Should I File Chapter 7 or Chapter 13 To Protect My Assets?
Bankruptcy gives distressed debtors in Illinois a fresh start, if they are “honest but unfortunate,” as the Supreme Court has so often stated. Asset retention is a big part of that fresh start. If debtors lose most or all of their assets, they must go back behind the financial starting line. That’s not the result Congress intended when it created the Bankruptcy Code.
A skilled Chicago bankruptcy attorney can use bankruptcy to protect your family’s assets and give them that coveted fresh start.
Automatic Stay
As soon as debtors file a voluntary Chapter 7 or Chapter 13 petition, Section 362 of the Bankruptcy Code forms an impenetrable ray shield around their assets. The Automatic Stay immediately stops all creditor adverse action, such as:
- – Repossession,
- – Foreclosure,
- – Wage garnishment, and
- – Creditor harassment.
Typically, bankruptcy is the only available remedy that delivers this kind of protection. The Supreme Court has eliminated some of the key protections in the Fair Debt Collection Practices Act. So, this law no longer effectively protects many consumers. A civil judge has the power to grant similar relief, but only if there is evidence of fraud, negligence, or other wrongdoing on the part of the moneylender.
Section 362 technically prohibits all communication between creditors and debtors. So, many creditors unilaterally suspend ACH debits and stop sending bills or payment coupons. Consumers are still responsible for these payments, and unless they are paid, the judge might give the creditor special permission to bypass the Automatic Stay.
Asset Exemption
Bankruptcy does more than stop immediate adverse action. Both Chapter 7 and Chapter 13 have generous property exemptions. Some prominent exemptions include:
- – Home equity,
- – Retirement nest egg,
- – Government benefits, such as Social Security benefits,
- – Personal property, and
- – Motor vehicle.
Chapter 7 is usually best for people struggling with credit cards, medical bills, and other unsecured debts. Chapter 7 usually discharges these debts in only a few months. If your family has a past-due mortgage balance or other secured debt delinquency, Chapter 13 is usually a better option. This form of bankruptcy includes a protected repayment period, as outlined below.
Protected Repayment Plan
The aforementioned Automatic Stay usually remains in effect as long as the bankruptcy is pending. In a Chapter 13, that period could be up to five years.
During this time, the debtor makes a monthly debt consolidation payment to the trustee (person who oversees the bankruptcy for the judge). This payment is based on the debtor’s income. The debtor has up to five years to catch up on all past-due secured debt. As long as the trustee approves the plan, moneylenders must wait for their money. They cannot demand it immediately.
At the end of this protected repayment plan, the debtor has a zero past-due balance on things like auto loans and mortgage notes. That’s the very definition of a fresh start.
Contact Experienced Lawyers
Bankruptcy debtors retain most or all of their assets. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in Illinois and Indiana.
Resource:
law.cornell.edu/supct/html/05-996.ZO.html
/will-i-lose-my-social-security-benefits-if-i-file-bankruptcy-2/
