Chapter 7 Bankruptcy In Illinois: Taking The First Step

As the economy continues to recover from coronavirus lockdowns, many families are still reeling from the effects of these lockdowns. As a rule of thumb, if your family’s unsecured debt, like medical bills and credit card bills, exceeds 10 percent of its income, that’s more debt than you can possibly repay. People in this situation have basically two choices. They can watch the situation get worse, or they can do something about it.

Usually, that “something” is filing Chapter 7 bankruptcy. This federal debt relief program eliminates these unsecured debts, in many cases in as little as six months. A Chicago bankruptcy attorney does more than fill out the forms for you. A lawyer also guides you through the complex filing process. Additionally, if bumps in the road arise, and they usually do, only a Chicago bankruptcy lawyer can stand up for your rights in court.

Qualifying for Chapter 7

Most jurisdictions have both formal and informal requirements when it comes to filing consumer bankruptcy.

The formal qualifications usually include debt counseling classes and, more importantly, the means test.

All bankruptcy debtors, whether they file Chapter 7 or Chapter 13, must complete a pre-filing debt counseling class. They must also complete a post-filing debt management class. Sometimes, the trustee (person who oversees the bankruptcy for the judge) sponsors free classes open to all debtors. Other times, these brief and inexpensive courses are available online.

The 2005 bankruptcy reform act gave us the means test. Big banks lobbied hard for this provision. Usually, the debtor’s income must be below the state average in order to file Chapter 7. As of May 15, 2022, the average income for a family of four in Illinois is a little over $113,000 per year.

Quite frankly, if your income is substantially above that level, you probably don’t need to file Chapter 7. If your income is slightly above that level and a Chapter 7 is still necessary, a Chicago bankruptcy lawyer can often use your actual income and expenses to satisfy the means test.

Speaking of income and expenses, to meet the informal qualification for bankruptcy, most trustees only approve bankruptcies if the debtor’s expenses, which are listed on Schedule J, substantially exceed monthly income, which is listed in Schedule I. Additionally, if the debtor voluntarily executed more than two or three reaffirmation agreements, the trustee may question the need for Chapter 7.

Basically, if the debtor signs a reaffirmation agreement, the debtor agrees to keep paying a debt which is otherwise dischargeable in Chapter 7.

Filing Chapter 7 Bankruptcy

COVID-19’s lingering effects have prompted many bankruptcy courts to limit their hours or close branches entirely. But an attorney can use the Electronic Case Filing system to file a petition 24/7/365.

As soon as debtors file their voluntary Chapter 7 petitions, Section 362 of the Bankruptcy Code prohibits creditor adverse actions, such as:

• Eviction,
• Wage garnishment,
• Repossession,
• Collection lawsuits, and
• Foreclosure.

Usually, the Automatic Stay remains in effect until the judge closes the case. Prior bankruptcy filings within the last ninety days could affect the Automatic Stay’s length and effect. 

Count on Reliable Cook County Lawyers

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

investopedia.com/ask/answers/12/reasonable-amount-of-debt.asp