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How to file Chapter 7 bankruptcy Illinois

Illinois Chapter 7 Bankruptcy Attorneys serving DuPage, Kane, Kendall and Will Counties

Why File Chapter 7 Bankruptcy Illinois?

  • Immediate Protection – Upon filing chapter 7 bankruptcy the automatic stay stops all creditors from contacting you.
  • A Fresh Start – With some exceptions, all of you debts are discharged (wiped out) and you get a fresh start.
  • Completed in a Few Months – You will receive your discharge and be finished within about 3 months of filing.
  • Lower Cost Than Chapter 13 – Generally, the cost of a Chapter 7 is less than that of a Chapter 13.

How to File Chapter 7 Bankruptcy in Illinois – Procedure

Want to know how to file Chapter 7 bankruptcy in Illinois?  A bankruptcy is begun by filing a petition with the bankruptcy court. The commencement of the bankruptcy creates an “estate” consisting of all your legal and equitable interests in property as of that time. A trustee is appointed to take “possession” of the property of the estate. In reality, nobody actually takes your property except in extreme circumstances. We would not file a bankruptcy for you if it appeared he would lose anything.

Approximately one month after filing chapter 7 bankruptcy, you will have to attend a hearing. It’s called a creditors or 341 meeting, because it’s a chance for your creditors to ask you questions about your debts and assets. In reality creditors rarely show up.

The main purpose of the hearing will be for the trustee to question you and determine if you have any assets to take and sell to raise cash for your creditors or if you have committed some sort of fraud. This meeting is a fairly routine matter.

Approximately 2 to 3 months later you will receive a discharge unless someone objects. You must also complete a financial management course prior to receiving a discharge. 

What is a Discharge?

The filing of the Chapter 7 bankruptcy petition is designed to result in a “discharge.” A discharge is a court order that says you don’t have to repay your debts. The discharge is granted unless specific grounds for denial are proven. Some debts are automatically excepted from discharge and must be paid. These include most kinds of taxes, debts owing to creditors who are not given the opportunity to participate in the chapter 7 case, i.e. not listed in your bankruptcy schedules, alimony, maintenance, child support, divorce obligations of any kind, fines, penalties, student loans, and personal injury claims arising out of driving while intoxicated.

Other debts are excepted from discharge only if the creditor files a timely objection and proves the grounds for nondischargeablity. These debts are generally debts incurred through some sort of fraud or missed dealing.

Your discharge may be denied entirely if you, for example, destroy or conceal property; destroy, conceal or falsify records; or make a false oath, ie. lie.

What are the effects of reaffirming a debt?

After you file your chapter 7 bankruptcy, a creditor may ask you to reaffirm (repay) a certain debt. Reaffirming a debt means that you sign and file with the court a legally enforceable documents, wherein you promised to repay all or a portion of the debt that may otherwise have been discharged in your bankruptcy case. Reaffirmation agreements are usually used for cars, and loans for which you pledged collateral. Reaffirmation agreements must be certified by your attorney to be in your best interest and not presumed to be an undue hardship and then approved by the court.

Do you qualify for Chapter 7 bankruptcy Illinois?

You may remember back in 2005 Congress did an overhaul of the bankruptcy code. These changes to the bankruptcy code that made it more difficult for some to file a Chapter 7 bankruptcy; however for most Chapter 7 bankruptcy relief is still readily available. The main thing that changed is now you must qualify to file a Chapter 7 bankruptcy in Illinois. We determine if you qualify by analyzing your financial situation, specifically your monthly income, household size, and monthly expenses to determine if you qualify. Your income must be at or below the average income for a family of your size in Illinois. If your income exceeds the median income for household size in Illinois, you may have to file a Chapter 13 bankruptcy. But don’t worry, many people over the median income still qualify for Chapter 7 bankruptcy.

Do you have enough debt to file Chapter 7 bankruptcy Illinois?

Quite often I get asked if there is a certain amount of debt required to be able to file for bankruptcy. The answer is no, but it is important that we evaluate your specific situation to determine if bankruptcy is a good option. The amount of debt you have is not as important as your ability to repay the debt. If you have a relatively small amount of debt but also have very limited or low income than they could be a good option. The opposite is also true.

Will you lose assets in Chapter 7 bankruptcy Illinois?

Chapter 7 bankruptcy in Illinois is a liquidating bankruptcy. This means that if you have assets that you all free and clear of any liens, the bankruptcy court concedes those assets and auction them off to pay your creditors. The good news is most assets are considered exempt under Illinois and federal law. This means that even though you own a particular asset out right, it will be protected during the bankruptcy process.

The exemption most people are familiar with is the Homestead exemption that protects your home. There are also exceptions for household goods, wedding rings, cars, and retirement accounts like 401(k)s and IRAs. Most people do not lose any assets during the chapter 7 bankruptcy process.

Chapter 7 bankruptcy Illinois-what types of debts are eliminated?

As stated above, chapter 7 bankruptcy is best suited for unsecured type debts (i.e. Credit cards, medical bills, etc.).  The following is a list of debts that are typically discharged in a chapter 7 bankruptcy:

  • credit card debt
  • Medical bills
  • Civil judgments
  • Unsecured loans

However, not all unsecured debts are discharged/eliminated. The following are typical debts that are not discharged in a chapter 7 bankruptcy:

  • Unpaid taxes
  • Student loans
  • Child-support/maintenance/and other divorce obligations
  • Criminal fines
  • Secured loans such as car payments or house payments
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Brand: Chapter 7 Bankruptcy
Manufacturer: Covey Bankruptcy Law Firm, P.C.
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