Filing Chapter 7 vs Chapter 13 Bankruptcy in Illinois
Which is Better?
What are my bankruptcy options?
Whether filing Chapter 7 vs Chapter 13 bankruptcy is right for you is something you should discuss with your attorney at your initial consultation. In researching the bankruptcy process you have probably learned that Chapter 7 and Chapter 13 are the two types of personal bankruptcy.
Why File Chapter 7 Bankruptcy in 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.
Why File Chapter 13 Bankruptcy in Illinois?
- Stop Foreclosure – Immediately stop foreclosure and catch up on your payments over a five-year period. One reason to file a Chapter 13 instead of a Chapter 7 is to catch up on past due mortgage payments. Chapter 13 allows you to begin making current mortgage payments and catch up on past due mortgage payments through your Chapter 13 Plan.
- Protect Assets – Chapter 13 allows you to keep assets you would otherwise lose in a Chapter 7. Yet another reason to file a Chapter 13 is to protect assets. If you have too much equity in an asset and would lose it in a Chapter 7, then Chapter 13 can allow you to keep the asset provided you pay back its value over the term of your Chapter 13 Plan.
- Modify Repayment Time, Interest, and Amount – You can repay your car over a five-year period, lower the interest rate on your car loan and sometimes the amount you pay for the car can also be lowered. In certain cases, you can get rid of your second mortgage!
- Child Support and Divorce Debts Restructured – You can repay back child support over a five-year period as well as pay a percentage on other divorce obligations such as property division and debts you assumed in a divorce.
- You don’t qualify for Chapter 7 but still need relief from your creditors. Another reason to file Chapter 13 bankruptcy is that you don’t qualify to file Chapter 7 because you make too much money and don’t pass the means test but still need relief from your creditors. I consider Chapter 13 a “fall back position” to Chapter 7. In other words, if you can’t do a Chapter 7 it is almost always better to do a Chapter 13 bankruptcy than do nothing.