How Many Times Can You File Bankruptcy in Illinois?

Filing for bankruptcy is a significant financial decision that can provide relief from overwhelming debt. But how often can you file bankruptcy in Illinois? You can file for bankruptcy multiple times, but there are specific wait times and conditions to meet. For example, if you previously filed for Chapter 7 bankruptcy, you must wait eight years before filing another Chapter 7 case.

Different types of bankruptcy have varying eligibility requirements and waiting periods. Chapter 13 bankruptcy, which allows individuals to repay debts over a period, can be filed more frequently than Chapter 7. If you had a Chapter 13 case dismissed, you can immediately refile, but multiple filings within a year might affect the automatic stay provision.

It’s crucial to understand the legal intricacies involved in filing for bankruptcy. Consulting a knowledgeable bankruptcy attorney can help you navigate the process and determine if you’re eligible to file again. 

Understanding Bankruptcy in Illinois

Bankruptcy in Illinois involves federal laws and rules designed to help individuals and businesses manage debts they cannot pay. This section examines types of bankruptcy available, who can file, and the process involved.

Types of Bankruptcy

In Illinois, the most common types are Chapter 7, Chapter 13, and Chapter 11. Chapter 7, or “liquidation,” requires debtors to sell non-exempt property to pay creditors. Chapter 13, also known as the “wage earner’s plan,” allows individuals with regular income to develop a plan to repay all or part of their debts. Chapter 11, mainly used by businesses, enables reorganization to keep the business alive while paying creditors over time.

Eligibility for Filing Bankruptcy

Eligibility varies by bankruptcy type. For Chapter 7, individuals must pass a means test, which compares their income to the median state income. Those who don’t qualify may file under Chapter 13, which doesn’t require a means test but does mandate a regular income. Businesses usually file for Chapter 11 without a means test. It’s critical to consult with DebtPros or another bankruptcy law firm to understand specific eligibility criteria.

The Bankruptcy Process

Filing begins with submitting a petition to the federal bankruptcy court. This includes detailed financial statements and schedules of assets and liabilities.

For Chapter 7, a trustee is appointed to oversee the sale of non-exempt assets. Chapter 13 requires a repayment plan, which must be approved by the court. Regular payments are then made to a trustee, who distributes them to creditors. Chapter 11 involves proposing a reorganization plan, which must be approved by creditors and the court. Engaging with a knowledgeable bankruptcy law firm can simplify this complex process.

For more details on eligibility requirements and the specific steps involved, visit Bankruptcy – Chicago frequently asked questions.

How Often Can You File Bankruptcy in Illinois?

The frequency of filing bankruptcy in Illinois depends on the type of bankruptcy previously filed and the desired type of current filing. Specific waiting periods exist between filings to prevent abuse of the system and ensure debtors attempt to repay their obligations.

Chapter 7 Bankruptcy

Individuals in Illinois can file for Chapter 7 bankruptcy once every eight years. This interval is calculated from the filing date of the previous Chapter 7 case. For example, if someone filed Chapter 7 on January 1, 2016, they wouldn’t be eligible to file again until January 1, 2024. This rule helps prevent frequent discharges of debts and encourages responsible financial behavior.

If a debtor previously filed under Chapter 13 and received a discharge, they must wait six years before filing a subsequent Chapter 7 case, unless they paid off all unsecured debts or at least 70% of their creditors under a court-approved plan and made their best effort to repay. Compliance with these regulations ensures fair use of the bankruptcy system.

Chapter 13 Bankruptcy

For Chapter 13 bankruptcy, the waiting period is shorter. Individuals must wait two years from the filing date of a previous Chapter 13 case before they can file another Chapter 13 petition. This duration provides some flexibility for those who experience recurring financial difficulties but is long enough to discourage repeated filings without serious attempts at repayment.

If a person wants to file Chapter 13 after having received a discharge from Chapter 7, they must wait four years from the filing date of the Chapter 7 case. This combined consideration of different bankruptcy types ensures balanced access to debt relief while maintaining system integrity.

For more information on Chapter 7 timelines, visit relevant resources like this Forbes Advisor article.

Legal Implications and Consequences

Filing for bankruptcy in Illinois can significantly affect a person’s financial status and legal standing. It impacts credit scores and provides conditions for bankruptcy discharge.

Impact on Credit Score

A bankruptcy filing can severely lower an individual’s credit score, often by 200 points or more. This negative impact persists for years. A Chapter 7 bankruptcy stays on a credit report for 10 years, while a Chapter 13 bankruptcy remains for 7 years. Creditors view this as a high-risk indicator, making it difficult to secure new credit, loans, or favorable interest rates.

The length of time a bankruptcy affects a credit score depends on the type filed. Improving one’s credit score post-bankruptcy involves prompt bill payments, obtaining secured credit cards, and monitoring credit reports for accuracy. Regular financial habits and consistent management can help rebuild credit over time.

Bankruptcy Discharge

Bankruptcy discharge releases the debtor from personal liability for certain debts. In Illinois, discharges under Chapter 7 or Chapter 13 have specific waiting periods before subsequent filings are allowed. Chapter 7 can be filed every 8 years, and Chapter 13 every 2 years.

A bankruptcy discharge does not eliminate all debts. Obligations such as student loans, child support, and certain taxes still need to be paid. Understanding these limits is crucial for financial planning and managing future obligations effectively. Engaging with a legal advisor can help navigate the complexities associated with bankruptcy discharges.

Professional Assistance and Resources

Finding guidance from professionals can make navigating bankruptcy in Illinois smoother and less stressful. Key resources include experienced bankruptcy lawyers and reputable debt counseling services, both offering valuable support throughout the process.

Choosing a Bankruptcy Lawyer

Selecting the right bankruptcy lawyer is crucial. Look for someone with a solid track record in Illinois, especially in Chicago. A reputable bankruptcy law firm will help you understand all your legal options, handle the paperwork, and represent you in court.

It’s important to choose a lawyer who specializes in bankruptcy cases. Evaluating reviews, asking for referrals, and consulting the Illinois State Bar Association can help you make an informed decision. Meeting with potential lawyers can also provide insight into their approach and compatibility with your needs.When you’re ready to move forward with your financial future, DebtPros, Chicago Bankruptcy Lawyers are here to help. Contact us today.