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Which Type Of Bankruptcy Is Right For You?


Most families in Illinois and Indiana walk a very thin financial line. About half these households do not have the cash to cover a $400 emergency expense. If even a moderate disaster strikes, like a short-term period of unemployment or a brief but serious illness, the fallout could be devastating.

As a result, it is not surprising that so many people turn to bankruptcy. This federal debt relief program offers both short and long-term solutions to debt problems in Chicago. The automatic stay prevents most adverse actions, including foreclosure and repossession. Furthermore, debts are eliminated.

Chapter 7 Bankruptcy

Many people in Illinois struggle with credit card debt, large medical bills, and other unsecured debt. After only one or two missed payments, most creditors begin adverse actions. In the current legal environment, moneylenders may become even more aggressive.

Through the automatic stay in Section 362 of the Bankruptcy Code, Chapter 7 stops these adverse actions. Chapter 7 is also a very straightforward procedure, in most cases. About six weeks after the debtors file their voluntary petitions, the trustee (person who oversees the bankruptcy for the judge) meets with the debtors. At this meeting, the trustee verifies identities, asks some basic questions, and goes over any questions. Usually, about six months later, the judge signs a discharge order.

Chapter 7 is sometimes called the “liquidation” bankruptcy. But this nickname is misleading because only nonexempt assets are liquidated. Both Indiana and Illinois have very generous exemptions. In most cases, they include:

  • – House,
  • – Motor vehicles,
  • – Retirement nest eggs,
  • – Insurance proceeds,
  • – Personal property, and
  • – Cash in a checking or savings account.

Most of the exemptions are value-based as opposed to item-based. For example, debtors can exempt a certain amount of home equity instead of the house itself. An attorney can help you fill out the schedules in a way that maximizes available exemptions.

Chapter 13

The repayment plan bankruptcy has the same exemptions as a Chapter 7. The automatic stay applies in the same way as well.

But Chapter 13 is very different in many other respects. This bankruptcy model is ideal for people who are behind on secured debt payments. For example, assume David Debtor is $1,000 behind on his auto loan and the finance company is threatening repossession. If David files bankruptcy, the creditor cannot repossess the car, in most cases, even though he’s behind on payments.

After the initial filing in Illinois, the protected repayment period begins. David has up to five years to catch up on his car note and any other past-due secured debts. The creditors must accept David’s income-based repayment plan, in most cases.

There’s more. David may be able to use the Chapter 13 redemption option to save thousands of dollars. If he is underwater on his loan, and he probably is if he’s driving a new car, he can use this option. If David pays the current fair market value of the car, the moneylender must write off the difference and give David outright title to the vehicle.

Reach Out to Tenacious Attorneys

There are several bankruptcy options, and one of them is right for you. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After-hours appointments are available.



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