Applying for Chapter 13 bankruptcy is a realistic way to get a substantial debt repayment facilitation on a legal basis. In this detailed guide, we have covered everything you need to know about filing Chapter 13 in Illinois, including essential definitions and step-by-step application instructions.
How Chapter 13 Bankruptcy Works in Illinois
All the key aspects of the Chapter 13 bankruptcy Illinois process are based on federal bankruptcy law rather than state law. The entire process is about negotiating a new repayment contract with your creditors regarding your current financial situation. It’s important to understand that Chapter 13 doesn’t let you erase the entire debt but can give you an opportunity to repay your debts within an extended period.
This legal instrument is usually used if you need to force your creditors to extend the repayment period and save all your valuable possessions, such as cars and estate. Besides, you can reduce the amount of debt by letting some of your property go if you can’t make the required monthly payments within the extended period. Unfortunately, most Chapter 13 debts are nondischargeable. You can discharge only some of the nonpriority unsecured debts, including:
- credit card debt;
- personal loans;
- medical bills;
- older nonpriority income tax obligations;
- utility bills;
- particular types of lawsuit judgments.
Do you qualify?
To qualify for Chapter 13, you need to:
- have regular income;
- have an unsecured debt lower or equal to $419,275 or a secured debt not higher than $1,257,850;
- file at least in 2 years after the previous Chapter 13 application or 4 years after Chapter 7 application.
- file at least 180 days after the last Chapter 7 or Chapter 13 application that was rejected for any reason.
Chapter 13 Bankruptcy Process
Below are all the necessary steps to claim Chapter 13 bankruptcy in Illinois in 2022:
1. Attend a credit counseling course
Within 180 days before filing for Chapter 13, you are obliged to complete a credit counseling course in a federally licensed nonprofit agency. The court will later request a copy of your certificate. You can also ask your counselor to help you with a repayment plan draft and initial calculations.
2. Hire an attorney
You are allowed to file for bankruptcy on your own, but it’s fraught with the risk of missing something important and having your application declined or not processed the way you expect.
3. Do the paperwork
Once you start working with an attorney, you need to fill out several forms. Here is the information you need to gather before you start:
- pay stubs for the last 2 months;
- the most recent tax return copy;
- a list of monthly living expenses;
- income size, frequency, and source(s);
- info about large donations and presents if any;
- recent debt down payments;
- current debts;
- details on property: everything from clothes and cash to cars and estate.
We recommend you make at least 3 copies of each supporting piece of documentation to submit them to the court and creditors. Next, you need to complete several bankruptcy forms and make 3 copies of each. Here is the most recent list of required forms:
- B 106 Summary, B106 Declaration, and B 106 Schedules A-J2;
- B 101 — Voluntary Petition for Individuals Filing for Bankruptcy;
- B 121 — Your Statement About Your Social Security Numbers;
- B 107 — Your Statement of Financial Affairs for Individuals Filing for Bankruptcy;
- B 2010 — Notice Required for Individuals Filing for Bankruptcy;
- Form 113 — Chapter 13 Model Plan (payment plan calculation sheet).
4. Submit your bankruptcy petition to the court
Now that you have all the info and forms prepared, you need to file them to the nearest Illinois bankruptcy court to start the bankruptcy process. Don’t forget that you need to pay submission fees. If they are too high for you to pay at once, you can file the Application for Individuals to Pay the Filing Fee in Installments to ask the court to split your processing fees into several installments.
You have to file Form 113 within 2 weeks after filing the main petition. You are required to start making payments based on your suggested repayment plan within 30 days after filing the petition regardless of your petition approval status.
5. Meet your creditors and attend the confirmation hearing
Once all the required documents are submitted, you will receive an invitation to a meeting with creditors from your trustee 21-50 days after submission. It’s necessary to visit it to talk over all the issues and your suggested repayment plan with your creditors.
Around 45-50 days after the meeting with creditors, you will need to attend a confirmation hearing in court to receive a repayment plan confirmation or amendment. If your attorney worked well, your initial repayment plan will be confirmed without significant changes.
6. Start paying and complete the debtor education course
Once your repayment plan is confirmed, you need to keep making payments within 3-5 years, depending on the court requirements. Besides, you will need to complete the debtor education course in the same credit counseling agency you completed a credit counseling course.
Although filing for Chapter 13 is quite a time-taking and complex process, it’s a great opportunity to make your debt obligations not that tough. Remember, the earlier you start, the faster you receive relief.
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