Bankruptcy is a legal process through which individuals who end up in financial trouble are able to work out their debts under the protection of the bankruptcy court. Bankruptcy allows the debtor to get a fresh start on his or her finances, without the burden of an overwhelming debt load.
The two kinds of bankruptcy that you can file for are Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Under Chapter 7 bankruptcy, assets that are considered non-exempt can be liquidated to pay part of your outstanding bills. Your legal obligation to repay your remaining bills is then forgiven.
You will not ever have to repay bills such as credit cards, medical bills, and repossessed car loan balances. Under the new bankruptcy laws, an individual will need to undergo a "means test" to determine whether he or she qualifies for Chapter 7 bankruptcy.
If a person is not eligible for a Chapter 7 Bankruptcy, then filing for Chapter 13 bankruptcy may be another option.
Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, you make a monthly payment to a court appointed trustee to pay some or all of your debts back based on what you can afford to pay.
In most cases, you are able to keep all of your property in a chapter 13 bankruptcy. Chapter 13
filing is valuable in situations where creditors are trying to seize assets not exempt under Illinois
law.
Chapter 13 will immediately stop lawsuits, garnishments, foreclosures, repossessions, tax levies, and all other collection activity against you, including harassing phone calls and collection letters.
Collection Abuse
Under the Fair Debt Collection Practices Act (FDCPA), debt collectors may not harass, oppress, or abuse you or any third parties they contact.
An example of such harassments is when collectors use threats of violence to intimidate you. It is also harassment when collectors threaten to have you arrested for failure to pay. Even if you owe the debt, you still have rights protected under the law.
There are many other examples where debt collectors may be engaging in illegal practices when they try to collect a debt.
Talk to us if you feel that you are a victim of collection abuse.
Foreclosure and Repossession
Across the nation, the number of foreclosures and repossessions are on the rise. If you have fallen behind on your car or house payment, bankruptcy will stop the finance company from foreclosing your home or repossessing your car.
Bankruptcy can consolidate all missed mortgage payments and then spread the repayment out over 3-5 years. Likewise, past due payments and the balance on your vehicle loan can be consolidated, which you will pay off over 3-5 years.
Some people use bankruptcy to buy time. For example, if you are behind on mortgage payments and about to be foreclosed on, you can file bankruptcy papers to stop collection efforts, and then attempt to sell the house before the foreclosure.
