Chapter 7 bankruptcy is the most common type of liquidation bankruptcy. This means that the court will cancel some of the filer’s debts, but that they must be willing to sell some of their property in order to make partial payments on the debt.
Chapter 7 bankruptcies often last from four to six months. However, they usually do not require more than one trip to the courthouse for the filer. Additionally, a recent change to the bankruptcy law requires that all filers participate in a credit counseling course in order to become eligible for bankruptcy.
The law does not make Chapter 7 bankruptcies available to everyone. If a person’s income could reasonably fund a repayment plan under Chapter 13, then the court will require them to do that instead. Additionally, if a person filed for bankruptcy in the last six or eight years, then they cannot get a Chapter 7 discharge.
Bankruptcy Procedures in McHenry County, IL
Bankruptcy requires the filer to complete several forms.
(1) First, they must complete a general form, the petition, asking the court for a bankruptcy.
(2) Then, they must fill out forms that give the court a clear picture of their financial situation. This picture includes a person’s property, their monthly income and expenses, their debts, property they believe to be exempt from liquidation, property a person owned or money they spent in the last two years, and property that the person gave away or sold in the past two years.
Other important aspects of bankruptcy include:
- Automatic Stay: Chapter 7 bankruptcy also triggers the protection of an automatic stay. This stay severely limits the ability of creditors to collect from a filer. It puts a hold on wage garnishments, repossessions, and the discontinuation of utility services or welfare.
- Property Control: Filing for Chapter 7 bankruptcy does, for a short time, turn over limited control of a person’s property to the court system. Generally speaking, filers cannot get rid of property or pay off debts without the court’s approval. However, these restrictions almost never affect property or income acquired after filing for bankruptcy.
- Trustees: The bankruptcy trustee is a person selected by the court who is responsible for making sure that your creditors receive as much payment as possible. The trustee will examine a filer’s application and attempt to find as much property to sell as the law allows. However, in many cases the trustee’s search finds nothing.
- Creditor’s Meeting: The creditor’s meeting is a meeting run by the bankruptcy trustee. In the meeting, the filer goes to the courthouse and answers questions about their bankruptcy and their finances to give the trustee a clearer picture of the situation.
What Happens to Your Property Following a McHenry County Bankruptcy?
Following the creditor’s meeting, the trustee will make a determination about whether the filer owns any property that might be worth selling. If they do, y the filer must either give up the property for the trustee to sell, or pay the trustee its cash value. However, most property that filers own will not be worth the trustee’s hassle to sell it. In those cases, the trustee can “abandon” the item, which allows the filer to keep it.
Secured debts are debts that a person has agreed to give up property to pay for in the event that they cannot make payments. If a filer has not kept up with payments on secured debts, then the court will likely allow the creditor to repossess the property. However, if the debt was originally unsecured, and the creditor obtained the security interest through a lawsuit, then Chapter 7 bankruptcy may eliminate that interest.
If you have bankruptcy questions, please contact us at Newland & Newland today. We provide support to clients in Lake County, McHenry County, Cook County, DuPage County, Crystal Lake, Arlington Heights, Barrington, Palatine, Rolling Meadows and throughout Northern Illinois.