Should I File Chapter 7 Or Chapter 13?
Mortgage payment deferrals and other financial relief packages kept the bankruptcy filing rate low through the worst of the pandemic. Now, these programs are ending. Therefore, many experts predict that the bankruptcy filing rate will increase sharply in 2022 after many years of decline. A financial crisis, like a creditor’s lawsuit or a home foreclosure, trigger most of the bankruptcy filings in Illinois.
Bankruptcy laws have changed significantly and repeatedly since 2005. So, if your family experiences a financial crisis, you should work with a Chicago bankruptcy attorney as opposed to a bankruptcy petition preparer. True, BPPs usually cost less. But you get what you pay for. These individuals can only fill out forms. They cannot give you legal advice about which chapter is best. They certainly cannot represent you in court if things go sideways.
Similarities
Both Chapter 7 and Chapter 13 stop creditor adverse actions, protect your assets, and discharge most unsecured debts.
As soon as debtors file a voluntary petition, Section 362 of the Bankruptcy Code takes effect. The Automatic Stay immediately halt most kinds of adverse creditor actions, such as:
- Foreclosure,
- Wage garnishment,
- Repossession,
- Creditor harassment, and
- Eviction.
Generally, the Automatic Stay remains in effect until the judge closes the bankruptcy. Creditors can only bypass Section 362 in very limited circumstances. And a Chicago bankruptcy lawyer is there to stop them.
Creditors are not your only worry in these situations. The trustee (person who oversees a bankruptcy for a judge) could seize nonexempt assets and sell them in order to pay debts. Fortunately, very few people have nonexempt assets. The list of exempt assets in Illinois includes:
- Home,
- Motor vehicle,
- Retirement account,
- Personal property, and
- Government benefits.
Additionally, Illinois has a generous wildcard exemption which debtors can use to protect otherwise nonexempt property, like a fishing boat.
Finally, most unsecured debts, such as medical bills and credit cards, are dischargeable in bankruptcy. “Discharge” means a judge erases the legal obligation to repay a debt.
Differences
The major kinds of consumer bankruptcy are designed for families struggling with different kinds of debt.
Some families have excessive unsecured debt, like the aforementioned credit cards. The average family owes thousands of dollars in credit card bills at interest rates that exceed 20 percent. So, it’s difficult or impossible to pay off these obligations.
In as little as six months, Chapter 7 bankruptcy discharges these and other unsecured obligations. Just think what your family could do with that extra money.
We mentioned mortgage deferrals above. When these deferrals expire, banks will want their money, and they will not be very patient.
Chapter 13 gives your family up to five years to catch up on past due mortgage payments and other delinquent secured debts. Since the Automatic Stay remains in effect the entire time, banks must accept these income-based payments. They cannot pressure you to pay back more money or pay it faster. They must wait in line like everyone else.
So, in a nutshell, both Chapter 7 and Chapter 13 help you take control of your own financial situation and get a fresh start.
Connect with Dedicated Cook County Lawyers
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.
Resource:
buffalonews.com/business/local/bankruptcy-filings-keep-falling-but-increase-could-be-looming/article_3f021f1c-eaf1-11eb-937d-3392196359d4.html
