Chapter 7 Bankruptcy Attorney — Chicago & Chicagoland

A Chapter 7 bankruptcy is known as a "total bankruptcy" or "total liquidation." Although this is an accurate description, it can be misleading as people mistakenly assume that they must lose their house or cars. This is not necessarily true. Many people who file Chapter 7 are able to keep their homes and cars.

In Chapter 7, eligible debts can be discharged (wiped out). All the property the filer has technically becomes property of the bankruptcy estate, which the appointed Trustee is charged with handling and possibly liquidating. However, Illinois exemptions may protect much of your essential property. Every case is different, and outcomes depend on your specific financial situation.

What Debts Can Be Discharged?

Chapter 7 bankruptcy can eliminate many types of unsecured debt, giving you a fresh financial start. Common debts that can be discharged include:

• Credit card debts
• Medical debts and hospital bills
• Personal loans
• Payday loans
• Auto loans (if surrendering the vehicle)
• Mortgage loans (if surrendering the property)

However, some debts cannot be discharged in Chapter 7:

• Student loans (in most cases)
• Child support obligations
• Most types of tax debt
• Divorce decrees
• Parking tickets
• Most debt owed to any level of government (city, state, or federal)

Do I Have to Give Up My Home or Car?

The basis for losing an item of property depends on the value of the property and whether there is an exemption protecting it. It is the value of something that determines if it is an asset the Trustee needs to take and liquidate.

If a person's house has a mortgage on it, or a car has a loan on it, there is often no value for that property. This is because if the Trustee were to sell the house or car, they must pay the lender first and nothing is left over for the creditors.

Even if the house or car is worth more than what is owed, Illinois provides exemptions to protect that value:

• $15,000 per filer for a filer's home (homestead exemption)
• $2,400 per filer for a vehicle

This is why many filers are able to keep their homes and cars even when filing Chapter 7. On the other hand, if someone wants to surrender a home or car, they are generally free to do so. Your attorney will explain how your specific property may be affected before you file.

Can I File Chapter 7?

There are three basic items to consider when determining your eligibility for Chapter 7:

1. Previous Bankruptcies. If you have filed a bankruptcy in the last 2-8 years, depending on the Chapter and the final disposition of the case, you may not be eligible to file.
2. Income vs. Expenses. If you have money left over at the end of every month's bills (more than a little), you may not qualify for Chapter 7 Bankruptcy.
3. The Means Test. The Means Test is a formula that takes into consideration where you live, what you own, your household size, and your household income to make its own determination of your eligibility.

Unfortunately, it is not easy for people to determine eligibility on their own. Contact our law firm to speak with an experienced bankruptcy attorney for a free consultation that can answer these or other questions.

The Automatic Stay

The automatic stay is one of the most powerful protections in bankruptcy. An "order for relief" (or protection of your property) is known as the automatic stay. This order immediately stops most creditors from collecting what is owed.

The automatic stay can:

• Stop lawsuits filed against you
• Stop wage assignments and wage garnishments
• Stop car repossession
• Prevent other service disruptions

Consult with a bankruptcy attorney to see how the automatic stay may protect you.

Do I Have to Go to Court?

There is one hearing, really a "meeting," that a filer must attend. This, in most cases, is the only meeting a filer will attend and usually does not last longer than 10 minutes. This is where you will meet the Trustee and he or she will ask you questions similar to what your attorney will ask you at your first consultation. Your attorney will also be with you at your meeting.