What Does A Chapter 13 Bankruptcy Do?
This form of consumer bankruptcy, like Chapter 7, offers a fresh start to honest yet unfortunate debtors. So, bankruptcy doesn’t take care of debts related to fraudulent or illegal conduct. However, it does take care of most debts. Additionally, because of the repayment plan provision, Chapter 13 usually looks better on credit reports than Chapter 7. Basically, Chapter 13 debtors get judicially-protected payment plans that allow them to catch up on later mortgages, auto loans, and other secured debts.
A Chicago bankruptcy lawyer helps families like yours maximize their fresh starts. Our professional team completes complex bankruptcy forms in a way that is consistent with your best interests. Furthermore, if things go sideways during this legal proceeding, our team advocates for you in bankruptcy court. Finally, through it all, we give you solid legal advice about your options and your financial future.
Most people reach out to a Chicago bankruptcy lawyer because a creditor is threatening adverse action, or has already started down this road. Section 362 of the Bankruptcy Code instantly shuts down most creditor adverse actions, such as:
- Collection lawsuits,
- Wage garnishment,
- Creditor harassment, and
This provision, which is called the Automatic Stay, is, well, automatic. Debtors need not provide any evidence of fraud or other lender misconduct. Bankruptcy gives people breathing room, so they can make better decisions.
Creditors can only bypass the Automatic Stay if they convince a judge to sign such an order. Usually, the judge won’t do so, unless the debtor has recently and credibly threatened the collateral. The Automatic Stay is especially strong if the asset is exempt. Some exempt assets include:
- Government benefits,
- Retirement accounts, and
- Personal property.
Usually, the Automatic Stay remains in place for five years in a Chapter 13. This extended time period gives debtors plenty of time to catch up on the aforementioned bills.
About six weeks after the filing, the debtor, debtor’s Chicago bankruptcy lawyer, and the bankruptcy trustee (person who oversees the bankruptcy for the judge) have an in-person or virtual meeting.
The trustee must verify the debtor’s identity and income. So, the trustee usually wants to see a drivers’ license, Social Security card, recent tax returns, and other such documents.
Additionally, the trustee sets the debtor up on an income-based debt consolidation plan. This plan usually pulls information from Schedules I and J, the monthly income/expense schedules in a bankruptcy filing package.
Normally, debtors commit most or all of their disposable income to the repayment plan. The trustee then distributes this money among allowed claims, which are mostly delinquent secured debts. As long as the proposed plan meets minimal legal qualifications, the judge usually approves it without asking any questions.
Five years is a long time. Financial circumstances usually change, and they usually change more than once. If this change affects a debtor’s ability to make the monthly debt consolidation payments, an attorney can file a motion to modify plan provisions. Once again, if the modified plan meets minimum legal requirements, the judge usually gives it the stamp of approval.
At the end of the protected repayment period, the judge discharges (forgives) most credit card bills and other unsecured debts. With a zero past due balance on secured debts and no crushing unsecured debts, the debtor has the fresh start the Supreme Court guarantees.
Count on a Hard-Working Cook County Lawyer
No matter what kind of financial problem you are having, a solution is usually available. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.