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Illinois Bankruptcy: Chapter 13

Bankruptcy creates a ripple effect that touches many beyond the people and companies that file. It is best to thoroughly understand the process of bankruptcy to know what to do when encountering it as a consumer of a company that has filed for bankruptcy, as a friend or loved one of someone who has filed for bankruptcy, or as the person person filing him or herself.

Companies and individuals can file bankruptcy when they have acquired too much debt. They file a petition, which includes all debts and assets, for bankruptcy with the U.S. Bankruptcy court. Most people require the assistance of a bankruptcy lawyer because the process can be tricky, especially when deciding which of the three types of bankruptcy to file.

Chapter 13: Wage Earner Plans

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What if I Do Not Qualify for Chapter 13 Bankruptcy?

If you are struggling with an intense level of personal debt, consider filing for bankruptcy. Individuals in this situation can file for Chapter 13 or Chapter 7 bankruptcy, depending on the chapter for which they qualify. Often, it is easier to qualify for Chapter 13 bankruptcy, but this is not always the case.

Consider Chapter 7 Bankruptcy

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Filing for Chapter 13 Bankruptcy with a Variable Income

Chapter 13 bankruptcy is an option for individuals who have an income to work through their debt issues and move toward a financially sustainable future. Unlike Chapter 7 bankruptcy, which involves ceding control of the filing party's assets to a court-appointed trustee to liquidate and use the profits to pay off his or her debt, Chapter 13 pairs the filer with a trustee to develop a repayment plan that will allow him or her to repay the bulk of his or her debt over a period of three to five years. This type of bankruptcy puts more responsibility on the bankrupt party, but also allows him or her to retain his or her assets.

When determining any bankruptcy plan, the filing party's assets and income level must be determined. The court needs to determine that you can repay your debt obligations with your income before it approves of your Chapter 13 plan. If you make an irregular income, proving this can be difficult. However, it is not impossible. If you are a real estate agent, a freelance writer, a server in a restaurant, a salesperson working on commission, or in any other position that does not provide a consistent salary each month, speak with an experienced bankruptcy lawyer about how you can handle the Chapter 13 process.

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Now that mortgages rates have lowered, people are looking to refinance their homes in order to keep them. To be eligible for refinancing a mortgage, applicants must have good credit ratings and a steady income source. This presents a problem for older people who could really benefit from easier mortgage payments.

The AARP has released many figures that document the financial state of those considering retirement. More than 1.5 million individuals over the age of 50 have lost their homes since 2007. More than 3.5 million are currently at risk of foreclosure. More than 16% of homes owned by the baby boomers are underwater or lack the equity to refinance leading to foreclosures for those who are on a fixed budget.

It is also compounded by the fact that more people are still paying their mortgages after they have retired. “More older Americans are carrying mortgage debt than in the past, and the amount of that debt is also increasing…leading to their worsening situation,” said AARP vice president for policy Debra Whitman. “It's one thing if your housing value goes down in your 50s. It's another thing if you're 75. For some people, it's not like you can go back to work.”

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