Chapter 7 Bankruptcy Frequently Asked Questions (2021 Update)

Chapter 13 FAQ's

Frequently asked questions

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Can I pay late overdue child-support in the payment plan?

In a Chapter 13, you can pay your overdue child-support payments over a period of up to 5-years. This would also restore any license suspensions and manage any "rule to show cause" matters.

I am in a LGBT Civil Union, can we file a joint bankruptcy?

Yes. In the Northern District of Illinois, Civil Unions have the same rights as marriage.

Will I lose all my house, auto, or property in and Chapter 13 Bankrupty?

In a Chapter 13, you will not lose your property unless it is part of your plan to do so.

Will I lose my income tax refund if I file a Chapter 13?

Generally, the tax refund will get paid into the plan if you are paying less than 100% to your creditors. If your plan pays 100%, you can generally keep your tax refunds as normal and will not "lose" your refund to the Trustee.

Can I get incur new debt while in a Chapter 13?

You can, but you must advise the Trustee, Creditors and secure permission.

My spouse doesn't want me to file a bankruptcy, can I file one anyway?

You can. You will need to document the income of your spouse and joint/marital assets will be discussed as part of your asset base. The name and other identifying information of your spouse is not part of the schedules filed.

How often can I file a Bankruptcy?

After your receive a bankruptcy discharge, you must wait 8 years before you can file another Chaper 7 Bankruptcy. You could file a Chapter 13 if you have not received a Chapter 7 discharge in the last 4 years; or if you have not received a Chapter 13 discharge in the last 2 years. If your case was dismissed within a year, you will need to permission from the court to continue your automatic stay after 30-days. In subsequent filings within one year, you will not get an automatic stay and with too many filings, you may be barred from further filings or need permission from the court.

Do I need an attorney to file a bankruptcy?

You do not need an attorney. But unlike a Chapter 7, a Chapter 13 is much more complex. Even for an attorney. The bankruptcy court publishes the forms for filing and instructions. Their is no right to an attorney to be provided "at no cost" by the court. The rules of exemptions are complex and there are many "traps" for the unknowing. Considering that your assets are at risk and you wish your debts to be extinguished, the cost of a bankruptcy attorney is reasonable. For most people, its the only time in their life they will actually be "happy" to make a payment.

What happens to my co-signer?

Generally nothing, as long as the payment is received the will credit the account. But, if the account is not paid in full and your are discharged, the remaining obligation falls on the co-signer.

What happens to my Student Loans in a Chapter 13 Bankruptcy?

Your student loan is not discharged. You can pay late payments through the plan.

What is the automatic stay and how does that help me?

The automatic stay is a court injunction for all actions to stop while the bankruptcy administers your estate. This means all lawsuits, foreclosure actions, wage garnishments, repossessions and other such action must halt, at least temporarily and each will be dealt with in tandem with your bankruptcy Chapter 13 plan.

What happens to my mortgage or auto loan in a Chapter 13?

If your are keeping your house, you continue your payments as normal and life goes on. If you receive a Chapter 13 discharge, you are not personally liable for the debt, but if you do not pay, the property will be foreclosed with no liability to you. Late payments can be paid through the plan over 60-monthly payments. All foreclosure activity such as foresclosure sales must stop.

I'm late several payments with my home or auto loan payments, can a Chapter 13 help?

Yes, you can have your Chapter 13 plan pay the late payments over 5-years (60-payments) and all foreclosure activity such as a foreclosure sale or automobile repossesion must stop.

My foreclosure sale is in 20-minutes, can a Chapter 13 help me?

That's cutting it close. But as long as a bankruptcy is filed before the sale, you still retain your options for managing the debt through your bankruptcy. You can pay all you late payments over 5-years or even sell the home to keep from losing your equity.

What is better Chapter 13 bankruptcy or loan consolidation?

This depends on many factors. The advantage of the Chapter 13 is that typically you are no longer charged interest and the lender must accept your plan proposed in good faith. In addition, you may be able to pay unsecured creditors as little as 10-cents for ever dollar owed. For example, if you owe a credit card $2000.00, you will pay $200 over the course of 5-years and the balance gets wiped out. This is a huge advantage over consolidated loan programs.

What is better Chapter 13 bankruptcy or loan consolidation?

In the Northern District, the 341 meetings are held in the old Kane County Courthouse, the Federal Courthouse Downtown, Roundlake, IL, Kane County Courthouse and Joliet. You do have to attend. During the COVID crisis, the meetings have been held by phone and soon will be held by Zoom conference.

Can my Chapter 13 by denied?

Yes. If you misrepresent assets and liabilities you can be denied. In addition, if your plan is not proposed in "good-faith" you can be denied. Finally, if you don't have sufficient income to support the plan, you might be denied.

What happens if I forgot to list an asset or creditor?

If you failed to list an asset, it may cause your plan to be denied or worse may trigger a creditor to challenge your plan through an adversary proceeding accusing you of fraud. Failing to list a creditor will not discharge them from a finished Chapter 13 bankruptcy. You will still owe them.

Do I get a discharge in a Chapter 13 Bankruptcy?

You do! If you finish your approved plan payments in full, you will receive a discharge. Exception occur if your plan was not eligible for a dischage to begin with or if the items are not dischargeable, such as student loans or child-support. Otherwise, the debt that remains is discharged.

What happends if I stop paying on my Chapter 13 plan?

If you stop paying, or never started, your case will eventually get dismissed. If you make an earnest effort to pay back your late amounts, you can usually get 14-30 days to catch-up your payments before dismissal if you aren't to far behind. Once dismissed, you no longer have bankruptcy protections and creditors are free to take action against you as before.

Can I "quit" or dismiss my Chapter 13 Bankruptcy

Yes, you have a right to dismiss your Chapter13 Bankruptcy at any time by motion to the court. If you stop payments, your case will eventually be dismissed as well.