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Chapter 13

If you make more than the median income and don’t otherwise pass the Means Test, chapter 13 might be for you. Chapter 13 is also for you if you fear losing property to a trustee in a chapter 7 case. Our clients use chapter 13 to keep property which might be taken away by secured creditors like a mortgage lender or automobile finance company. Our experienced chapter 13 attorneys in Chicago can help you decide if this is the right option for you.

Chapter 13 bankruptcy can help you in many ways:

  • You can catch up on your car payments
  • You can catch up on your mortgage
  • You can get rid of a second mortgage if your first mortgage is for more than your house is worth – this is called “lien stripping.”
  • You can eliminate most, if not all, of your debts by writing one check a month for no more than 5 years and as little as three years
  • You can get breathing room from oppressive debts, such as tax debts, student loans and even child support and alimony
  • Our Chicago chapter 13 law firm can stop mortgage foreclosure in chapter 13 bankruptcy
  • We can object to erroneous credit card claims and fraudulent mortgage claims in chapter 13 bankruptcy cases
  • You can eliminate divorce related claims which are not “domestic support obligations” in chapter 13 even though you can’t do this in chapter 7
  • In many cases, our board certified consumer bankruptcy attorney can help you obtain a mortgage modification agreement in chapter 13 even if you have previously been denied a mortgage modification under the Obama plan, the HAMP program, or even the bank’s private loan modification program.

Clear your debt now!

  • If you don’t think you qualify for a Chapter 7 bankruptcy, see our chapter 13 bankruptcy attorneys in Chicago to find out what options are available to you. We work hard to help you achieve the financial freedom you need to get out of debt and improve your credit for a more solid financial future

Recovering after chapter 13 bankruptcy

When you complete your plan with your chapter 13 attorney, you can rebuild your credit. You can get some credit right away. Your credit score will improve. We’ll help you check your credit report to make sure that everything is reported correctly. If credit reports are wrong, we will sue the creditors for money and to make them correct your credit report.

Your Lakelaw chapter 13 bankruptcy lawyers are with you for the long run.

Frequently Asked Questions About Chapter 13

What is a chapter 13 plan?

A chapter 13 plan is a legal document stating your monthly income and expense, your disposable income, the monthly payment you can make to the Chapter 13 trustee and how the payments will be applied. In general, chapter 13 payments are used to pay your attorney’s fees, the chapter 13 trustee’s fees, secured creditors’ arrearages, priority creditors, like taxes, and a percentage of your debt to unsecured creditors. The plan is presented to the court on a form plan designed by the court. We have the right to customize the model plan in ways to best meet your needs. If you fulfill the terms of the plan, your debts are eliminated or discharged.

Who is the chapter 13 trustee?

The chapter 13 trustee is a person appointed by the United States Trustee, a division of the United States Department of Justice, to oversee your chapter 13 case. The chapter 13 trustee reviews your plan, determines if it meets legal requirements, determines if the math of your plan works, and recommends to the bankruptcy court whether to accept or “confirm” your plan. The chapter 13 trustee also monitors payments under the plan and will move to dismiss your case if you fail to make necessary payments.

What is the role of the Bankruptcy Court in Chapter 13 cases?

The Bankruptcy Court decides whether to confirm your plan. It will rule on any objections to the plan. It will rule on any objections to claims. It will consider any lawsuits or “adversary proceedings” or “contested matters” which arise in your case. The Bankruptcy Court also determines if your attorney can be paid. The Bankruptcy Court will carefully consider the opinion and recommendation of the chapter 13 trustee because the judge will value the trustee’s experience and expertise. So we work hard with you to be sure that you satisfy the trustee’s requirements. The Judge’s decision is final and he or she can overrule the recommendation of the chapter 13 trustee.

What are the fees for a chapter 13 case?

In Illinois, there is a fixed fee that courts allow for chapter 13 cases without need for hourly accounting. Sometimes, in complicated cases, your bankruptcy attorney may enter into a contract with you for fees on an hourly basis. In such cases, the fees must be approved by the Bankruptcy Court. Your Lakelaw attorney will organize a fee payment plan that will work for you.

How much must I pay every month?

