Bankruptcy FAQ

Will I lose my property if I file for Chapter 7?

It depends. In the vast majority of Chapter 7 cases, filers do not have to surrender any assets. Whether or not you will be able to keep your property will depend on what type of property it is and the value of the property. A certain level of exemptions are allowed for your home, your car, and other property up to a specific dollar amount. If your assets are worth more than these exemptions allow for, the bankruptcy trustee may take them to pay off your debts but the trustee will need to pay you for the amount of exemptions you applied toward the item. It is rare for any of our clients to lose property in a bankruptcy that they do not want to lose.  

Will bankruptcy ruin my credit rating?

In most cases, those who have accumulated enough debt to file for bankruptcy have already seen their credit ratings fall. Filing for bankruptcy provides a clean slate that will give you the breathing room to start rebuilding your credit.  For many of our clients, filing a bankruptcy helps their credit worthiness.  Many of our clients are unable to obtain credit prior to filing a bankruptcy due to their payment history and large amount of debt, yet immediately after bankruptcy when they are debt free they are now able to secure credit at good rates to get a car loan or other items.

What debts cannot be discharged?

In both Chapter 7 and Chapter 13 bankruptcy, there are some certain debts that are not eligible for discharge. These include child support, alimony, many tax debts, debts incurred due to fraudulent activities, school loans (except in case of extreme hardship), and DUI claims. The court may also scrutinized debts incurred immediately prior to filing for bankruptcy and refuse to discharge those. If you incur additional debts after filing for bankruptcy those will not be discharged either.

Can I get mortgage financing after bankruptcy or foreclosure?

The Federal Housing Administration (FHA) released a mortgagee letter that will allow financing with 12 months re-established credit after a bankruptcy, foreclosure, deed in lieu based on loss of income as the extenuating circumstance. Please click here to view the full Mortgagee Letter 2013-26.

For more answers to your questions about bankruptcy or foreclosure, contact us to schedule a free consultation. Our firm has six offices in Northern Illinois and we assist clients throughout the Chicagoland area including Cook County, Lake County, DuPage County, McHenry County, Kane County, and Will County.

  • Newland & Newland LLP, Attorneys, Arlington Heights, IL
  • Lawyer.com