Chapter 7 bankruptcy, also called “straight” or “liquidation” bankruptcy, is the most common type of personal bankruptcy. With Chapter 7, most or all of your debts are discharged, or cancelled. Chapter 7 bankruptcy provides a clean financial slate so that you can rebuild your finances. At Newland & Newland, LLP, we work with clients interested in filing for Chapter 7. We will evaluate your financial situation to help you determine if Chapter 7 is the best solution and guide you through the bankruptcy filing process.
The Chapter 7 Bankruptcy Process
The first step in filing Chapter 7 is determining if you are eligible to do so. If you have filed for bankruptcy in the past 6 or 8 years (depending on which type of bankruptcy), you are not allowed to file. You must also pass a “means test” to determine if your income is low enough to qualify for Chapter 7. If you do not qualify for Chapter 7, Chapter 13 may be another option to pursue. Before filing for either Chapter 7 or Chapter 13, you must complete credit counseling with an approved agency. We email you a link to do the course in the privacy of your own home. The course will take a little over an hour to complete. A second course will need to be completed after the case is filed.
The Chapter 7 process is fairly straightforward. A bankruptcy petition disclosing all of your assets, debts, current income, current expenses, and other details about your financial situation is completed and filed with the court. When it is filed, an automatic stay goes into affect that immediately prevents creditors from continuing collection efforts. A bankruptcy trustee is assigned to your case, and the trustee determines what, if any, of your assets need to be liquidated to pay off your creditors. In most cases, your assets will be exempt from liquidation or not of sufficient value to be sold and you will not have to surrender any property.
It is extremely rare for any of our clients lose any assets in bankruptcy. We will be able to advise you prior to filing should any assets be at risk.
After the case is filed, you will be required to attend a creditor’s meeting run by your bankruptcy trustee. At this meeting, you will answer questions under oath about your debt and the paperwork you filed with the bankruptcy court. We will be sitting right beside you to assist you. The meetings tend to last no more than a few minutes.
At the conclusion of the Chapter 7 process, any remaining debts are discharged by the court. Some debts are not eligible for discharge including:
- Child support
- Most Tax debts
- Student loans
- Debts incurred by fraud (declared nondischargeable)
The entire Chapter 7 process typically takes between three to five months from beginning to end. To learn more about the process and whether or not Chapter 7 is right for your financial situation, contact us to schedule a free consultation. From our six Northern Illinois offices, we serve the entire Chicagoland area including Cook County, Lake County, DuPage County, McHenry County, Kane County, and Will County.