Illinois residents dealing with unmanageable debt may look at various options for healing their finances. Filing a Chapter 13 bankruptcy is one avenue of debt relief some may benefit from.

Understanding some fundamental points about how a Chapter 13 filing works can help you consider whether this path is right for you. 

How it works

Under Chapter 13, the bankruptcy trustee sets up a repayment plan. If the debtor complies with it and makes payments on time, at the end of the repayment period, the rest of his or her dischargeable debt will be gone. The repayment plan usually covers between three and five years.

Who can benefit

This type of solution could work for a debtor who has a regular income that allows him or her to have an amount left over after paying for necessities such as shelter, transportation, food, health insurance and similar types of expenses. Basically, there should be enough for you to be able to commit to making monthly payments, even though the disposable income does not suffice to pay off debts in full.

A Chapter 13 does not require selling off assets. This can make it an attractive option for homeowners whose equity would exceed the Illinois Chapter 7 exemption amount. However, you would still need to keep current on payments for any asset you want to keep. Typically, this variety of bankruptcy also disappears from your credit report sooner than a Chapter 7.

Remaining debt

You will still bear the obligation of paying certain kinds of debts in full. These include court-ordered payments such as child support, judgments, fines and alimony. They also usually include some kinds of taxes, wages you owe to employees and student loans.

When you cannot keep up with the repayment plan

Sometimes, unforeseen circumstances may arise that change your ability to keep making the Chapter 13 payments. In such a situation, solutions may include asking the bankruptcy trustee to modify the repayment plan, petitioning the court for a discharge based on hardship or converting to a Chapter 7.