For Chicago residents who have missed several monthly payments, the risk of foreclosure, threat of repossession and harassing creditor calls make every day stressful. Filing for Chicago Chapter 13 bankruptcy allows you to create a manageable repayment plan without losing your home, vehicle and other personal property. However, it is also a complex legal process. You must adhere to a strict financial plan for three to five years. This takes commitment, and success depends on you. Here are some tips to help you complete Chapter 13 successfully.
Chapter 13 – The Wage Earner’s Plan
If you have consistent income, chances are, you don’t qualify for Chapter 7 bankruptcy, which can wipe out debts in about six months. When filing Chicago Chapter 13 bankruptcy, you propose a repayment plan that repays creditors over a specific time. If the court approves your plan, it assigns a trustee to work with you and distribute the payments.
During the repayment period, creditors cannot contact you regarding collections. Your home and vehicle are not subject to foreclosure or repossession. If debts remain at the end of the repayment period, they are typically wiped out. Exceptions may include student loans, tax debt, alimony and child support.
Can Chapter 13 Fail?
Bankruptcy has several pros and cons, and the benefit that most filers focus on is that they can keep their home, car, and other personal items. Despite the benefits, Chapter 13 bankruptcy filings often fail for several reasons:
- Incomplete or inaccurate information – For Chapter 13 to be successful, the court must have accurate and complete information regarding your assets, income and debts. Any errors or omissions in your bankruptcy filing or repayment plan might result in the court dismissing your case.
- Inability to follow through on the repayment plan – Unforeseen circumstances, such as job loss and medical expenses, may prevent you from making the payments, per your court filing.
- Failure to make payments – You make payments through the court-appointed trustee during the repayment period. Failure to do so might result in the trustee filing a motion to dismiss the bankruptcy. Any collection action started before your filing may continue at this point.
- Changes in personal circumstances – If you experience a sudden increase in income, win lottery money or come into an inheritance, the trustee may seek a modification to the bankruptcy filing.
- Lack of commitment – Payment plans last three to five years. The judge may dismiss the case if you do not stick to the budget created for your bankruptcy filing.
What Happens if Your Chicago Chapter 13 Bankruptcy Fails?
If your Chapter 13 bankruptcy case fails, there are several possible outcomes. If the court dismisses your case, your debts will still be active, and creditors will begin collection attempts. In situations that involve job loss or unforeseen events, the trustee may modify your repayment plan or convert your case to Chapter 7. The result may include the liquidation of your non-exempt assets to pay creditors.
Tips for Successfully Completing Chicago Chapter 13 Bankruptcy
- Develop a realistic budget – When creating a budget, make sure it allows you to meet monthly expenses and still make on-time payments. Consider the necessary expenditures, including utilities, food, medical expenses, transportation, and housing.
- Avoid taking on new debt – New debt typically means additional payments. You could jeopardize the success of your bankruptcy if you take on new debt after the court approves your bankruptcy case and you miss payments.
- Cut unnecessary expenses – Dining out, entertainment and luxury purchases can cut into your budget. Stay on track with your repayment plan by cutting back or removing “extra” expenses to help maintain your payment plan.
- Communicate with your trustee – The court-appointed trustee oversees your bankruptcy and disburses your monthly payments to creditors accordingly. Communicate with your trustee regularly and immediately inform them of any changes to your financial situation. This can help you stay in good standing with the court and help ensure the success of your bankruptcy.
Chicago Chapter 13 Bankruptcy Attorney
Several parties, deadlines, and court dates are involved in a bankruptcy case. Managing all components while still accurately completing the required paperwork can be time-consuming and complicated. Having an attorney at your side to navigate the bankruptcy process, work with the trustee and develop a realistic plan can help you survive and thrive after Chicago Chapter 13 bankruptcy. Contact Kevin Benjamin or call 312.853.3100 to schedule a free initial consultation and find out if bankruptcy is the right option for you.