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Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy. This form of bankruptcy is normally best suited for people with low incomes and large amounts of unsecured debt. Filing for Chapter 7 bankruptcy will eliminate this type of debt without having to pay for it and typically only lasts four to six months. However, not everyone can file for Chapter 7 bankruptcy.
To qualify for Chapter 7 bankruptcy, you must pass the “means” test. The means test is used to determine whether your household income is at or below the median income level in your jurisdiction. Even if you are above that threshold, however, you may still qualify if you have certain uncommon monthly expenses. In determining whether you qualify, it is important to speak with an experienced bankruptcy lawyer in Chicago who knows the different deductions you can take.
After you file the case, you will have a meeting of creditors with an appointed trustee. During this meeting, the trustee will review your petition, ask questions to verify if everything is accurate, and determine whether there are any unexempt assets to liquidate.
The standard Chapter 7 bankruptcy timeline is as follows:
Immediately upon filing for Chapter 7 bankruptcy you are protected from your creditors. The “automatic stay” prevents creditors from collecting debt from you while you are in the case – creditors cannot call you, garnish you, pursue any lawsuits against you, or repossess your property without seeking court permission.
In addition to this protection, you will be able to eliminate your eligible unsecured debt, including:
Although Chapter 7 bankruptcy is a liquidation chapter, in practice it is very rare for the trustee to sell your property. Under Illinois law, you are afforded certain exemptions that prevent the trustee or creditors from doing this. The most common exemptions include:
Additionally, if you are financing a vehicle and would like to keep it you may do so through the “reaffirmation” process. If you are current on your car note, and continue to pay it while in the case, the creditor will allow you to keep the car and sign a new contract with them under the same pre bankruptcy terms. Conversely, if the car note is too burdensome to pay, you can also decide to “surrender” the car and eliminate the outstanding debt.
If you are considering filing for Chapter 7 bankruptcy call now to learn more about our services. The consultation is free and you will speak directly with a bankruptcy lawyer in Chicago who will answer all your questions and determine if bankruptcy is the right course of action for you.