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Bankruptcy for Individuals

What is Bankruptcy?

Bankruptcy is intended to allow you a fresh start. It is a court proceeding under a federal law that allows people in financial distress relief from some or all of their debt. Bankruptcies are administered through a separate federal court called the United States Bankruptcy Court.

Is there more than one kind of bankruptcy?

Yes, there are several types of bankruptcies. For individuals, the two main types of bankruptcy filings are cases under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 cases are also referred to as “liquidation” cases. Chapter 13 cases are commonly referred to as “debt adjustment” or “wage earner” cases. Individuals can also be eligible for Chapter 11 reorganization, but Chapter 11 is normally used by debtors in business or debtors with extremely high amounts of debt. Farmers can also file a separate type of bankruptcy available only to farmers under Chapter 12.

Can a husband and wife file a bankruptcy together?

Yes, the Bankruptcy Code allows a husband and a wife to file bankruptcy proceeding jointly in one case. The question of whether a husband and a wife file a bankruptcy together depends on whether both are liable on the debts involved. You should remember that filing bankruptcy generally only protects the person who filed the bankruptcy.

What happens when I file a Chapter 7 Case?

Immediately upon filing a petition in a Chapter 7, the bankruptcy court issues an automatic stay to your creditors. An automatic stay prohibits creditors from proceeding with collection outside of the bankruptcy case, unless the bankruptcy judge approves it. When the case is filed, the bankruptcy court appoints a bankruptcy trustee to review your assets and financial affairs. The trustee has the power to liquidate assets which exceed the amount of exemptions which the law allows you. In most cases, Chapter 7 filers can keep all of their assets. After the trustee has completed the review process, and if no objections are allowed by the bankruptcy court, a bankruptcy discharge is issued. The discharge relieves the debtor from liability for discharged debt.

What happens to property I own that is subject to a lien?

In some cases, the bankruptcy court can set aside or reduce a lien on property. Additionally, individuals who want to keep a car or home secured by a lien commonly enter into reaffirmation agreements with the secured creditor. A reaffirmation agreement is a voluntary agreement to continue to pay a specific secured creditor despite the bankruptcy, so that the individual can keep the car or home. All reaffirmation agreements must be presented to the bankruptcy court.

What types of property may I keep if I file a Chapter 7?

Every person who files a bankruptcy is entitled under Illinois law to keep certain property claimed as “exempt.” For some types of property, such as family pictures, workmen’s compensation benefits, retirement plans, IRAs and life insurance, the value and amount of property an individual can claim as exempt is unlimited. In other cases, the equity an individual can claim as exempt is limited by a fixed dollar amount. Other exemptions include:

  • Your personal residence (equity of $15,000.00),
  • Personal injury cases ($15,00.00),
  • Motor vehicle (equity of $2,400.00 for each individual owner),
  • Tools or books used in your occupation (equity of $1,500.00), and
  • Necessary wearing apparel.

In addition, Illinois law also gives each individual the right to exempt $4,000.00 in equity in any other personal property, including cash or money in the bank. If a husband and a wife file a joint bankruptcy petition, each spouse is entitled to claim these exemption amounts.

Whick of my debts are not discharged in Chapter 7?

A discharge in Chapter 7 will not affect some of your debts such as alimony, child support, certain taxes, fines, certain debts arising from education loans, and debts you fail to disclose properly to the bankruptcy court. A specific creditor may also request the bankruptcy court to exclude it from your discharge debts resulting from loans you received by giving a lender a false financial statement as well as debts arising from fraud, embezzlement, drunk driving or certain other willful or malicious acts. If the bankruptcy judge rules in that creditor’s favor, the debt to that creditor will not be discharged in bankruptcy.

What happens when I file a Chapter 13 Case?

In a Chapter 13 case, the bankruptcy court issues an automatic stay to your creditors just like in a Chapter 7 case. However, in a Chapter 13 case, a person filing bankruptcy generally keeps most or all of his or her property instead of liquidating assets, and proposes a plan to repay all or a portion of the debts over time. The Chapter 13 plan payment period is usually three years, but can be as long as five years. During the period the “plan” is in effect, you make regular payments to a Chapter 13 trustee, who, in turn, distributes the money to your creditors. In order to be eligible to file a Chapter 13 case, you must have regular income and meet certain debt limitations for your unsecured and secured debts. Only individuals can file a Chapter 13 bankruptcy.

What are the reasons a person would file a Chapter 13 Case instead of a Chapter 7 Case?

Individuals consider filing a Chapter 13 case because the provisions of Chapter 13 have advantages to some persons who are considering bankruptcy. For example, you might have more equity in a home than can be protected with the exemption for real estate. The Chapter 13 plan could allow you to keep the home. Certain debts which are not dischargeable in Chapter 7, such as those based on fraud, may be discharged if you successfully complete a Chapter 13 plan. When a co-signer is involved in consumer debt situations, a Chapter 13 proceeding could protect the co-signer who has not also filed for bankruptcy protection.

If I file bankruptcy, how will it affect my future credit and my job?

Different people have different experiences obtaining credit after they file a bankruptcy case. As a general rule, most people find it more difficult to obtain long-term credit, such as a home mortgage, shortly after a bankruptcy has been filed. On other types of credit, experiences of people after bankruptcy differ. The Bankruptcy Code prohibits your employer from discharging or discriminating against you solely because you have filed a bankruptcy case.

If I own a home, will I lose it if I file a Chapter 7 or a Chapter 13 Case?

The answer to that question depends on many factors, such as the equity in your home and whether you are seriously delinquent in your mortgage payments at the time you file bankruptcy. You should consult an experienced bankruptcy attorney to answer this question based on your circumstances. However, in most bankruptcy cases, individuals do not lose their homes in the bankruptcy.

Do I need a lawyer to represent me if I file a bankruptcy case?

Any person has a right to file a legal case and represent himself or herself at all court hearings, but remember that bankruptcy is a court proceeding. Some bankruptcy courts in Illinois require that the bankruptcy materials themselves be filed electronically and not through written papers. In every bankruptcy case, each individual is required to prepare and submit to the court detailed forms concerning his or her property, debts and financial affairs. Options available to each individual, such as properly claiming exemptions, filing jointly with a spouse or what type of bankruptcy to file probably cannot be properly assessed without the assistance of an experienced attorney.

Chapter 7 Bankruptcy – Fresh Start or Debt Elimination

Eliminate Your Bad Debt

Chapter 7 Bankruptcy is the most common form of bankruptcy and was designed to provide people with a way out from the burden of debt they can longer pay. It is generally the quickest form of bankruptcy & allows individuals to eliminate debt.

Chapter 7 Bankruptcy Elminates Most:

  • Credit Cards
  • Personal Loans
  • Repossessions
  • Judgments & Lawsuits
  • Medical Bills
  • Payday Loans
  • Utility Bills
  • Wage Garnishments

Keep All Your Possessions

Generally, people don’t “lose” any of their assets in Chapter 7 bankruptcy because state exemptions allow you to retain your property. You can obtain a “Discharge” of your debts in as little as 4 months while getting “instant” relief from creditor harassment, bill collectors and collection agencies.

Experience Counts More Than Ever

Why go to unknown attorneys for such an important matter as your financial future? Call us for a review of your case.

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