Chapter 13 Individual Bankruptcy

When people in Chicagoland with serious debt problems consider bankruptcy, many decide that a Chapter 13 debt repayment plan is their best option. Some people make too much money to qualify for a Chapter 7 debt liquidation while others would lose their homes or other property if they filed under Chapter 7. A Chapter 13 bankruptcy is an alternative that debt relief professionals often recommend to individuals who have a regular source of income but cannot keep up with mounting debt.

A Chapter 13 bankruptcy can give you protection from debt collectors who harass you with annoying telephone calls and threatening letters. Chapter 13 allows you to keep all of your property while you catch up on delinquent payments owed to secured creditors. If you are at risk of losing your house or car, a successful Chapter 13 bankruptcy puts an end to the threat of foreclosure or repossession. After you complete your Chapter 13 plan, the debt that you owe to unsecured creditors is usually wiped out completely, even if those creditors received no payment at all.

To learn whether a Chapter 13 bankruptcy is the best solution to your debt problems, talk to a bankruptcy attorney at Thomas W. Lynch & Associates, P.C. Call 708-598-5999. You can also fill out our online contact form to start the process of obtaining relief from your unmanageable debt.

Why Should You Consider a Chapter 13 Bankruptcy?

While a Chapter 7 bankruptcy is the right choice for many debtors (particularly those who own few assets and have limited incomes), a Chapter 13 bankruptcy provides protection for people who do not qualify for a Chapter 7 bankruptcy and for those who prefer the unique benefits that Chapter 13 provides. There are many reasons debtors file bankruptcy under Chapter 13.

  • Chapter 13 prevents foreclosure and repossession.
  • Chapter 13 provides relief for higher income debtors.
  • Debtors usually keep all their secured property, including homes and cars.
  • Debtors usually keep all their other assets, including property they would lose if they filed under Chapter 7.
  • The court’s “automatic stay” forces debt collectors to cease collection efforts.
  • Nearly all unsecured debts are discharged at the end of the Chapter 13 plan.
  • Debtors usually pay only a percentage (and sometimes none) of their unsecured debt before receiving a discharge.
  • Debtors with nondischargeable debt (like student loans, child support, and certain tax debt) get a break from debt collectors while the plan is in effect.
  • In some cases, second mortgages and home equity loans can be treated as unsecured debt.
  • Debtors can feel good about making their best effort to repay their debts.
  • Future creditors might be more willing to take a chance on debtors who repaid some debts through Chapter 13 rather than discharging all debt in Chapter 7.
  • Chapter 13 provides peace of mind and a fresh start without the burden of unmanageable debt.

“Great bankruptcy attorney. We believed we had a complicated bankruptcy case and met with Mr. Lynch to discuss our case. He communicated clearly what the next steps in filing our Chapter 13 case would be and after we got him our documents, he followed through on what he said he was going to do.” ~ P. Nicholas, bankruptcy client

Thomas W. Lynch & Associates, P.C. is a debt relief agency that is dedicated to helping you find the right solution to your debt problems. To make an appointment for a free consultation with an experienced bankruptcy lawyer, call 708-598-5999. You can also submit our online contact form if you want our staff to contact you.

How Does Chapter 13 Work?

Classify Your Debts

When you file a Chapter 13 bankruptcy, you supply the court with a complete list of your debts. The debts are classified as:

  • Priority debts. These debts cannot be discharged. They include child support, alimony or spousal maintenance, damages for drunk driving lawsuits, and certain tax debts and fines.
  • Secured debts. Home mortgage loans, car loans, and other loans that are secured by liens fall into this category.
  • Unsecured debts. Credit cards, medical bills, and other debts that are not secured by a lien are classified as unsecured.

Make Your Repayment Plan

Your Chapter 13 petition also tells the court about your income, your expenses, and your assets. Following the guidelines that required by the Bankruptcy Code, your attorney will prepare a debt repayment plan. The plan leaves it up to you to pay your monthly expenses (your food, clothing, transportation, insurance payments, mortgage payment, car payment, and everything else except unsecured debt payment). The income you do not use to meet your monthly budget becomes your Chapter 13 plan payment. The payment is a fixed amount that is calculated by subtracting your monthly budget from your monthly income.

Make Your Plan Payments

Your plan payment is sent to the bankruptcy trustee. After paying certain administrative expenses, the payments are distributed to secured creditors until you catch up on delinquent payments. For instance, while you make your regular monthly mortgage payment, your plan payment is used to catch up on mortgage payments that you missed. Since you do not need to send money to credit card companies or other unsecured creditors, you should have enough money available to make your regular mortgage and car loan payments. If you do not have enough income to make those payments, you might not qualify for a Chapter 13 plan.

Receive Your Discharge

After you catch up on delinquent payments to secured creditors, the trustee will distribute your plan payments to priority creditors and to unsecured creditors. Your plan lasts from three to five years. When the plan ends, you will be caught up on your secured debt, and your unsecured debt (other than priority debt) will be discharged, whether or not you were able to repay it.

Does a Chapter 13 bankruptcy sound like the answer to your debt woes? Call Thomas W. Lynch & Associates, P.C. to 708-598-5999 to make an appointment at our offices in Hickory Hills or Berwyn, or submit your questions through our convenient online contact form.