Chapter 13 Information

The Concept Of Reorganization Bankruptcy


Chapter 13 is a debt repayment plan. It may work for you if you:

  • Have non-exempt assets that you don't want to lose
  • Are behind on your mortgage or car payment and want to keep your property from foreclosure or repossession
  • Have had your driving privileges have been suspended
  • Have had your car booted or impounded
  • Make good income but cannot afford to pay off your debt
  • Need relief from certain debts that cannot be discharged in Chapter 7
  • Received a Chapter 7 discharge in recent years

You propose a plan to make a certain payment each month to a government-appointed officer called a trustee. The trustee will use that money to pay your creditors according to your repayment plan once it's approved by the court. Most Chapter 13 plans last between 3-5 years. During that period, you and your property are protected by the federal court from creditors as long as you fulfill your obligations under the plan. Typically, a person who completes a plan as approved gets to keep his or her property and receive a discharge of the unpaid balance of most types of unsecured debt.

To qualify for Chapter 13, you must have regular income. After paying your living expenses such as rent, mortgage, utility bills, groceries, gasoline and insurance, you must have some money left to enable you to make a payment into your plan each month. There are other restrictions as well, which is why you need to consult an experienced attorney.

Chapter 13 is an extremely powerful tool. In most cases, filing a case immediately stops foreclosures, repossessions, IRS levies, wage garnishments and collection lawsuits. They require a powerful commitment from you as well. You will be required to make regular monthly payments for several years in a good faith effort to repay as much debt as you can afford. A well designed plan will save your home, car and paycheck. A poorly designed plan by an inexperienced or ineffective attorney will cost you money, time and aggravation without helping you with your financial issues.

The Chapter 13 Process


As in all bankruptcy cases, filing of a Chapter 13 case usually triggers immediate court protection known as the "automatic stay." It means that most collection actions such as lawsuit, judgment, garnishment, foreclosure, repossession and harassment against the debtor must stop. Under certain circumstances, however, the stay may be limited or does not exist at all. In these cases, you absolutely need an experienced attorney to get into court and get the stay extended or imposed.

The court sends notices of the bankruptcy to all listed creditors. The case is assigned a federal judge and a bankruptcy trustee. The trustee's primary job is to administer the repayment plan submitted by the debtor. In other words, to use the money paid by the debtor to pay creditors according to the plan.

Finishing Up

The debtor starts making the plan payment 30 days after filing of the bankruptcy petition. All debtors are required to attend a meeting of creditors. Creditors have the right to attend the meeting and ask the debtor questions, but they rarely show up. Typically, the debtor just meets with the trustee, who asks a few questions about the debtor's debts, assets, income, expenses and financial affairs. The main purpose of the meeting is for the trustee to determine if the plan meets the requirements of the bankruptcy law. If you elect to hire us to represent you, we will be with you at this meeting.

The court then holds a confirmation hearing about four weeks after the creditor meeting, where the trustee makes a recommendation as to whether the plan should be confirmed (approved). Your creditors and trustee may object to the plan being confirmed and request that the automatic stay be modified to remove them from the bankruptcy protection. An experienced attorney knows how to deal with these objections and motions.

Once the plan is confirmed, the debtor simply continues to make payment as required by the plan, until it is completed, at which point the court will issues a discharge, if the debtor is eligible. Your plan is not set in stone, however. If your financial situation changes after the plan is confirmed, your plan may be modified to meet your new situation. Modification requires the plan to be completely recalculated and a motion with supporting evidence to be filed with the courts. Again, this is where you want an experienced attorney representing you.

You can also incur new credit while in a Chapter 13 bankruptcy, but you must get court approval to do so. The court must find that the credit is reasonable and necessary, so you need to have an experienced attorney to make that argument on your behalf.

Call Today

Contact our offices online or call 312-574-3327 to speak with an experienced Illinois Chapter 13 bankruptcy lawyer. We are ready to help.

Ledford, Wu & Borges, LLC has offices in Downtown Chicago, the South Side of Chicago, Homewood, North Riverside/Berwyn, the Northwest Side and the Southeast Side.