Chapter 7
Chapter 7 Bankruptcy Protection
With Gateway Bankruptcy Group, you’ll have access to over 20 years of bankruptcy experience. We’ll help you decide whether or not Chapter 7 Bankruptcy best fits your needs, and work hard to ensure the protection of your most important assets.
In a difficult time, you want straight, honest answers. Before you do anything, contact Gateway Bankruptcy Group for a FREE consultation, to see if Chapter 7 Bankruptcy is right for you.
How Does a Chapter 7 Work?
Chapter 7 is known as "straight" bankruptcy or "liquidation." It requires a debtor to give up property which exceeds certain limits called "exemptions", so the property can be sold to pay creditors. Upon conclusion of the case (approximately 3 to 4 months), most debts are discharged (canceled). However, there are certain debts that will survive a Chapter 7 discharge (the most common exceptions include: certain tax debts, student loans, and support obligations).
Frequently Asked Chapter 7 Questions:
Is it true that a debtor can cancel all debts?
The underlying policy of bankruptcy law is that the honest debtor who is in debt beyond his or her ability to repay the debt should be given a fresh start through the discharge of debts in a bankruptcy proceeding.
However, not all debts are dischargeable. Generally speaking, the following debts will not be discharged: taxes (the rules are complex – some taxes are discharged); spousal and child support; debts arising out of willful misconduct or fraud by the debtor; liability for injury or death from driving while intoxicated; student loans; criminal fines and penalties.
Those debts, which are secured, may be discharged such as a mortgage on a home the debtor wants to surrender. In most cases, if the debtor’s equity interest in the property is exempt, the debtor may retain the property by redemption or reaffirmation if he or she chooses to do so.
What are the most common reasons for a Chapter 7 bankruptcy?
The most common reasons for consumer bankruptcy are: job loss; large medical expenses; marital problems and other large unexpected expenses. Business bankruptcies are caused by normal operating problems, which may range from economic conditions to poor management.
How long after filing will the creditors stop calling?
Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, all efforts to collect the debt must stop immediately. After the bankruptcy is filed, the court mails a notice to all the creditors listed in the debtor’s schedules. The creditors will then have notice within one week. If this is not soon enough, your attorney can inform the creditor immediately. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees for this conduct.
Does the spouse of a married person also have to file bankruptcy?
No. In some cases where only one spouse has debts, or one spouse has debts that are not dischargeable, then it might be advisable to have only one spouse file.
What happens to the debtor’s personal property, real property, and other assets?
Once the bankruptcy is filed all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of this property for purposes of satisfying the creditors.
There is certain property which is either excluded or exempt, and the debtor will be able to keep it. Most Debtors filing bankruptcy in Illinois will need to claim the Illinois state exemption; however, if the debtor lived in more than one state during the past two years another state (or federal) exemption may apply.
Can the debtor keep a home and personal property?
As for homes and mobile homes in Illinois, dependent upon which exemption scheme is selected and the debtor’s circumstances, the debtor may exempt up to $15,000 in equity in residential property ($30,000 in a joint case if both spouses are on the deed / title). When calculating equity, a value that is based upon a forced liquidation as opposed to the best selling conditions should be used. Once the value is determined, the amount owed plus selling and transfer costs are deducted from the value to calculate the equity.
As for personal property, in Illinois, exemptions are permitted for a variety of personal property. This includes automobiles, household furnishings and personal effects, jewelry, tools of the trade, retirement plans, life insurance, personal injury awards, earnings, and some other miscellaneous property. The value of each exemption and which exemptions can be used are determined by the statutory exemption scheme selected.
Can the debtor keep a car after bankruptcy?
A debtor may keep a car if the equity is equal to or less than the allowed exemption. When calculating equity, the N.A.D.A. Guide or a comparable guide can be used. Once the value is known, then subtract the amount owed from the value to calculate the equity.
Most leased vehicles have no equity and therefore are entirely exempt. If the debtor owes money on a car, or it is leased, the payments must still be made. In those instances, the debtor will have to redeem or reaffirm the property to keep it. Most creditors require that the loan be current in order to reaffirm. If the debtor is in serious default or has a very high interest rate, Chapter 13 may be a better option.
Can the debtor keep credit cards after bankruptcy?
Under some circumstances, the debtor may keep his credit cards. There are many factors, which must be considered. Some of those include the credit card balance at the time of the bankruptcy, what the credit card company is willing to do and debtor’s ability to pay the present and future credit card debt.
What happens after the debtor files bankruptcy?
Under normal circumstances, the Bankruptcy Court will automatically issue the discharge approximately 3 to 4 months after the case if filed.
Who deals with the bill collectors during the bankruptcy?
Usually, your attorney deals with all creditors.
This information is intended to inform but not provide legal advice. The reader should seek professional advice with regard to specific applications of the information contained herein.
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