Should I File Chapter 7 Bankruptcy?
If you have excessive unsecured debt, you should at least consider filing Chapter 7 bankruptcy. Credit card debt, the largest form of unsecured debt, plagues many Americans. When times get tough, or when unexpected expenses arise, many families charge living expenses on credit cards. With an average interest rate of 25 percent, the “charge it” approach isn’t sustainable for more than a month or two. Many of life’s financial storms, like unemployment and divorce, are just getting started after a month or two.
With the help of a Chicago bankruptcy lawyer, Chapter 7 discharges (forgives) credit cards, medical bills, and most other unsecured debts in as little as six months. Whereas a lawyer-guided Chapter 7 is often rather straightforward, a DIY Chapter 7 is often a train wreck. The filing paperwork is very complex and must be completed perfectly the first time. Furthermore, turnover motions and other adverse proceedings are par for the course. Attorneys are experienced in these matters. DIY filers must feel their way in the dark.
Automatic Stay
When a Chicago bankruptcy lawyer files a voluntary petition on behalf of a distressed debtor, Section 362 of the Bankruptcy Code halts most adverse creditor actions, such as:
- Repossession,
- Wage garnishment,
- Foreclosure,
- Eviction, and
- Creditor harassment.
Usually, the Automatic Stay applies whether or not the underlying debt is dischargeable. In most cases, creditors must obtain special permission from the bankruptcy judge to bypass the Automatic Stay. Even this limited option is only available in extreme cases.
Some issues may affect the implementation or duration of the Automatic Stay. Notice issues could delay implementation. All interested parties must receive actual notice. A home foreclosure is a good example. At a minimum, these matters usually involve the bank that loaned the money, the servicing company that manages the loan, a foreclosure company that seizes and secures the property, and an auction company that sells it.
Asset Protection
Unless distressed debtors file for bankruptcy protection, creditors can normally liquidate their assets in order to pay their debts.
Chapter 7 is also known as a liquidation bankruptcy, but don’t let the “liquidation” nickname fool you. Creditors can only liquidate nonexempt property. Exempt property in Illinois includes:
- House,
- Motor vehicle,
- Retirement accounts,
- Government benefits, and
- Personal property.
Additional loopholes are available that extend asset protection even further. The best interests of creditors rule is a good example.
Assume Phil owns a used power boat. The boat needs a new engine and other substantial work. If the cost of repairs exceeds the boat’s expected sale value at auction, a Chicago bankruptcy lawyer can successfully argue that seizing the boat isn’t in the creditors’ best interests, since they would receive little or no money from the sale.
Debt Discharge
A few final words about debt discharge. As mentioned, Chapter 7 discharges most unsecured debts. However, discharge doesn’t affect the collateral consequences of debt.
Assume State U is withholding Phil’s transcript because he owes back tuition. The tuition is a dischargeable unsecured debt, but a bankruptcy judge doesn’t have the power to lift the lien. An attorney must address the lien in a separate proceeding.
Rely on a Detail-Oriented Cook County Lawyer
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. Virtual, home, and after-hours visits are available.
Source:
lendingtree.com/credit-cards/study/average-credit-card-interest-rate-in-america/
