Chapter 7

In 2005, the Bankruptcy Code was amended to require individuals to demonstrate their eligibility for this type of bankruptcy by completing a means test. Individuals who do not meet the financial requirements of Chapter 7 can still file under Chapter 13 to reorganize their debts to make payments over a period of time from 36 to 60 months. Our lawyers help clients understand the means test and how it affects their bankruptcy options.

Filing Chapter 7 bankruptcy stops all creditors’ collection efforts. Known as the automatic stay, this feature of the bankruptcy law requires creditors to cease phone calls, wage garnishment, demand letters, lawsuits and any other collection activities. Our attorneys help enforce the automatic stay when necessary, notifying creditors that they can no longer try to collect a debt.

We also answer questions about other issues, including:

• I’m upside down on my house. Can I walk away?
• Someone told me to consider a short sale. Will I incur tax liabilities?
• What about debt consolidation services?
• Can I discharge my student loans? My back taxes? Child support arrears?

Our lawyers advise clients about the process that typically includes:

• Filing the Chapter 7 petition that includes lists of assets and debts, income and expenditures, financial statements, pay stubs, copies of tax returns, lists of creditors and other documents required by the bankruptcy court
• Certifying that the petitioner has completed required credit counseling
• Paying the Court and filing fees (currently around $400)
• Meeting with the bankruptcy trustee for a 341 meeting, named for the relevant section of the Bankruptcy Code, to review papers and answer creditor questions (if any)
• Selling of property (if any) not covered by bankruptcy exemptions
• Completing a required financial management class
• Reaffirmation of secured debt or property you wish to retain
• Signing the discharge order

Contact the Oak Forest Chapter 7 bankruptcy attorneys at 708-381-5426 to learn more about our Illinois law firm and how to file Chapter 7 bankruptcy. As a full-service law firm, we are also able to help clients with legal matters that may not have a bankruptcy component.

Chapter 7 of the Bankruptcy Code provides the relief that people commonly refer to as a straight bankruptcy. Under Chapter 7, you are provided a discharge from your debts and given a fresh start.

Under Chapter 7, the court enters an order giving you relief from your financial obligations.

The court also appoints a trustee to determine if you own any non-exempt property which should be sold for the benefit of your creditors. In most cases, there is no such property which can be sold. Normally, most property people own is considered to be exempt property.

One of the oldest myths is that if you declare Chapter 7 bankruptcy, you will lose everything. This is not true. Under the law, you are allowed to keep certain property, which is called exempt property. In most cases, the debtor will lose very little, if any, of his or her property, as most is considered “exempt property.” Under the law in Illinois, each debtor is entitled to keep up to $15,000.00 in equity in the real estate where he or she lives. If you file a joint petition with your spouse, you can keep up to $30,000.00 in equity in your home. If you have more than $30,000.00 equity in your home, you should discuss a Chapter 13 with your attorney to protect your home.

Also, the law provides exemptions to each debtor of $2,400.00 in a vehicle; $4,000.00 in personal property; $1,500.00 for tools of the trade, and all necessary personal possessions. Current law allows for the protection of all pension and 401K assets while you are able to discharge your debts. The law also allows certain exemptions for personal injury settlements and workers compensation awards. It is important that you advise your attorney about all potential assets which you own so s/he can properly claim the maximum exemptions to protect your property.

If at the time you file a Chapter 7 bankruptcy, you owe a creditor who has a lien on property such as a car, boat or furniture, and if you wish to keep the property, it will be necessary for you to enter into a reaffirmation agreement with that creditor. Reaffirmations are voluntary, legally binding agreements between the debtor and a secured creditor for repayment of a loan which is secured by collateral. For example, a debtor may wish to reaffirm a car loan and continue to make payments on the loan and keep the car, even though he has filed bankruptcy. When cars are involved, the monthly reaffirmation payment is usually the same as your payment before the bankruptcy. On other secured loans, such as furniture, a monthly payment may be negotiated to a lower amount with the creditor.