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Advantages and Disadvantages of Filing Chapter 13 Bankruptcy

Bankruptcy Attorney

Bankruptcy is the inability of an individual to repay their debts in full on time per the repayment schedule. Under federal law, all individuals are allowed to file for bankruptcy to seek an immediate stop on repayment to creditors. It can help avoid immediate foreclosure, eliminate legal debts, help stop wage garnishments, and restore any termination of utility services to both your house and business. Debt adjustment or Chapter 13 bankruptcy helps debtors with a repayment plan that can be used to repay debts and seek a new start.

Understanding Chapter 13 Bankruptcy

Also called the wage earner’s plan, Chapter 13 bankruptcy allows a debtor to repay full or partial debts over a period of three to five years, depending on their income. An incorporated business or self-employed individual can file for chapter 13 unless a previous bankruptcy petition was dismissed by the court prior to 180 days because creditors exercised their liens or debtor failed to appear in front of the court. An Official Bankruptcy Form should be completed, which includes list, amount and nature of creditors, source and frequency of debtor income, debtor property list and debtor’s monthly expenses. If you are filing Chapter 13 bankruptcy for the first time, seek support from a competent bankruptcy attorney.


Possible advantages include:

  • Removes all creditor accounts after 7 years,
  • No assets such as vehicles, house or other property are confiscated,
  • No income test is required, but an Official Bankruptcy Form must be filled and verified,
  • Provides up to five years to repay debts,
  • Allows for forming classes of creditors, and reduction of principal or interest fee can be sought,
  • Repayment plan modification available if debtor loses their job.


Bankruptcies need timely repayments and must adhere to the plan for a debtor to seek relief:

  • Chapter 13 bankruptcy can only be valid if the debtor salary is below the median wage,
  • Almost all disposal cash is applied to a repayment plan and payments are done through payroll,
  • It can be hard to buy new assets or mortgages,
  • Chapter 7 straight bankruptcy cannot be sought during the repayment period,
  • It can be difficult to improve your credit score for 7 years until the debts are removed from credit history.

Upon discharge, a debtor will still be liable for repayment of all long-term debts, government taxes, child support or education loans.

If you wish to know more about chapter 13 bankruptcy filling in Illinois or speak with an experienced bankruptcy attorney, contact the offices of Covert Marrero Covert LLP at (630) 717-2783 and schedule a free consultation session.

By Brian Covert | Posted | Posted in Bankruptcy Attorney

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