Chapter 13 bankruptcy in Illinois is a court-supervised repayment plan that lets individuals with regular income keep their house, car, and other property while catching up on debt over three to five years. It is the main alternative to Chapter 7 liquidation for Illinois filers who have steady earnings and want to protect assets they would otherwise lose. The trade-off is a long commitment: your disposable income goes to the plan for the full term, and the eligibility rules, exemption limits, and procedural steps are stricter than most people expect.
Who Can File
Chapter 13 is for individuals, not businesses, and only for people with regular income. There are also hard ceilings on how much debt you can carry into the case. For cases filed between April 1, 2025, and March 31, 2028, your unsecured debts cannot exceed $526,700 and your secured debts cannot exceed $1,580,125. Credit cards, medical bills, and personal loans are unsecured. Mortgages and car loans are secured. If you are over either limit, Chapter 13 is closed to you and Chapter 11 is the reorganization alternative.
Your income decides how long the plan runs. The court averages your monthly income over the six months before filing and compares it to the Illinois median for a household your size. For cases filed on or after April 1, 2026, the median income is $73,180 for a single earner and $137,902 for a four-person household.1U.S. Trustee Program. Census Bureau Median Family Income By Family Size (April 1, 2026) Below the median, the plan lasts at least three years. Above the median, it must run five.2United States Courts. Chapter 13 Bankruptcy Basics No plan can go past five years in any case.
Illinois Exemptions Decide What You Protect
A common misconception is that Illinois filers can choose between state and federal exemptions. You cannot. Illinois has opted out of the federal system, so only Illinois exemptions apply.3Illinois General Assembly. 735 ILCS 5/12-1201 – Bankruptcy Exemption This matters in Chapter 13 because of the “best interests of creditors” test: your plan must pay unsecured creditors at least what they would have received if your non-exempt assets had been liquidated in Chapter 7. More exempt equity means less you have to pay in.
Effective January 1, 2026, Public Act 1738 raised several key exemption amounts:
- Homestead: up to $50,000 of equity in your primary residence, or $100,000 when two or more people own the property jointly.
- Motor vehicle: up to $3,600 of equity in one car, truck, or other motor vehicle.
- Wildcard: up to $4,000 in any personal property not covered by another specific exemption.
- Tools of the trade: up to $2,250 in professional tools, books, or equipment you use for your livelihood.
Illinois also protects certain property regardless of value, including necessary clothing, prescribed health aids, Social Security benefits, unemployment compensation, and veteran’s benefits.4FindLaw. Illinois Code 735 ILCS 5/12-1001 – Personal Property Exempt Working through which assets are exempt and which carry unprotected equity is one of the most important things you do before filing, because it directly sets the floor on what unsecured creditors must receive.
What Happens When You File
Before you file, federal law requires a credit counseling session with an agency approved by the U.S. Trustee Program, completed within the 180 days before your filing date.5Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor The agency issues a certificate, and the court will not accept your petition without it.6United States Courts. Credit Counseling and Debtor Education Courses Preparing the petition itself means gathering recent pay stubs, two years of tax returns, bank statements, and a complete list of creditors, all of which feeds into schedules filed with the court.7Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 1007 Errors or omissions can draw trustee objections, delay confirmation, or get the case dismissed.
You file in the federal bankruptcy court for the district where you live. The moment the petition hits the docket, the automatic stay takes effect. It immediately halts most creditor actions against you, including collection calls, lawsuits, wage garnishments, and pending foreclosure proceedings.8Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay It stays in place through the case, though a creditor can ask the court to lift it in specific circumstances, such as where you have no equity in collateral and it is not necessary for your reorganization.
One timing detail trips up many filers. You must begin making plan payments within 30 days of filing, even before the court confirms your plan.9Office of the Law Revision Counsel. 11 USC 1326 – Payments The Chapter 13 trustee holds those early payments and distributes them once the plan is confirmed. If the plan is not confirmed, the trustee returns the money to you, minus any administrative costs already allowed.
How the Plan Pays Your Creditors
Not every debt in a Chapter 13 case is treated the same. The hierarchy matters, because it determines how much your monthly payment ends up being and who actually receives it.
