Bankruptcy Laws in Illinois

Bankruptcy laws in Illinois pretty much follow the federal law in the USA and hence technically follow the same bankruptcy aspects as in all the other states. Basically, bankruptcy is a legal process that allows someone to wipe clean some or all of their debts if they cannot afford to pay it.

Once the process is complete and you are discharged from the bankruptcy, you are no longer obliged to pay off the debts that were originally part of the filing.

In Illinois however there are some important differences to the other states in the way that bankruptcy law is interpreted. In accordance with the bankruptcy code, Illinois residents may file under chapter 7 straight bankruptcy also known as the ‘fresh start bankruptcy’ and the chapter 13 restructuring bankruptcy which is more complex and involved than the chapter 7 type.

For most common individuals, chapter 7 is the more usual type of bankruptcy which is filed. This is more suited to people who do not have a large amount of assets, like a large amount of equity tied to their home. In some cases a Bankruptcy Trustee may seize your home by liquidating your property, although the majority of Chapter 7 bankruptcy proceedings result in ‘no asset’ where in fact no property is taken. You should seek legal advice on this to determine which of your assets are protected.

The bankruptcy laws in Illinois and specifically Chapter 7 is an effective way to eliminate a large amount of unsecured debts such as credit cards, store cards, medical bills and unsecured loans within, in some cases, just 4-6 months which allows you to start from afresh and hopefully have a more manageable financial future.

So you know exactly what to do, it is advisable to seek the services of a professional lawyer who is proficient on bankruptcy laws in Illinois. The laws can be quite complex and detailed and there is usually a lot of paperwork involved. Professional help and guidance can ensure a more smooth bankruptcy process and knowing exactly where you stand will make it easier in the long run.

Once a chapter 7 is filed, your creditors (those organizations which you owe money to) are not allowed to contact you any further or engage in any activity against you without the permission first of the bankruptcy judge in court.

One disadvantage of filing a Chapter 7 is that the bankruptcy will stay on your credit report for ten years. However, most people find credit readily available immediately after receiving their bankruptcy discharge and are eligible for competitive home loans in as little as 24 months.

Not all types of debt are eligible for discharge under a Chapter 7 – these include student loan debts, some IRS or state income tax debts, child support or alimony obligations and government fines. If you have a significant amount of debt with any of the above, then it may be better to seek a Chapter 13 bankruptcy.

Filing Chapter 13 Bankruptcy In Illinois

In order to file for Chapter 13, you must have a stable job with some disposable income left over at the end of each month. The secured debt must not exceed $1,010,650 and the unsecured debt can be no more than $336,900.
The Chapter 13 allows you to pay an amount each month of what you can afford to your creditors which is a reduced percentage of the total debt.

You creditors must adhere to the repayment terms which are laid down by the bankruptcy court. In looking briefly at the bankruptcy laws in Illinois, it would be safe to say that Chapter 13 is more complex and involved than Chapter 7, but the former type can give you more debt relief and protection against creditors.

Filing Bankruptcy in Illinois

Filing bankruptcy in Illinois, like any bankruptcy proceeding can be a long, complex and drawn out affair so it is essential to seek professional help and guidance at every step of the way. Whether you opt for a Chapter 7 or Chapter 13 bankruptcy type is really dependant on your individual circumstances. Filing for a Chapter 7 usually takes only 4-6 months to complete, whereas filing a Chapter 13 is a much longer process and can take between 3-5 years.

Both Chapter 7 and Chapter 13 have two different repayment concepts in the paying back of your debts. In Chapter 7 there is no repayment plan and certain debts can be wiped out, whereas in Chapter 13, it is more of a court-ordered repayment plan with you having to pay back a portion of your debt on a monthly basis to your creditors.

In Chapter 7, you must usually pay your fees upfront and before filing your bankruptcy case which is different to Chapter 13 where your fees are included in your monthly repayment plan and there is no upfront payment required before filing your bankruptcy.

You should also be aware that there exists some bankruptcy exemptions which pertain to the State of Illinois in determining which assets you are able to retain when filing either a Chapter 7 or Chapter 13 bankruptcy. These include assets such as real estate, farm, lot with building, mobile home, personal goods, insurance, pensions and public benefits etc.

In both cases, filing bankruptcy in Illinois basically follows the same steps and guidelines and we will look briefly at the process.

Consider Using The Services Of A Bankruptcy Attorney

This is a critical step and you need to make an appointment with your bankruptcy attorney in your area who will go through all of your finances, budgets and assets with you and determine the best course of action and whether bankruptcy is the right option for you.  You do not NEED to use one but they can be invaluable at a time like this, and you really do need all the help you can get.  You should at least arrange for a free consultation with a bankruptcy specialist.  You could learn a lot without paying out any money.

Prepare Your Bankruptcy Petition

If bankruptcy is the recommended course of action for you then your attorney will prepare your bankruptcy petition once you have paid your fees (if filing a Chapter 7 bankruptcy). When you review your petition you need to ensure that all your personal details are correct and that all of your debts are listed.

Obtain your Credit Counseling Certificate

Before even filing your bankruptcy, you must receive a credit counseling for bankruptcy briefing from an approved non-profit agency specializing in credit counseling. It will take around an hour and can be done in person, online, or via the telephone. You must complete this briefing within 180 days before filing your bankruptcy or your case will be dismissed.

Filing of your Case

When everything is complete, your attorney will file your bankruptcy petition with the Bankruptcy Court which officially starts the procedure of the actual bankruptcy itself. Your creditors will not longer be allowed to contact you unless granted a court order. You will also be assigned a Trustee to administer your case where you will have to attend a 341 meeting of your creditors.

You will attend the 341 meeting around 30-45 days after filing your bankruptcy and your attorney will usually accompany you. It is very unlikely that any of your creditors will actually attend the meeting. You will need to testify under oath that your filed petition is true and accurate.

Being Discharged

In a Chapter 7 bankruptcy, you receive your discharge as soon as the 60 day time period for your creditors to object to discharge expires.

In a Chapter 7 bankruptcy, your discharge papers usually arrive 2-3 months after the 341 meeting has taken place.

In a Chapter 13 bankruptcy, you receive your discharge after you have made all of the agreed monthly repayments to your creditors under the terms laid down by the bankruptcy court.

Once you have received your discharge, your creditors cannot ever ask you for further monies which you have declared when filing your original bankruptcy petition.

Rebuilding your Credit

After you have been discharged it is important to start rebuilding your credit as soon as possible. Some of the ways to do this involve keeping your house and car and reaffirming any mortgage and auto payments, applying for a credit card, paying everything on time and opening a checking/savings account. All of these things show that you are making the effort at rebuilding your finances which creditors like to see, and this should stand you in good stead for the future. You should take this very seriously and start to rebuild your financial status as soon as you have been discharged.  This is the only way you will get back a good financial story and history.

NEVER EVER make late payments.  These go on your credit and will destroy any efforts you are making to rebuild a good credit story.

It may sound complicated but it is not.  And you can do it step by step. One step and one day at a time. Remember that there are millions of people like you all around the world who have been forced into bankruptcy through no fault of their own.  They too are starting again.  Everyone gets a second chance.  A second chance checking account is a good place to start.

All these things apply whether you have filed bankruptcy in Illinois or any other state.