Is Chapter 13 Right for Me?
Especially for some people, the moral imperative to repay debts is very high. But reality gets in the way. Credit cards are a good example. The average credit card interest rate is so high that these debts quickly spiral out of control. Similarly, there’s a practical obligation to pay secured debts, like a home mortgage. You must pay to stay, whether you file bankruptcy or not.
Chapter 13 is ideal in these situations, especially if the debtor works with a good Chicago bankruptcy lawyer. An attorney strongly advocates for you during the entire Chapter 13 process. But first, an attorney accurately determines if you qualify for Chapter 13, and if this form of consumer bankruptcy is truly the best option for you and your family. As outlined below, this assessment involves looking at formal and informal qualifications.
Formal Qualifications
Almost all debtors meet the brief, formal qualifications for Chapter 13 bankruptcy. Citizens and noncitizens alike can file bankruptcy, as long as they provide proof of residency, like a utility bill, and proof of identity, like a drivers’ license, and proof of Social Security number or ITIN (individual taxpayer identification number).
A government-issued card is the best proof of SSN or ITIN. Usually, however, the trustee (person who manages the bankruptcy for the judge) accepts correspondence from the IRS that includes the pre-printed SSN or ITIN.
A debt ceiling applies. As of July 2024, that debt ceiling is $2.75 million combined unsecured and secured debts. If you just bought an expensive home or have accumulated significant medical bills, especially unpaid surgery bills, the debt ceiling might be an issue. Otherwise, you’re probably fine.
Additionally, all bankruptcy debtors must complete pre- and post-filing financial management classes. These classes, which are available online, usually only cost a few dollars to take and require a few minutes to complete.
Informal Qualifications
The formal qualifications are basically the same everywhere. The informal qualifications vary in different jurisdictions, and only an experienced Chicago bankruptcy lawyer is familiar with them.
Sometimes, the formal and informal qualifications overlap. The duty to cooperate with the trustee, which is written in the Bankruptcy Code, is a good example.
Generally, trustees demand many financial documents, such as tax returns, paystubs, secured debt contracts (like mortgage agreements), and insurance policies. Some trustees are very strict on the type of documents and production deadlines. Other trustees are more relaxed.
The ability to make a monthly debt consolidation payment is a much more important informal qualification. The debtor must show enough disposable income in the Schedule I (monthly income) and Schedule J (monthly expense) schedules to fund this payment every month.
This payment must cover all allowed claims, mostly secured debt and priority unsecured debt arrearage, administrative fees, and the trustee’s bounty, which is usually 10 percent. The amount obviously varies significantly in different cases, but generally, the debt consolidation payment is somewhere between a car payment and a mortgage payment.
If the debtor can’t make the payment, based on the aforementioned Schedule I/J comparison, or if it’d be tight, another form of bankruptcy, like Chapter 7, might be a better option. If the debtor is unable to make the payment, the judge could dismiss the bankruptcy. The judge also has the power to lower the plan payment, but that’s unlikely to happen.
Count on a Detail-Oriented Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State.
Source:
bpb-us-e2.wpmucdn.com/faculty.sites.uci.edu/dist/2/432/files/2011/03/The-Moral-Obligations-of-Some-Debt.pdf
