Why Do People File Bankruptcy In Illinois?
In board games like Monopoly, filing bankruptcy is more than just an admission of failure. It’s also the end of the game, and there is usually no way to recover.
Fortunately, real life is much different. There is no doubt that reckless overspending causes some bankruptcy filings. But for the most part, the circumstances leading up to a filing are entirely beyond the debtor’s control.
Since bankruptcy was more than likely not your fault, it would do no good to punish people in these situations. Instead, bankruptcy is a way back to the starting line. This fresh start is available to everyone who deserves it, and that includes you.
Some Reasons People File Chapter 7 in Illinois
Many people live hand to mouth. They have less than $1,000 in savings. Families in this position are basically unable to deal with the financial storms of life. That includes events like:
- – Illness: Medicare and other insurance plans often only cover 80 percent of most medical expenses. In catastrophic illness situations, that 20 percent can be tens of thousands of dollars which most Chicago families cannot possibly pay. Government-sponsored health insurance has reduced the number of medical bankruptcies, but not by very much.
- – Unemployment: If a family’s income stream goes dry for even a month or two, the results can be disastrous. Most people can barely afford to pay their monthly bills. When the balance doubles or triples, the hole gets deeper. The pressure is real, because many lenders begin adverse action, like foreclosure, after just one or two missed payments.
- – Divorce: Even a relatively low-key divorce could mean thousands of dollars in legal fees. There are other expenses as well, such as family support obligations, day care deposits, and so on. Once again, most people simply do not have the money to cover these costs and keep up with their regular bills.
People file Chapter 13 bankruptcy for many of these same reasons. Once a family loses its financial footing, it is almost impossible to regain it.
What Happens When People File Bankruptcy
Both Chapter 7 and Chapter 13 usually begin with a voluntary petition. That “voluntary” aspect is important to remember. In most cases, no one forces anyone to file bankruptcy. It’s a personal choice, meaning that it’s largely up to you to pursue the case or abandon it.
Upon filing, the automatic stay usually takes effect. Section 362 of the Bankruptcy Code prohibits all forms of creditor adverse action, including repossession, foreclosure, and wage garnishment. To resume these activities, moneylenders must obtain special permission from the bankruptcy judge.
The petition also exempts most of the debtor’s assets. That usually includes things like house, car, retirement account, and personal property.
In a Chapter 7, a judge usually signs a discharge order within a few months. This order eliminates the need to repay credit cards, medical bills, and most other unsecured debts.
Chapter 13 works a little differently. These debtors have up to five years to bring their secured debts (e.g. home mortgage and car loan) current. All this time, the automatic stay remains in effect, in most cases. As a bonus, Chapter 13 also discharges most unsecured debts.
Reach Out to Tenacious Lawyers
Debt problems may be beyond your control, but you have the power to cure these issues. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.
Resource:
cnbc.com/2018/01/18/few-americans-have-enough-savings-to-cover-a-1000-emergency.html
