Chapter 7 bankruptcy is something that we in the industry have coined “a fresh start.” In reality, it is a liquidation process. That means it is a type of bankruptcy that will remove most debt without the need to make payments, but the court process assigns a person called a Trustee that will look to see if you own and real estate or personal property that they can sell to get money for creditors.
To file a Chapter 7 bankruptcy, you do not have to have a lawyer. If you represent yourself, you will fill out a series of documents. Typically, when I do this for a client, the paperwork is 60 to 120 pages long depending on how many creditors and assets you have listed. The papers must disclose all of income into your home, your monthly expenses, a complete list of creditors, a complete list of property and much more.
Assets is much more that a house or a car. It is absolutely everything you can think of that you own. We list it all out, tell the court what we could sell it for, not what you bought it for but what you can sell it for. The assigned Trustee will look at that list of assets and decide if there’s anything he/she could sell to give money to your creditors. If the answer is a yes, that trustee would be able to step into your shoes and sell off your property. When you file a chapter 7, your assets are at risk, however, there are other options in bankruptcy that might be able to protect your assets and still provide relief.
If a trustee believes you have no assets, they file something called the No Asset Report, so all of the creditors know they’re not getting paid, and 60 days after you meet with that trustee, you should a Discharge Order. The discharge order is an injunction, stopping creditors from trying to collect any bill you had at the time of filing. There are some exceptions, so once again, it would be essential to talk to someone knowledgeable in the field of bankruptcy to find out what those exceptions are. This ensures that if you file for bankruptcy, you get the best benefit you can for yourself. Some things, like income tax, people think are entirely non-dischargeable, meaning it survives your bankruptcy, but there are exceptions. You do want to make sure you’re getting the best bang for your buck and get the best relief out of that chapter 7, where you will walk away in three to four months, relatively speaking, debt-free. The only reason I say relatively speaking is if there are some exceptions and you can move on with your life, get that “Fresh start” and start rebuilding.
What Debts Are Dischargeable In A Chapter 7 Bankruptcy?
Debts are divided into three categories in all bankruptcy cases: secured debts, priority debt, and general unsecured debt. Secured debt is anything that if you fall behind, the creditor may take your property away. The most common secured debts are houses and cars. In bankruptcy, secured debt is a choice as to whether to keep making payments or surrendering the property.
Priority debts are various debts that Congress has decided should not be discharged in a bankruptcy. The most common Priority debts are child support, spousal support, governmental fines and taxes, and any damages or caused by an individual while they were intoxicated from wrongful death or personal injury situation and a few other types of debts that do not apply to most. There are some exceptions to priority debts listed here. If you are considering a bankruptcy, and you have these types of debts, it is important to speak with an attorney to make sure you have the best result in your case.
The last category of debts is general unsecured debt. Typically speaking these are medical bills, credit card bills, past due utilities, the money you owe friends and family, and unpaid rent (from former apartment/home) are the most common general unsecured debts. These are the debts discharged in bankruptcy along with some secured debts.
It is important to note, that there are circumstances in which a person might not be able to discharge debts. Once again, this is why speaking to an attorney knowledgeable about bankruptcy will help you avoid potential obstacles.
For more information on Bankruptcy Law in Illinois, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (847) 440-5998 today.
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