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What obligations do I face if I file for Chapter 13?

The potential value of filing for personal bankruptcy is that it provides those who might find themselves in debt distress the opportunity to regain their financial footing. Chapter 7 and Chapter 13 are the two routes most commonly taken by individuals in Illinois. Which one is appropriate depends on your particular circumstances, which is why speaking with an experienced bankruptcy attorney is always advised.

Chapter 7, often called liquidation, is attractive for some because of the speed with which debt can be erased. However, not everyone is eligible to file for this form of protection and it sometimes can mean a loss of assets that the filer might rather prefer to hold on to.

Chapter 13 may take longer, but it may be easier to pursue if the filer has a steady stream of income. But it doesn't come without obligations.

Obviously, there are all the necessary forms and documents that need to be filled out and filed with the bankruptcy court. Included among them is a plan for making payments over the course of time -- usually three or five years.

Once a petition is granted, the filer has the obligation to make all the payments called for in the plan on time. A trustee will be appointed to handle distributions and the money collected will go to cover administrative costs; priority debts, such as child or spousal support and taxes; secured debts, such as mortgages, car and boat loans and personal loans; and secured liens.

Unsecured creditors will expect to be paid over the time of the plan a sum equal to the value of any nonexempt property held by the filer.

Diverging from the plan without getting a modification from the court could result in an involuntary dismissal of the case. But at least the option exists to make changes if reasons should call for them.

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