When your financial situation starts to spiral beyond your control, and your debts pile up faster than you can pay them down, you are left to decide if you are going to file for bankruptcy. What, which kind of bankruptcy is right for you - Chapter 7 or Chapter 13?
If you want to keep your property, then your best option might be to file for Chapter 13 bankruptcy. You can create a payment schedule to catch up on your debt payments, and you should be able to keep your original mortgage for your home or business. You may also choose to file this chapter if your income is too high to file Chapter 7.
Choosing Chapter 7
Now, if your final decision is to get rid of all massive debt and your income is not such that you can pay it back, you might be better off choosing Chapter 7 bankruptcy. Individuals and large and small businesses can file Chapter 7; it is the quickest route to eliminate debt.
When filing Chapter 7, state law determines what you will be able to keep, and a trustee sells your other belongings to try and pay down as much of your debts as possible.
If you have a business and decide to start another business (even with a different name), your new business will have to pay your old debts. On the other hand, if you have filed as an individual, then you will be removed from all debts moving forward. Once your bankruptcy is complete, you can begin working to rebuild your personal credit score.
Chapter 7 provides filers with a fresh start, which means:
- You are cleared of all debts (Though you can keep secured assets if you sign a “Reaffirmation Agreement”);
- Creditors can not bother you about collections after bankruptcy is filed;
- Your income and any property you get after the bankruptcy is solely yours;
- There is no minimum amount of debt required to file;
- The entire process can be wrapped up within three to six months.
Though there are incredible advantages to filing for Chapter 7 bankruptcy, the disadvantages may be a deal-breaker for your specific situation. For example:
- You can lose property that is non-exempt (keeping secured assets like a car or home may not be possible if your Illinois bankruptcy exemptions do not cover it);
- The automatic stay created in this filing is only temporary with foreclosures, so you will have to catch up on payments ASAP or be forced out of your home;
- Co-signors may get all the debt you just rid yourself of unless they file bankruptcy too;
- You have to wait eight years to file a second Chapter 7 bankruptcy.
Contact an Illinois Bankruptcy Attorney Right Away
If you are experiencing overwhelming debt and would like to file bankruptcy, call the bankruptcy lawyers at Newland & Newland, LLP today at (847) 797-8000, or a fill out our online contact form for a complimentary evaluation of your situation. We help clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Pepi Stojanovski)