Chapter 13

Chapter 13 bankruptcy allows individuals to reorganize their debts, paying them over a three to five year period. This type of bankruptcy usually allows individuals to keep their homes and other property while making a fresh start. At Urban & Burt, Ltd., we guide clients through the Chapter 13 bankruptcy process, helping them achieve their financial goals and pay their debts.

Led by experienced attorney Edmund G. Urban III, our bankruptcy team counsels clients about the advantages of Chapter 13 bankruptcy. These include the ability to:

Strip away second or third mortgages, allowing the homeowner to bring the first mortgage current over time

• Cure home mortgage arrears
• Protect co-signers
• Prevent sale of assets such as cars, boats, and other personal property
• Bring mortgage current while preventing other creditors from seeking payment
• Stop foreclosure proceedings

Benefits such as these make it possible for individuals to keep their cars and homes while becoming current with their debts. Once the agreed-upon repayment plan is completed, the court will discharge any remaining unsecured debts.

This type of bankruptcy is often called a wage-earner’s bankruptcy, because it is intended for individuals who have a steady source of income, are able to make regular payments, and may not qualify for Chapter 7 under the means test. Part of the filing process is to develop a budget or payment plan that indicates how much income can be applied to the debt each month. This amount is usually paid to the trustee, who distributes the funds to the creditors. The individual will continue to make current mortgage payments and pay ongoing bills. Our lawyers advise clients about which expenses are their responsibilities and which will be paid by the trustee.

Contact the Oak Forest Chapter 13 bankruptcy attorneys at 708-381-5426 to learn more about how to file Chapter 13 bankruptcy. As a full-service law firm, we are also able to help clients with legal matters that may have a bankruptcy component.

Under Federal law, individuals with regular income from wages or commissions, as well as individuals who operate a small unincorporated business, are entitled to reorganize their finances under Chapter 13 of the Bankruptcy Code. Previously the statutory limits for chapter 13 limited an individual or couple who had debts that exceed the Chapter 13 limits of $465,275 for un-contingent, liquidated, unsecured debts and $1,395,875 for un-contingent, liquidated, secured debts from filing a Chapter 13. On June 21, 2022, President Joe Biden signed the Bankruptcy Threshold Adjustment and Technical Corrections Act. This Act increases the eligibility to a combined total for unsecured and secured non-contingent, liquidated debts to $2,750,000. This legislation, however, will sunset in two years and the previous limits will once again apply. Those who may need help and exceed the old limits should contact Urban & Burt, Ltd. to discuss their options for filing under Chapter 13. Cases filed under Chapter 13 are preferred over Chapter 11 since court approval is easier and the cost of Chapter 13 is substantially less than Chapter 11.

If your debts are over those limits or you are a corporation, you must file a Chapter 11 to get relief from your creditors. Chapter 13 can be very helpful to individuals with many financial or business problems. Upon the filing of the Chapter 13 petition with the court, an order from a judge of the United States Federal Bankruptcy Court is entered which stops all lawsuits, garnishments, repossessions, foreclosures, and collection harassment. This order also stops collection actions and garnishment against co-signers on consumer debt.

Under the Chapter 13, you and your lawyer will propose a plan to reorganize your financial affairs. Under the Chapter 13, any creditor who holds a mortgage on your home, or liens on vehicles or furniture, must be paid 100% of the value of his security. However, depending on what assets you own and what your income and expenses are, other creditors may be entitled to receive as little as 0% of what is owed. The typical Chapter 13 usually lasts 36 months. However, it may last up to 60 months with special permission from the court. It may also last less than 36 months if all creditors can be paid in full in a shorter time.

If you have fallen behind in your mortgage payments, foreclosure can be stopped by a Chapter 13. Normally, your mortgage company will not accept late or partial payments if you have fallen behind. They usually demand all past due payments plus late charges, and if a foreclosure has been filed, attorneys’ fees and court costs. Under federal law, if you are able to make your current mortgage payments, the judge may order your mortgage company to accept payments on your mortgage arrearage to allow you to become current over a period of up to 24 months or possibly up to 60 months. This gives most people the time needed to catch up and save their home after an illness, job layoff or other financial difficulty.

Additionally, the court will order your other creditors, such as charge cards, hospitals, or financial companies, to stop collection procedures and wait until payments have been made to your mortgage company so that you may save your home.

It is important to speak with a Bankruptcy attorney as soon as a foreclosure is filed by your mortgage company. Chapter 13 can only stop the foreclosure if timely filed before the creditor holds a sheriff's sale. Once that sale takes place, the Illinois courts have consistently ruled that you no longer have legal ownership in your home and the Chapter 13 won't help save it from foreclosure.

When you file a Chapter 13, the court enters an order forbidding the repossession of your vehicle even if you are behind on your payments prior to filing. Under Chapter 13, payments on your vehicle are made by the trustee from your monthly payments to the Chapter 13 trustee. It is your responsibility to make all payments for insurance on the vehicle and to be sure they are kept current. If there is no insurance coverage protecting the lien holder on your vehicle, the court will allow the lien holder to repossess the vehicle.

Under certain circumstances, if your vehicle has been repossessed before you have filed a Chapter 13, the court can order the vehicle returned. However, the return of the vehicle will usually only be allowed when the vehicle is essential for you to get to and from work, with no other means of travel available.

In many cases, loans are made with the requirement that a friend or family member act as a co-signer and become responsible on that loan as well. Chapter 13 provides protection to your co-signer. Your creditors are prohibited from contacting the co-signer or requesting payment from him or her since your Chapter 13 plan will provide for full payment to that creditor. The creditors must wait for payment from the Chapter 13 Trustee. Your creditors are also prohibited from harassing, suing, or garnishing your co-signers.

If you are unable to make your Chapter 13 payment on time because of an emergency, you should contact the trustee and advise his office of your situation. If you are unable to continue with payments because of illness or loss of job, you should contact your attorney to discuss those problems. If you miss payments, the court will automatically place you on payroll control and your payments will be deducted by your employer. Once all creditors who have filed claims have been paid, your case will be set for closing and you will be notified of your discharge. You should keep those discharge documents for future reference.

Your attorney will work with you before filing your Chapter 13 to develop a budget of your expenses and income for the court’s approval. Your attorney will set up a payment to the Chapter 13 trustee in an amount which you can afford on your monthly budget. Under your Chapter 13 plan, you will typically be required to make your current payments on your mortgage, utility bills, and personal expenses, as well as a payment to the Chapter 13 trustee. All credit cards, auto payments, mortgage arrearage, and other bills will typically be paid by the trustee from your monthly plan payment. The Chapter 13 trustee is appointed by the court to make payment on the bills which have been consolidated under the Chapter 13. Since each Chapter 13 is different, you should consult with your attorney on what payments are your responsibility.