Is There More Than One Kind Of Bankruptcy For Individuals?
Yes, the two main types of bankruptcy cases for individuals are Chapter 7 liquidation cases and Chapter 13 debt adjustments. Individuals are also eligible to file Chapter 11 reorganizations, but because of the complexity and expense of Chapter 11, it is normally used only by persons in business or those with excessive debts. Individuals engaged in farming also may be eligible for relief under Chapter 12.
What Happens When I File A Chapter 7 Case?
You turn over all of your non-exempt property to a person known as a "trustee in bankruptcy" who sells it and distributes the proceeds to your creditors under certain priorities prescribed in the bankruptcy laws. In exchange, unless you have committed certain wrongful or fraudulent acts prior to or during the bankruptcy or there are other unusual circumstances, you will receive a discharge (or cancellation) of all of your "dischargeable" debts.
In addition, once you file a bankruptcy case your creditors, generally, are prohibited, without having first obtained approval of the bankruptcy judge, from taking any further steps to collect any money you may owe them.
What Property May I Keep If I File A Chapter 7?
As of January 1, 1996, Illinois law permits you to retain as "exempt" up to $7,500 of equity in your residence and up to $1,200 in value in your car. In addition, you may keep up to $2,000 in personal property such as cash and furniture and all your necessary clothing, books and family pictures. You may also keep up to $750 in any implements, professional books or tools of the trade as well as all professionally prescribed health aids for you or your family. Additional exemptions are available and the amounts of these exemptions may change from time to time. However, to avail yourself of these "exemptions" you must properly request them in your bankruptcy case. These exemptions are available to each individual so if both you and your spouse file a bankruptcy case each of you would be entitled to these exemptions.
Which Of My Debts Are Not Discharged In A Chapter 7?
A discharge in Chapter 7 will not affect some of your debts such as alimony, child support, certain taxes, fines, certain debts arising from educational loans, and debts you fail to disclose properly to the bankruptcy court. At the request of a creditor, the bankruptcy judge may also exclude from your discharge debts resulting from loans you received by giving a lender a false financial statement as well as debts arising from fraud, embezzlement, drunken driving, larceny or certain other willful or malicious acts.
What Happens When I File A Chapter 13 Case?
Normally, in Chapter 13, you keep all or most of your property and propose a plan to repay all or some of your debts over time. During the period the "plan" is in effect, which can be as long as five years, you make regular payments (typically once a month) to a Chapter 13 Trustee, who, in turn, distributes the money to your creditors. Under certain circumstances, the bankruptcy court may approve a "plan" permitting you to keep all of your property even though you repay less than the full amount of your debts. Certain debts not dischargeable in Chapter 7, such as those based on fraud, may be discharged if you successfully complete your Chapter 13 plan. In order to be eligible to file a Chapter 13 case you must have regular income and owe less than $250,000 in unsecured debts and $750,000 in secured debts.
How Will A Chapter 7 or Chapter 13 Case Affect My Future Credit And My Job?
Different people have different experiences obtaining credit after they file a bankruptcy case. Some find it more difficult. Others find it easier because they have relieved themselves of their prior debts or because their creditors know they cannot file another bankruptcy case for a period of time. Some people may discover that obtaining future credit is easier if they file a Chapter 13 and repay some of their debts than if they file a Chapter 7 and make no effort to repay. The bankruptcy laws prohibit your employer from discharging or discriminating against you solely because you have filed a bankruptcy case.
If I Own A Home, Will I Lose It If I File A Chapter 7 Or Chapter 13 Case?
The answer depends on many factors. Many homeowners who file bankruptcy do not lose their homes. You should consult with an experienced bankruptcy attorney to obtain an answer.
Does My Spouse Have To File A Bankruptcy Too?
No, but you may discover that your spouse also owes many of your debts and that it would be beneficial for your spouse also to file a bankruptcy.
Do I Need A Lawyer To Represent Me If I File A Bankruptcy Case?
You have the absolute right to file your own bankruptcy case and represent yourself at all court hearings. However, in any bankruptcy case, you must complete and file with the bankruptcy court several detailed forms concerning your property, debts and financial condition. Many people find it easier to complete these forms with the assistance of experienced bankruptcy counsel. In addition, you may discover, especially if you own significant property or if your creditors object to your discharge, that your case will develop complications requiring the advice and assistance of a lawyer.