptcy,” is a type of bankruptcy that allows you to repay as much of your debt as you can afford over a three or five year period.. Not everyone can qualify for or afford to file for Chapter 13 bankruptcy, however. At Newland & Newland, LLP, we help you determine if you qualify for Chapter 13 and if it is the best way to handle your debt situation.
The Chapter 13 Bankruptcy Process
Before you can file for Chapter 13, you must determine if you are eligible. To do so, you must look at the total value of your debts. Your secured debts must not be more than $1,010,650, and your unsecured debts must not be more than $336,900. The credit counseling requirement that is required in a Chapter 7 bankruptcy is also required in a Chapter 13 bankruptcy.
Filing for a Chapter 13 bankruptcy involves completing a petition which includes a repayment plan that outlines how you will repay your debts over the course of the plan. The repayment plan is the most important part of the filing and must be carefully considered. Certain debts, such as child support, alimony, tax debts and others, must be paid in full, but other debts may be only partially paid. In addition, you must plan for continued payments on secured debts, such as a mortgage or car loan if you want to keep the collateral.. Finally, your plan must show that your disposable income will be used to repay all or even a small percentage of unsecured debts such as credit cards.
When the plan is over, after three or five years depending on your average monthly income, any remaining debts that are eligible for discharge will be cancelled. If you are able to repay all of your debts prior to the end of your repayment plan, the bankruptcy will be over.
A main benefit to a Chapter 13 bankruptcy is that it requires a secured creditor, such as a mortgage lender, to give you time to get caught up with missed payments so that you can keep your house.
Also in many cases a Chapter 13 bankruptcy can allow you to strip 2nd mortgage liens from your house.
To learn more about the Chapter 13 process or to discuss your financial situation with an experienced bankruptcy attorney, contact us to schedule a free consultation. We work with clients throughout Northern Illinois including Cook County, Lake County, DuPage County, McHenry County, Kane County, and Will County.