Do I Qualify for Chapter 7 in Illinois?

Shortly before the coronavirus pandemic hit and caused significant economic hardship for thousands of Illini, the Supreme Court deleted some key consumer protections from the Fair Debt Collection Practices Act. As a result, many debt collectors will be more aggressive than ever in 2021, and consumers have very few ways to stop them.

Chapter 7, which is still available in most cases, is one of the last remaining shields available to consumers. While distressed debtors have many different options in terms of a professional partnership, a dedicated Chicago Chapter 7 bankruptcy lawyer is probably the best option. Only a top-flight advocate knows how to take advantage of some legal loopholes and maximize your fresh financial start.

Benefits of Chapter 7

The Automatic Stay, asset protection, and unsecured debt discharge are the three biggest benefits of a Chapter 7 bankruptcy.

Section 362 of the Bankruptcy Code immediately halts all forms of adverse creditor actions, such as repossession, foreclosure, wage garnishment, and debt collection lawsuits. The Automatic Stay, which is almost impossible for creditors to bypass, usually stays in effect as long as the bankruptcy is active.

Furthermore, and this benefit surprises many people, Chapter 7 protects your assets from creditor seizure. In Illinois, these protections include your house, motor vehicle, personal property, and retirement account. So, even if moneylenders find a way around the Stay, they cannot touch your most important assets.

At the end of the bankruptcy, the judge discharges most unsecured debts, like signature loans, medical bills, and credit cards. “Discharge” means the judge eliminates the legal obligation to repay the debt.

Formal Qualifications

When we talk about formal Chapter 7 qualifications, we are normally referring to the means test. The 2005 bankruptcy reforms imposed this requirement on Chapter 7 filers. In order to qualify for this form of bankruptcy, the debtor’s income must be below the average amount for that family size. In Illinois as of November 1, 2020, that amount was $107,226 per year for a family of four.

Some geographic variations might apply. It is much more expensive to live in Chicago than in other parts of the state. The general means test does not always take these differences into account.

Other formal qualifications include a pre-filing debt counselling course and a post-filing debtor education course. These brief and inexpensive classes are usually available online.

Informal Qualifications

The informal qualifications vary in different jurisdictions. The Schedule I/Schedule J balance is usually the biggest one.

Debtors must list their monthly incomes on Schedule I and their monthly expenses on Schedule J. If the debtor is not in the red every month, many trustees (people who oversee bankruptcies for judges) question the need to file Chapter 7. No one wants to answer questions like this, especially under oath.

An experienced attorney knows how to properly present information in a way that avoids unwanted scrutiny. Do not attempt a self-help remedy in this area. Intentionally including inaccurate information on a bankruptcy form could be considered bankruptcy fraud. 

Connect with Experienced Lawyers

Most people qualify for Chapter 7 and are thus able to protect themselves from overaggressive creditors. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

supremecourt.gov/opinions/16pdf/16-348_h315.pdf