What Can I Do if I Do Not Qualify for Chapter 7 Bankruptcy?

 Posted on October 23, 2024 in Chapter 7 Bankruptcy

In order to be allowed to file for liquidation bankruptcy under Chapter 7, you need to pass a means test. In Illinois, you will generally pass the means test if your total monthly income is less than the median income. The current median income is approximately $7,475, but that amount does fluctuate. However, even if you make more than this, it is still possible to go into debt that you cannot repay. A serious illness or injury or a change in your career can set you back enough that you are considering bankruptcy. If you do not qualify for Chapter 7 bankruptcy but still need relief from insurmountable debt, you may have other options. An experienced McHenry County, IL debt relief attorney can assess your individual financial situation and explain your options.

Filing for Chapter 13 Bankruptcy 

Chapter 13 bankruptcy is often considered a restructuring of your debts because you will have to keep making payments toward your debt for several years. However, a significant portion of your debt can still be cleared without being paid back through Chapter 13 bankruptcy. You will be expected to make a single monthly payment that roughly equals your disposable income for a period of three to five years. Once those three to five years are over, any remainder of the debt you still owe is cleared. So, if you have much more debt than you could realistically pay back in a few short years, you will likely come out ahead by filing for Chapter 13 bankruptcy.

Negotiate With Your Creditors 

One of the problems with debt is that it can quickly snowball as interest rates and late fees add up. Some creditors are willing to negotiate repayment terms so that you can make lower, more manageable monthly payments. Medical providers, home loan agencies, and credit card companies are often willing to work with debtors. Lenders usually prefer to be paid back slowly than risk not being paid back the full amount they are owed because their debtor has filed for bankruptcy.

Home loan agencies would often prefer to renegotiate the terms of your loan than to foreclose on the house. Foreclosing on a house can force the lender to sell it at below-market value and cause them to incur significant legal expenses in the process. Giving you a lower interest rate or lowering your monthly payment might be preferable to foreclosure for both parties. An attorney should handle these negotiations 

Contact a McHenry County, IL Debt Relief Lawyer 

The Thomas Law Office is committed to helping people find relief from crushing debt. Our experienced Carpentersville, IL bankruptcy and loan modification attorney Colleen G. Thomas will do all she can to help you get out of debt. Contact us at 847-426-7990 for a confidential consultation.