This varies from case to case. It depends on your income and permitted expenses and allowances under the “means test.” Sometimes, if things in the future are much different than your economic situation was in the past, we look at your current budget to figure out your payment. This is permitted by a United States Supreme Court case called Hamilton v. Lanning. Frequently, this is a negotiation with the Chapter 13 trustee. In all cases, your monthly payment must be approved by the Bankruptcy Court.

How does the means test work?

First, we figure out your “current monthly income.” This means the average income you have made over the past six months. We use either your pay stubs or your income and expense statements from your business to figure this out. Then, we use a complicated form provided by the courts to figure out how much “disposable income” you have. We deduct from your “current monthly income” items that you must pay, such as taxes, mandatory deductions from your salary, payments on secured loans like your mortgage and car payments, life and health insurance and some others. We then deduct “allowances” provided by the Bankruptcy Code based on Internal Revenue Service standards for things like transportation, food and automobile expenses. There are other items considered too. If you have enough disposable income left over to pay something to your creditors, you are expected to pay that amount under your chapter 13 plan.

What if I lose my job?

If you lost your job, it doesn’t matter what you used to make. You won’t be bound by the “means test” and you would be eligible for chapter 7.

What if I am making less money than I used to?

If things have changed for the worse and are not likely to get better immediately, we will figure out if you have any disposable income based on a current budget. If you have disposable income based on a current budget, you can file a chapter 13 case. Otherwise, you can file a chapter 7 case.

What if I am getting divorced and have to pay child support or alimony?

Child support and alimony are deductions from income. You may be eligible for chapter 7 if as a result of child support and alimony payments, you don’t have any disposable income.

What happens to my tax refunds in Chapter 13?

Most trustees will ask that you contribute some or all of your income tax refund toward the payment of your plan obligations. This does not mean you’ll pay more. But it does mean that you’ll complete the payment of your plan sooner.

What happens if I inherit money or win a lawsuit or lottery while I’m in Chapter 13?

You have to inform the court and the chapter 13 trustee of any windfall or inheritance. You may have to pay some or all of this toward your plan. The chapter 13 trustee or a creditor might try to require your plan to be modified in order for you to pay more. It is very important that you keep us informed every step of the way. Very bad things can happen to you if you fail to report something as important as this to the court. Your case could be dismissed, you could lose your right to a discharge and you can even be prosecuted, fined or imprisoned. Former baseball player Lenny Dykstra, for example, was imprisoned for bankruptcy fraud. Don’t let this happen to you.

Will you keep in touch with me during the Chapter 13 case?

Yes, we’ll check on you regularly to see how you are doing. We want to make sure that everything goes smoothly. If something changes for the worse in your financial life, we can often help you resolve the issue with the court and the chapter 13 trustee before it turns into a problem. Keep in touch with us too!

Case Studies

Case Study #1

We represented Mr. and Mrs. C. in chapter 13. During the course of their Chapter 13 case, we helped them negotiate a modification of their first mortgage. Unfortunately, Mr. C. lost his job and was unable to continue in the chapter 13 case. We were then able to convert the case to a case under chapter 7 and as a result discharged all of their unsecured debt.

Case Study #2

We represented Ms. L. in a chapter 7 case. She discharged all of her debts. She still had a second mortgage on her house. The first mortgage was for more than the house was worth. Unfortunately, she needed to file a chapter 13 case within a year or two of her first case. We did so and tried to eliminate the second mortgage lien in that case. The Bank objected. We ended up appealing to the district court. Even though the district court denied the motion to eliminate the second mortgage lien, after all appeals were done, 4 years had passed and then Ms. L was eligible to file a new chapter 13 to eliminate that second mortgage lien. We didn’t charge Ms. L. one cent extra for the work we did on the litigation and the appeal. We’ve stuck with her for over 4 years now and we will see her case through to a successful conclusion.

Case Study #3

We represented Mr. C. in a chapter 13 case. We reduced a $360,000 debt on a 6 flat apartment building to $165,000. We reduced the interest rate on the debt substantially as well. And we eliminated the second mortgage on his residence. As a result of this, Mr. C’s plan will result in him owning the 6-flat free and clear at the end of 5 years.