Why Do People File Bankruptcy In Illinois?

Right now, unemployment is lower than at any other time in recent memory. But just because you have a job, you are not immune to financial pressure. Most people in Illinois live on the razor’s edge, from a financial standpoint. Over a third of families in the state cannot cover a $400 emergency expense.

So, most families are unable to weather financial storms which come into their lives. In these situations, bankruptcy can prevent a bad situation from becoming even worse.

Reasons for Filing

Some people overspend and must file bankruptcy. In other cases, poor financial management is at least a partial contributing factor. But for the most part, people file bankruptcy because of situations which are at least mostly beyond their control. Some examples include:

– Divorce: For both ex-husbands and ex-wives, divorce or separation usually means a significant income drop. Marriage dissolution is particularly hard on women, because they statistically have a harder time recouping wealth after divorce.
– Medical Bills: Sudden emergency surgery often means expensive out-of-network care. Furthermore, most health insurance companies, including Medicare, only cover a portion of chronic illness treatments. The uninsured amounts quickly add up.
– Job Loss: Since most people are in such precarious financial positions, even a few weeks without a paycheck can be a major setback. A few months without a paycheck, or a new job that pays substantially less, can be a full-blown disaster.

Typically, issues like these have a snowball effect. For example, one house payment might be one month late. In these situations, most lenders almost immediately accelerate the loan. As a result, they stop taking partial payments. So, with each passing month, the family goes deeper and deeper into the financial hole.

How Bankruptcy Helps

Late mortgage payments, and most other late payments, cause significant distress. In some cases, debtors can hire lawyers who can file temporary restraining orders. If the judge finds that the bank has behaved badly, which is not likely, the judge can stop adverse action, at least for the moment.

But a Chapter 7 or Chapter 13 bankruptcy is different. In most cases, the automatic stay takes effect immediately after debtors file their voluntary petitions. These filers do not need to show cause, need, or anything else to stop things like:

– Creditor collection harassment,
– Repossession,
– Foreclosure,
– Lawsuits, and
– Wage garnishment.

The automatic stay applies whether or not the debt is dischargeable, as outlined below.

Unless there is an imminent threat to the collateral (e.g. threatening to drive the car off a cliff) or similar cause, most moneylenders are unable to overturn the automatic stay. So, as long as debtors comply with all bankruptcy court orders, the stay remains in effect for as long as the bankruptcy is pending. That could be up to five years.

Bankruptcy does not just offer short term relief. Chapter 7 discharges (eliminates) medical bills, credit card debt, divorce lawyer fees, and other unsecured debt. Debtors may pick and choose which accounts they wish to repay. For example, a husband going through a divorce may want to keep paying his lawyer but not pay his credit card bills.

Rely on Thorough Lawyers

Bankruptcy may be the best way to weather the financial storms of life. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours visits are available.

Resource:

federalreserve.gov/publications/files/2017-report-economic-well-being-us-households-201805.pdf