In a previous post, this column discussed Chapter 7 bankruptcy and who can benefit from that type of relief. This week, the focus will shift to Chapter 13 bankruptcy and who it is meant to help. Not all Illinois residents who want to file for bankruptcy will qualify for or wish to pursue Chapter 7 relief. Chapter 13 may better suit their needs.

Chapter 13 bankruptcy is for individuals who, for whatever reason, would rather not file a Chapter 7 petition and those who make too much money to file for that type of debt relief. It is called a wage earner’s plan for a reason — sufficient income is needed to qualify for this type of bankruptcy protection. If a Chapter 13 petition receives court approval, the petitioner will be expected to utilize his or her income to pay back creditors by making a set payment every month for the next 36 to 60 months. The money is sent to the trustee assigned to one’s case, and the trustee sends the funds on to creditors. At the end of the repayment term, qualifying debts may be discharged.

The main benefit of Chapter 13 bankruptcy is that it allows people to keep their property. Of course, there are many others, such as putting an end to creditor harassment and offering protection to co-signers. It is not without its disadvantages, though — the biggest being that it will impact one’s credit rating.

Chapter 13 bankruptcy offers relief to those who would otherwise be turned away if Chapter 7 was the only available option. Illinois residents who feel they need bankruptcy protection but fear they will not qualify can turn to legal counsel for guidance. After a careful case review, the best form of debt relief for one’s situation can be pursued.