Bankruptcy FAQs

To qualify for a Chapter 7 bankruptcy, individuals must pass a means test comparing their income to the median income for a similar household in Illinois. If their income is below the median, they likely qualify; if above, they may still qualify after deducting certain allowable expenses.

Illinois has its own set of exemptions to protect essential assets from liquidation, such as up to $15,000 in equity in a primary residence (or $30,000 if married and filing jointly), $4,000 in personal property, called the “wildcard” exemption, and $2,400 in equity in a motor vehicle.

Chapter 13 bankruptcy may be suitable for Illinois residents who have a steady income and wish to reorganize their debts rather than liquidate assets. Unlike Chapter 7, Chapter 13 allows individuals to keep their property while repaying creditors over a three to five year period, based on a court-approved plan. This option is particularly beneficial for those who are behind on mortgage payments or other secured debts and want to avoid foreclosure or repossession. Illinois residents must meet certain eligibility criteria, including having unsecured debts of less than $465,275 and secured debts of less than $1,395,875.

The length of a Chapter 13 repayment plan is typically three to five years. The specific duration depends on your income level relative to the median income for a similar household in your state. If your income is below the median, you may propose a three-year plan, although it can be extended to five years if necessary to meet the plan’s requirements. If your income is above the median, the plan generally must be for five years. During this period, you will make regular payments to a bankruptcy trustee, who will distribute the funds to your creditors according to the terms of the approved plan.

Chapter 13 bankruptcy allows for the discharge of many types of unsecured debts, including credit card debt, medical bills, and personal loans, upon the successful completion of the repayment plan. However, certain debts are non-dischargeable. These include domestic support obligations like child support and alimony, most student loans, certain taxes, and debts arising from fraud or malicious conduct. Secured debts, such as a mortgage or car loan, must be paid according to the terms of the plan if you wish to keep the collateral.

Yes, filing for Chapter 7 bankruptcy triggers an automatic stay, which is a court order that immediately halts most collection activities against you. This includes wage garnishments, collection calls, lawsuits, and other attempts by creditors to collect on debts. The automatic stay provided by a Chapter 7 bankruptcy provides temporary relief from financial pressure and gives you the breathing room to proceed with the bankruptcy process.

However, it’s important to note that the automatic stay from your Chapter 7 bankruptcy does not apply to all types of debts. For example, a Chapter 7 bankruptcy typically does not stop actions related to child support or alimony, and certain tax debts may also be excluded. Once your bankruptcy case is completed and your debts are discharged, most creditors will no longer have any legal right to pursue collection activities against you for those discharged debts.

Yes, it can. It might even give you up to five years to repay any mortgage arrears owed to the lender or mortgage company.

Yes, if you are behind on payments for things like your house, car, or student loans, bankruptcy can allow you to catch up. You can spread these payments over up to 60 monthly installments.

Yes, you can. Filing for bankruptcy can stop people who have won in court from taking your home, wages, or other things you own. It gives you the chance to sort out your money issues and keep your house.

Yes. Bankruptcy stops all debt collection, including by the IRS and the Illinois Department of Revenue. Sometimes, Chicago bankruptcy lawyers can help eliminate interest, penalties, and old tax debt with IRS debt negotiation services.

Yes, you can file bankruptcy on the loan, obtain debt relief, and still keep exempt property. However, this is only the case if you did not use the loan to buy the items you pledged.