Priority Debts Get Paid in Full
Certain debts must be paid 100% through the plan unless the creditor agrees to different treatment.10Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan Priority debts include recent income tax obligations, child support and alimony arrears, and other debts Congress has designated as non-waivable. These come off the top before general unsecured creditors see anything.
Secured Debts Get Cured or Reduced
Secured debts tied to property you want to keep must be addressed in the plan. For a home, Chapter 13 lets you cure mortgage arrears over the life of the plan while continuing your regular monthly payments to the lender. For a car loan, depending on when you bought the vehicle, you may be able to reduce the balance to the car’s current market value through what is known as a cramdown.
Unsecured Creditors Share What Is Left
Credit card companies, medical providers, and other general unsecured creditors receive whatever disposable income remains after priority and secured obligations are covered. The plan still has to pass the best interests test, so unsecured creditors must receive at least as much as they would have gotten in a Chapter 7 liquidation of your non-exempt property. In many cases, unsecured creditors end up with only a fraction of what they are owed, and the remaining balances are discharged when the plan ends.
The Trustee’s Cut
Every payment you make goes through the Chapter 13 trustee, who takes a commission before distributing the rest. Federal law caps the trustee’s fee at 10% of your plan payments.11Office of the Law Revision Counsel. 28 USC 586 – Duties; Supervision by Attorney General The actual percentage varies by district. It is built into your monthly payment, so it is not a separate out-of-pocket cost, but it does reduce what reaches your creditors.
The 341 Meeting and Confirmation
Roughly 21 to 50 days after filing, you attend the Meeting of Creditors, known as the 341 hearing. Despite the name, creditors rarely appear. The Chapter 13 trustee runs the meeting, not a judge.12United States Department of Justice. Section 341 Meeting of Creditors You answer questions under oath about your income, expenses, assets, and the terms of your proposed plan. Bring a government-issued photo ID and proof of your Social Security number.
After the 341, the court sets a confirmation hearing. The judge checks whether the plan satisfies every statutory requirement: priority debts paid in full, best interests test met, and enough income to sustain payments for the full commitment period. Creditors can object before the hearing, and the trustee may ask for modifications. Once confirmed, the plan’s terms bind you and your creditors.
Debts That Survive Chapter 13
Chapter 13 wipes out more types of debt than Chapter 7, but several categories cannot be discharged no matter how long you pay:
- Domestic support obligations. Child support and alimony cannot be discharged, and you must certify you are current on all domestic support payments before any discharge is entered.13Office of the Law Revision Counsel. 11 USC 1328 – Discharge
- Certain tax debts. Priority tax claims and taxes tied to fraud or unfiled returns survive.
- Student loans. These survive unless you prove undue hardship, a standard that is still difficult to meet.
- Criminal restitution and fines imposed as part of a sentence.
- Debts from willful injury. A civil judgment for intentionally causing someone physical harm follows you.
If a large share of your debt sits in these categories, Chapter 13 can still help by restructuring the payment timeline, but those balances remain after the case closes.
If You Fall Behind During the Plan
Life does not pause for three to five years. The Bankruptcy Code expects circumstances to change. If yours do, you, the trustee, or a creditor can ask the court to modify the plan. Modifications can raise or lower the payment, extend or shorten the period, or shift distributions among creditors.14Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation Even a modified plan cannot extend beyond five years from when your first payment was originally due.
If you simply stop paying, the trustee or a creditor can ask the court to dismiss the case or convert it to Chapter 7.15Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal Dismissal lifts the automatic stay and puts you back where you started, with creditors free to resume collection. Conversion to Chapter 7 means your non-exempt assets become available for liquidation. Courts are far more accommodating when you raise a problem early than when you go silent and miss several payments.
Finishing the Plan and Getting Your Discharge
After your final plan payment, one requirement is left. You have to complete a debtor education course, which is separate from the pre-filing credit counseling. The course covers personal financial management and must be taken through a U.S. Trustee–approved provider.13Office of the Law Revision Counsel. 11 USC 1328 – Discharge Without that certificate, the court will not enter the discharge order.
You also have to certify that all domestic support obligations due through the date of certification have been paid.16United States Courts. Chapter 13 Debtors Certifications Regarding Domestic Support Obligations and Section 522(q) Once those conditions are met, the court enters the discharge order. Your personal liability on qualifying debts provided for by the plan is eliminated, and those creditors can never pursue you for the forgiven balances again.