Why Is Chapter 13 Bankruptcy Right for Me?

Are you facing insurmountable debt? Job loss, illness, and other life-changing events may make you consider bankruptcy.

Chapter 13 bankruptcy allows debtors to develop a plan to repay all or part of their debts to creditors while keeping their property.

Chicago Bankruptcy Clinic in Oak Brook, IL, guides you through the process and helps determine if Chapter 13 bankruptcy is right for you.

Understanding Bankruptcy Plans

The Different Chapters of the Bankruptcy Code

Chapter 7

Often a first choice for individuals and business entities with few luxury items, Chapter 7 is a liquidation bankruptcy in which a debtor sells their non-exempt assets to pay their creditors. The remaining debt can be discharged. Chapter 7 bankruptcy is quick, taking about four months to complete.

Chapter 13

Chapter 13 is a reorganization bankruptcy designed for debtors with normal income who have enough left over each month to pay some of their debts using a three- to five-year repayment plan. Unlike Chapter 7, debtors don't have to resort to selling certain belongings to pay back creditors. The amount you must pay will depend on your income, your debt, and how much property you own.

Chapter 11

Chapter 11 is another reorganization bankruptcy for individuals whose debt is too high to qualify for Chapter 13 and struggling businesses. This plan allows a debtor to reorganize their debts into a manageable payment plan after a financial setback. The plan can include selling assets, downsizing operations, and debt forgiveness.

When Chapter 13 May Be Right for You

There are many reasons why Chapter 13 bankruptcy may be more appropriate for your situation than Chapter 7 bankruptcy. Typically, Chapter 13 is best for debtors who:

Don’t qualify for Chapter 7, but need debt relief to lower credit card debt, prevent a wage garnishment, or stop litigation
Want to keep nonexempt property by paying for it over three to five years in a repayment plan
Have fallen behind on house payments and want to save their home from foreclosure
Have fallen behind on car payments and want to save their car from repossession
Want to prevent a collection action while paying off nondischargeable debts like child support, alimony, and overdue taxes

Which Debts Can Be Erased?

Any nonpriority unsecured debt you can erase with Chapter 7, you can erase with Chapter 13, but Chapter 13 goes even further. Bankruptcy filings with Chapter 13 can wipe out common debts like:

Medical bills
Personal loans
Credit card balances
Overdue utility bills
Most types of lawsuit judgments
Certain government fines and penalties
Debts for damaging someone’s property
401(k) or other retirement account loans
Older income taxes that qualify as nonpriority debts
Debts incurred as a result of a divorce decree or similar proceeding

However, debts like alimony, child support, recent tax debts, and student loans won’t be erased in a bankruptcy case. Before filing, be sure that bankruptcy would erase enough of your debt to make it worthwhile. Our bankruptcy law attorney offices in Chicago and Oak Brook can help.

Get Your Life Back on Track

With Our Oak Brook Team

At Chicago Bankruptcy Clinic, we can handle all the details of your bankruptcy filing with precision and professionalism. Our team can help you determine if Chapter 13 bankruptcy is the correct solution for your situation, or if another option like Chapter 7 bankruptcy would be better.

Our bankruptcy attorney, Mr. Alex Ranjha, and his team are familiar with the rules and procedures of the local bankruptcy courts and have developed working relationships with bankruptcy trustees in jurisdictions throughout Chicago. Our legal team has a well-earned reputation as dedicated advocates of our clients and as honest brokers.

If you are considering filing for Chapter 7 or Chapter 13 bankruptcy, don’t go it alone. When you work with our bankruptcy lawyer, you can have peace of mind knowing that debt relief is on the way. Please contact our Chicago or Oak Brook office today for a free consultation.

Navigating Bankruptcy Law

So You Don’t Have To

“I would strongly suggest anyone looking to file for bankruptcy to contact them for immediate debt relief.”

-Joanne Saviano

Our Oak Brook Law Firm Can Make a Difference

Understanding the Bankruptcy Code for You

Navigating bankruptcy law can be difficult for the average person, so we’re here to do it for you. Our bankruptcy attorney and his dedicated team will help you qualify for the chapter of your choice, help you keep your property, determine when it’s time to file, handle calls from creditors, prevent bankruptcy fraud, and explain when you can stop paying the bills that will be erased in your bankruptcy case.

Many debtors find it difficult to represent themselves when filing for Chapter 13 because they are required to draft a repayment plan the bankruptcy court will confirm. With our Oak Brook team on your side, you can make the process as easy as possible and keep many of the things you’ve worked hard to secure.

Chapter 13 Bankruptcy Eligibility

Preliminary Tests

Before filing for Chapter 7, Chapter 11, or Chapter 13 bankruptcy, you must obtain credit counseling, and most individuals must pass a means test. Credit counseling will help determine if it's possible for the debtor to get back on solid financial ground with bankruptcy, and the means test ensures that debtors are not abusing the system.

Individual Filing

You must file as an individual, not as a business. Although you can include business debts, you must file as an individual or the business will remain on the hook for the debt.

Qualifying Debts

You must demonstrate that your debt (both secured and unsecured debt) does not exceed a certain amount. This amount changes every three years. As of the beginning of 2024, the amount is $2,750,000.

Up-to-Date Income Tax Filings

To be eligible for Chapter 13, you must submit evidence that you already filed your federal and state income tax returns for the previous four years. The court can postpone your proceedings if you are not current on these filings.

Enough Disposable Income

You must prove that you can keep up with your repayment plan. You will have to demonstrate to the bankruptcy court that even after making required payments on secured debts and specific allowable expenses, you will still have enough money left over to pay back creditors.

Your repayment plan may call for full repayment of certain debts or offer creditors a percentage of their claim.

Sources of Income

for Your Repayment Plan

To show that a debtor will have enough income to meet the obligations to their creditors under their repayment plan, they can include the following sources of income:

Salary or regular wages
Seasonal wages
Self-employment income
Commissions
Social Security benefits
Pension payments
Child support or alimony payments
Disability compensation benefits
Workers’ compensation benefits
Unemployment benefits
Public benefits (like welfare payments)
Royalties
Rents
Proceeds from property sales

If a debtor is married and not working, they can file solo and use money from their spouse as a source of income. Debtors can also file jointly with their working spouse.

We'll Make the Process Easy

And Keep You Informed Every Step of the Way

“Very respectable and well spoken professionals.”

-Damiano Manzella

Chicago Bankruptcy Clinic

At Chicago Bankruptcy Clinic, our bankruptcy attorneys and paralegals work closely with clients to assess their financial situation and explore debt relief options, including filing for Chapter 7 and Chapter 13 bankruptcy. Our team is proud to be affiliated with the following organizations:

We offer free consultations and flexible payment plans. To learn more about foreclosure and bankruptcy, contact our office online or call (630) 349-4127 today.

Oak Brook Office

Chicago Office