Understanding if Bankruptcy Is Right for Your Situation

 Posted on December 00, 0000 in Bankruptcy

The word bankruptcy may bring about feelings of financial ruin or destitution. However, more people file for bankruptcy than you might expect, especially during these uncertain times. A lot of people have lost their jobs as a result of the COVID-19 pandemic since many non-essential businesses are closed. There are remedies when it comes to resolving financial problems. Bankruptcy has many advantages, such as reducing or eliminating your debts. It can also protect your home from being foreclosed on and keep bill collectors from constantly contacting you. However, there can be long-term consequences to your credit score, which may hinder your ability to take out loans in the future. It is important to understand the bankruptcy process to determine if it is a viable option for you.

Chapter 7 & Chapter 13 Bankruptcy

Individuals typically file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 11 bankruptcy is primarily used for businesses. Most people file for Chapter 7 bankruptcy, which is also known as a straight bankruptcy or a liquidation. The court designates a trustee who has the authority to sell your property and use the profits to pay back any creditors, upon which the debts are discharged. However, certain types of property that are considered essential or necessities can be exempt from liquidation, such as a vehicle, clothing and household items, tools of a trade, pensions, and a home’s equity.

Chapter 13 bankruptcy is slightly different in that it uses a court-approved plan for you to repay all or part of your debts over a three- to five-year period. Depending on the circumstances, some debts may still be discharged. Chapter 13 bankruptcy may help if you are a homeowner and want to avoid foreclosure as long as you can make scheduled payments. Specific types of debts or financial obligations do not apply to bankruptcy, including child support, spousal maintenance, student loans, and certain tax obligations.

Considerations Before Filing

Before you can even file for a bankruptcy petition, you are required to complete a credit counseling session and obtain a certificate. The financial counselor typically reviews the situation and offers tips for creating a reasonable budget and ways to manage debt.  When submitting a bankruptcy petition, you must submit important financial information, including income, debts, and assets. A means test form also determines if your income is low enough to qualify for Chapter 7 bankruptcy. If it does not fit the parameters, you will have to file for Chapter 13 bankruptcy instead. Regardless of the type of bankruptcy you use, it can be the best way to obtain a fresh start on the road to financial recovery.

Contact a Kane County Bankruptcy Lawyer

Although you may be apprehensive about filing for bankruptcy, it may be your best option for overcoming your financial troubles. At the Thomas Law Office, Attorney Colleen Thomas has more than 16 years of experience representing clients in bankruptcy matters. Our dedicated McHenry County bankruptcy lawyers understand the complex nature of bankruptcy laws and the profound impact they can have on your future. In addition, Colleen Thomas will review your case and discuss options other than bankruptcy, so you can determine which route is best for you.  To arrange a confidential consultation, call us today at 847-426-7990.

Source:

https://ilga.gov/legislation/ilcs/fulltext.asp?DocName=080501800K1-5