Chapter 13 Bankruptcy: What It Is and How to File

Portage Park, IL Bankruptcy Lawyer
Portage Park, IL Bankruptcy Attorney


Chapter 13 bankruptcy is a type of reorganization bankruptcy that is available to individuals. It is also known as a wage earner’s bankruptcy because it requires the debtor to have a regular source of income.

Under Chapter 13, the debtor proposes a plan to repay all or part of their debts over a three to five-year period. The debtor must use their best efforts to repay the debts, and the payments are made to a trustee who then distributes the funds to the creditors.

If you are considering filing for Chapter 13 bankruptcy, it is important to speak with a bankruptcy attorney to learn about your rights and obligations.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a type of reorganization bankruptcy that enables an individual who has a regular source of income to repay all or part of their debts over a three to five-year period. The repayment plan is supervised by a Bankruptcy Court, and the debtor must use their best efforts to make the payments as agreed. The trustee distributes the payments to the creditors, and at the end of the repayment period, the debtor receives a discharge of the remaining debt, which means they no longer have to pay it.

A Chapter 13 bankruptcy is filed in the District of the debtor’s residence. The guidance of a bankruptcy attorney is important to ensure that all the necessary steps for successful filing are taken.

How to file for Chapter 13 Bankruptcy?

The filing of a Chapter 13 bankruptcy involves several steps. First, the debtor must prepare the paperwork that is needed for the filing. This includes a list of the debtor’s assets and liabilities, income and expenses, a schedule of the debtor’s property, and a statement of the debtor’s financial affairs. The debtor must also submit a proposed repayment plan and a budget that shows how the debtor will use their income to make the plan payments.

Next, the debtor must file the paperwork with the Bankruptcy Court in the district of the debtor’s residence. A debtor’s bankruptcy lawyer will prepare and file these documents for them. The debtor must also attend a meeting with the trustee, their bankruptcy lawyer and the creditors (who rarely show up), where they can ask questions about the plan and discuss any objections they may have.

Finally, the Bankruptcy Court must approve the repayment plan before it is put into effect.

The Advantages and Disadvantages of Chapter 13 Bankruptcy

Chapter 13 bankruptcy has several advantages. The repayment plan allows the debtor to catch up on past due payments, such as mortgage or car payments, and make regular payments on secured debts, such as a car loan. The debtor also has the opportunity to negotiate with creditors to reduce their debt or interest rate. One of the major disadvantages of Chapter 13 bankruptcy is that it requires the debtor to make regular payments over a three to five-year period. This can be difficult if the debtor’s income is reduced or if their expenses increase. The debtor’s credit score will also suffer, as the bankruptcy will be listed on the debtor’s credit report for up to seven years.

What to do After Filing for Chapter 13 Bankruptcy?

After filing a Chapter 13 bankruptcy, the debtor must continue to make their regular monthly payments as outlined in their repayment plan. The debtor must also keep the trustee informed about any changes to the debtor’s income or expenses, such as a change in employment or an increase in medical expenses. The debtor should avoid making large purchases or taking out new loans unless the are reasonable and necessary. The bankruptcy Judge and trustee must approve these purchases in advance, by a motion filed with the court.


Filing for Chapter 13 bankruptcy enables an individual with a steady source of income to restructure their debts and repay them over a three to five-year period. There are some advantages to filing, such as the ability to catch up on past due payments and pay unsecured debts with little to no interest, and often, just pennies on the dollar. There are also some disadvantages, namely the time commitment, having to make regular payments over three to five years. To ensure a successful filing, it is important to speak with a bankruptcy attorney, as they can provide the guidance needed to make the best decisions when it comes to filing and repaying debts. Contact us now for a free legal bankruptcy evaluation.

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About Author

Terrance Leeders

Chicago Bankruptcy Lawyer, husband, father, Cubs fan.

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