Chapter 13 Bankruptcy
Chapter 13 bankruptcy is sometimes referred to as the Wage Earners bankruptcy. Just like with Chapter 7 cases, there are certain requirements to be eligible to file a Chapter 13. The most important eligibility requirement is that you must have regular income to file a Chapter 13. Regular income can include wages, social security, disability, unemployment compensation, court ordered alimony, rental income, or regular contributions from third parties. It is important to note that only individuals and married couples, not businesses, can file for Chapter 13.
The primary purpose of a Chapter 13 bankruptcy is to create a repayment plan for your debts. It allows you to retain all of your assets while repaying all or a portion of what you owe to your creditors over a 3 to 5 year period. In many cases, you will only be repaying your unsecured creditors 10% of the debt. In a Chapter 13 case, you file a Plan that provides the payment terms for your creditors.
The decision to choose a Chapter 13 filing depends on the specific goals you are trying to achieve.
Why File a Chapter 13 Bankruptcy?
Just like a Chapter 7 case, filing a Chapter 13 provides an “automatic stay” that stops all lawsuits, foreclosures, wage garnishments or other collection activities. The typical reasons to file a Chapter 13 are:
- Stop a foreclosure
- To regain possession of a repossessed car
- To repay parking tickets and get driver’s license reinstated
- To keep valuable assets
- To repay non-dischargeable debt
- To stop wage garnishments.
Filing a Chapter 13 means that you will make monthly payments to the Chapter 13 Trustee – these are called Plan Payments. The amount of your monthly Plan Payment will depend on a number of factors, including, your income, the amount of your debt, what assets you want to keep and the value of your assets. You will be required to provide information to your attorney and who will work with you on your budget so that you can achieve an affordable Plan Payment.
Below is a list of “Pros” and “Cons” for filing Chapter 13
| PROS | CONS |
|---|---|
| Filing of a case give you an automatic stay that stops all foreclosures, lawsuits, garnishments and threatening phone calls. Creditors are required to return repossessed cars. You get your driver’s license reinstated. | You have demonstrate that you have regular income to support a Plan Payment over a 3 to 5 year period. |
| You get to keep your house and car. | Your bankruptcy case lasts for 3 to 5 years. |
| May only have to 10% to unsecured creditors. | You are prohibited from getting any new loans while your case is pending, unless you obtain court approval. |
| May be possible to strip off lien against your property. | Attorney fees are higher than filing Chapter 7 in most cases. |
Are There Alternatives to Filing Chapter 13 Bankruptcy?
There are always alternatives to filing bankruptcy, but not every alternative is effective in every case. For instance, some of the alternatives we explore for our clients include…
- Defense litigation
- Negotiation and restructuring
- Debt settlement
- Asset protection
Of course, if your home is nearing or going into foreclosure, time is important. We can help you avoid losing your home if that is your wish, but the sooner we get started, the sooner you will gain relief.
At the offices of Gregory K. Stern, P.C. Bankruptcy and Foreclosure Attorneys for Chicago, we have helped individuals and businesses since 1983. Located at 53 West Jackson Boulevard, Suite 1442, Chicago, Illinois 60604, we provide a free consultation and the assurance that everything will be alright. Call us now to schedule a visit.