What to Expect in an Illinois Chapter 7
From a financial standpoint, many area families live on the edge. In fact, over a third of people do not have enough cash to cover a $400 emergency expense. So, if your family is living from paycheck to paycheck, you are probably in the majority.
As long as the fiscal seas are calm, this statistic is pretty much meaningless. But inevitably, there is an unexpected doctor bill, car repair, or other emergency. If that emergency happens at a time when the family’s income is lower, perhaps due to a temporary job loss, the financial effect could be devastating.
In times like these, moneylenders aggressively demand payment for past-due bills. Until recently, Chicagoans could count on the Fair Debt Collection Practices Act to protect them. But the Supreme Court has watered down the FDCPA’s protections. Therefore, your best option is probably Chapter 7 bankruptcy.
Contrary to popular myth, Chapter 7 is not the end of the world. Most debtors get to keep most of their assets, and most creditors cannot take any adverse action. After all, bankruptcy is designed to give debtors a fresh start and not to punish them for alleged financial misdeeds.
Preparing for Bankruptcy
Before filing, all Chapter 7 debtors must complete a debt counselling class. In most cases, this course costs less than $20 to take and requires less than a half hour to complete.
Next, debtors must financially qualify for Chapter 7 under the means test. The household’s income must be less than the average income for that family size in that state. As of May 1, 2019, that annual income is $98,603 for a family of four in Illinois. Your income for bankruptcy purposes may be different from the income that appears on your paystubs.
Similarly, your assets may have a lower bankruptcy value than their fair market values. Debtors must declare the as-is cash value on Schedules A and B. For example, a house may have a $200,000 fair market value. But its as-is cash value may be half that figure, or even less. Most home investor companies only offer pennies on the dollar for as-is cash sales.
The Automatic Stay
Once debtors file their voluntary petitions, Section 362 of the Bankruptcy Code typically takes effect. The Automatic Stay halts adverse creditor actions like:
- – Foreclosure,
- – Wage garnishment,
- – Repossession, and
- – Lawsuits.
This provision usually remains in place as long as the bankruptcy is pending. So, if you are behind on secured debts, you have time to negotiate with creditors. If you are behind on unsecured debts, these obligations are generally discharged, as outlined below.
Dischargeable Debts
Generally, the bankruptcy judge closes Chapter 7s about nine months after the filing date. At that time, the judge discharges most unsecured debts, such as:
- – Credit cards,
- – Medical bills, and
- – Payday loans.
Other kinds of unsecured debts, most notably student loans and past-due income taxes, are dischargeable in certain situations.
Discharge means that the judge dissolves the debtor’s personal obligation to repay the debt. The collateral consequences may remain. So, if a college withholds your transcript because of unpaid tuition, bankruptcy discharges the tuition bill, but it does not automatically mean the college will release the transcript.
After bankruptcy, we give debtors the tools they need to rebuild their credit ratings. As a result, after a few years go by, many of our clients do not even remember they filed Chapter 7.
Contact Dedicated Lawyers
Chapter 7 gives your family the fresh start that it deserves. For a free consultation with an experienced Chicago Chapter 7 bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.
Resource:
federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf
/7-bankruptcy-exemptions-in-an-illinois-chapter-7/
