Will I Lose My Property If I File?
Chapter 7 bankruptcy in Chicago involves liquidating a debtor’s nonexempt assets. In this situation, the trustee will take possession of the debtor’s property and liquidate any assets that are unprotected. During this process, the assets will be sold and funds will be paid to creditors. Under the bankruptcy code, the debtor will be allowed to retain certain basic assets, which are the exempt property.
Below are properties that might be exempt in a bankruptcy:
- Whole Life Insurance
- Personal Injury Payment
- Wild Card
- Motor Vehicle
- Pensions and Qualified Retirement Plans
- Alimony and Child Support
- Social Security, Unemployment and Public Assistance
- Workers' Compensation
- Illinois College Savings Pool Accounts
- Certain Personal Items (Clothing, School Books, Family Photos)
The Pros of a Chapter 7 Bankruptcy
The process for declaring a Chapter 7 bankruptcy is typically over within about three to six months, which is relatively short. That said, while the process itself is not too time-consuming, it will remain on your record for up to ten years. Your missed payments, defaults, and any lawsuits against you will also harm your credit score.
Oftentimes, there are exemptions that prevent important items from being liquidated, and you might even be allowed to keep more than you expect.
Assuming you do not owe money on the debts that survive bankruptcy, such as a mortgage lien, the amount and number of debts that a Chapter 7 bankruptcy can relieve you from paying is potentially unlimited.
The Cons of a Chapter 7 Bankruptcy
You cannot keep your credit cards and you will lose property that was not exempt from sale by the trustee, in addition to other luxury items that were not exempt.
If you declare bankruptcy now, it will be harder to declare it later if you find yourself in an even worse financial situation. Make sure that filing for a Chapter 7 bankruptcy is necessary. Once you file a Chapter 7 bankruptcy, you will not be able to file again under that chapter for another 8 years.
If you previously filed a Chapter 13 bankruptcy and less than 70% of your unsecured debt was paid to creditors in good faith, you must wait 6 years before you are able to file a Chapter 7 bankruptcy.
What Type of Debt Relief Is for Me?
There is only one way to know whether or not filing for bankruptcy is the right choice for you, and that is to discuss your options with a Chicago bankruptcy attorney to fully understand the benefits and disadvantages of each. If you initiate the Chapter 7 bankruptcy process blindly, you could find yourself in trouble later. At our firm, we fully understand the scope of bankruptcy law and can even dispel some of the common bankruptcy myths that you may have heard.