Chapter 13

Chicago Chapter 13 Bankruptcy Attorneys

Chapter 13 is the second most common type of bankruptcy case for individuals. It is an alternative for individuals with regular income and is utilized in most cases to permit the debtor to keep certain non-exempt assets (in particular, the debtor’s home). Like a Chapter 7 case, the automatic stay prevents creditors from immediately taking any action to collect their claims against a debtor.

In order to qualify as a Chapter 13 debtor, you must have less than $394,725 of unsecured debt (for example your credit card debt is most often an unsecured debt) and less than $1,184,200 of secured debt (for example, loans secured by a mortgage on your home or a lien on the title to your car is a secured debt) (see our Chapter 13 Debt Limits blog). The automatic stay generally applies to certain consumer co-debtors as well.

Unlike Chapter 7, the debtor in a Chapter 13 case agrees to reimburse its creditors from a future flow of income, payable over three to five years. A plan, which details the repayment schedule must be filed within 15 days of the commencement of the Chapter 13 case and must also be confirmed by the bankruptcy court. The unsecured creditors must receive the greater of what they would have received had the debtor filed a Chapter 7 (see our best interest of creditors blog). The Plan must be filed in “good faith” and must pass a feasibility test (i.e., the debtor must show his or her ability to fund the Plan).

A Chapter 13 debtor can often force the secured creditor to allow the debtor to retain the collateral even if there is a significant amount of arrearage.

See our Chapter 13 Lien Stripping blog. Chapter 13 can save your home!

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