When most Illinois residents hear the term ‘bankruptcy,’ they likely picture a liquidation, where all a person’s major possessions are sold to pay off his or her debt. While a Chapter 7 filing might require some of that — though there are exemptions for certain property — there are other types of bankruptcy filing as well. One of these is a Chapter 13, or ‘wage earner’s plan.’ This types of filing allows the debtor to submit a repayment plan that proposes to pay some part of the debt over a certain number of years, usually three or five. One advantage of this kind of filing is that, under certain circumstances, it can stop a foreclosure or other repossession action.
But who is eligible for a Chapter 13 filing? First, Chapter 13 is for individuals, not businesses. The individual filing has to have less than $383,175 in unsecured debt and secured debt below about $1.15 million. The individual filing must not have had a bankruptcy cases dismissed in the prior 180 days due to the fault of the debtor such as failure to appear or comply with a court order. Further, the filing debtor must have completed an approved credit counseling course within 180 before filing the petition.
The filer will have to pay a filing fee to the court, generally $235, plus a $75 administrative fee. The debtor will have to disclose the identity of, and amounts owed to, any creditors, as well as the amount and frequency of the debtor’s income, as well as the income source. The debtor will also have to show the court a list of all his or her property, and a detailed list of monthly living expenses for food, shelter, clothing, utilities and so on. If the debtor’s income level is too low, or too infrequent to meet legal requirements to pay various types of creditors, a Chapter 13 filing may not be allowed.
As can be seen, there is some work that needs to be done before an Illinois resident files a Chapter 13 bankruptcy case. How the information is presented to the court may be the difference in being able to continue with this type of petition. Those with questions about the process may want to consider seeking advice from an experienced legal professional.