Are there options when filing for bankruptcy in Chicago?
Bankruptcy can cause feelings of panic and unease just from hearing the word. During these current times of global uncertainty, more and more people are finding themselves in a position where they can no longer afford to pay their bills. Bankruptcy can happen – not because of excessive spending – but due to unanticipated events such as loss of a job, divorce, or medical expenses.
In fact, even before COVID-19, the earnings of the average family had been outpaced by the cost of living, leaving a record number of people in a financial bind.
The road to bankruptcy has two main avenues, Chapter 7 and Chapter 13, through the bankruptcy code for consumers who find that they are no longer able to pay their bills.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy also called a liquidation, is used to quickly discharge your debts so that you can get a fresh start.
When you file a bankruptcy under Chapter 7 the Court appoints a Trustee who reviews your income, property and debts. If the Trustee finds sufficient equity in some of your property, the Trustee then has the power to liquidate, (sell) that property to pay off your creditors.
Our goal, as your attorney is to help you keep as much, if not all, of your property allowed under the bankruptcy rules. You may also have the option to keep paying some of your creditors, (reaffirm) in order to keep a car or your house if you have over the amount of equity allowed by law.
The advantage of filing under Chapter 7 is that many people manage to keep all of their property while permanently discharging all of their unsecured debt. What property you can keep depends upon its value. For instance, if you have a large amount of equity in a piece of property such as a home, car or boat, the Trustee will most likely decide to sell it unless we can find another way for you to keep the property.
What property you are allowed to keep in bankruptcy law is determined by the value of your equity in the property and the amount of value in that property that is exempt, (i.e. the amount of equity you are allowed to keep). For instance, in Illinois, you are allowed to keep the equity in one vehicle of up to $2,400.00. So, if your vehicle is worth $2,400.00 or less it is “exempted” from being surrendered and sold by the Trustee. You also have a wild card exemption for $4,000.00 that you can apply to any of your other property or use it in conjunction with a specific exemption.
So, for instance, if your car is worth $6,000.00 and your exemption is only for $2,400.00 you will have $3,600.00 of equity in your vehicle that the Trustee will want to access, (sell). You can then use $3,600.00 of your $4,000.00 “Wild-Card Exemption”, to apply towards the remaining equity in your car and keep your vehicle.
Other types of exemptions include (per person):
Homeowners: $15,000.00
Personal injury Settlements: $15,000.00
Work clothing unlimited
retirement funds unlimited
Child support/maintenance “Reasonable Amount”
Tools of the trade $1,500.00
Unemployment Comp 100%
Veterans Benefits 100%
When you meet with Michael J. Robins, we will review your entire financial situation to determine if you are eligible to file under Chapter 7 of the Bankruptcy Code, and if so, what property you will be able to keep and which property the trustee will most likely order to be sold to pay off your creditors. A great majority of bankruptcy filings in Illinois are no asset cases which means that the trustee did not find any assets to sell for the benefit of the creditors and thus, the debtor was able to keep all of their property and be discharged from their debts.
Chapter 13 Bankruptcy
Chapter 13 is also known as a personal reorganization. When you file under this Chapter, the consumer proposes a repayment plan to the court and creditors which will pay off all or part of the debt over a period of time. The time period can be between 3 and 5 years depending on how your income compares to the median income in Illinois. If you are below the median income it will be 3 years, if you are over then its 5 years.
The chapter 13 can be used to help prevent a home foreclosure or makeup missed payments. In some cases, if there is not sufficient value in your home to secure the first mortgage, it can be used to strip away the second mortgage.
After a person performs under the terms of the repayment plan, any unpaid amounts of the unsecured debts will be discharged, and you will no longer be responsible for them.
This website provides a general overview of bankruptcy in Illinois, but it is not legal advice. You should contact our office or another Illinois bankruptcy attorney for specific information related to your unique situation.
For the past 30 years, Michael J. Robins has been helping people find a solution to their debt, through bankruptcy.