Benefits of Bankruptcy: Chapter 7

The biggest benefit of Chapter 7 bankruptcy is a fresh start. The financial storms of life, such as divorce, death in the family, and high medical bills, strike everyone from time to time. Most families live from hand to mouth. Therefore, even a temporary income disruption is usually devastating. A fresh start, which includes the specific benefits discussed below, is just what the doctor ordered in these situations.

No one, not even a Chicago bankruptcy lawyer, can wave a magic wand and give a family a fresh start. This outcome is a process, not a result. The bankruptcy process includes a thorough case review, careful evaluation of all available legal options, and determined advocacy after filing. Only the best Chicago bankruptcy lawyer checks all three of these boxes.

Automatic Stay

When debtors file their voluntary petitions, Section 362 of the Bankruptcy Code blocks most creditor adverse actions, such as:

• Foreclosure,
• Wage garnishment,
• Eviction,
• Creditor lawsuits, and
• Respossession.

This relief is available regardless of the facts and remains in effect until the judge closes the case, at least in most situations.

However, as one might expect, a couple of strings are attached. First, serial filers (usually people who’ve filed bankruptcy more than twice in the past five years) cannot take full advantage of the Automatic Stay.

Second, a Chicago bankruptcy lawyer must deliver actual notice to all concerned parties. These parties include the bank that loaned the money, the servicing company that manages the loan, a debt buyer that acquired a delinquent account, and the list goes on.

Asset Protection

The Automatic Stay provides immediate protection from aggressive creditors. The property exemption provisions in a Chapter 7 provide additional protection.

Trustees (people who manage bankruptcies for judges) cannot seize and liquidate exempt property to pay debts. Written property exemptions in Illinois include:

• House,
• Motor vehicle,
• Retirement accounts,
• Government benefits, and
• Personal property.

Unwritten exemptions, such as the best interests of creditors rule, expand the written exemptions. Assume Jane owns a boat that needs repairs. If the repair cost exceeds the likely auction sale price, and it probably does, the trustee cannot seize Jane’s boat, even though it’s a nonexempt asset.

Debt Discharge

Chapter 7 discharges most unsecured debts, in many cases in less than six months. Let’s break it down a little more.

A discharge eliminates the legal requirement to repay a debt. However, the debt itself doesn’t go away. If the IRS placed a lien on Bill’s credit report before he filed bankruptcy, even if the debt is dischargeable, an attorney must deal with the lien in a separate proceeding.

Tax debt comes with an “if” because it and certain other unsecured obligations, such as student loans, are priority unsecured debts which are only dischargeable in some cases. Strict rules apply to tax debt discharge. Student loan discharge is a little easier to obtain.

Debt discharge facilitates the fresh start that’s the main benefit of a Chapter 7 bankruptcy. Discharge allows families to stop throwing away money on credit cards and other unsecured debts and spend that money elsewhere.

Reach Out to a Detail-Oriented Cook County Lawyer

No matter what kind of financial problem you are having, there’s 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:

congress.gov/bill/117th-congress/senate-bill/2598