Bankruptcy in Illinois: what should you do?
Financial difficulties are not only stressful but downright challenging. Bankruptcy is a legal process that can offer relief if you are overwhelmed by debts. But this severe matter should be considered as a last resort. Why? Because it will impact y our financial future for a long time. So, if you are considering bankruptcy in Illinois, here is what you need to know.
Types of Bankruptcy
There are different types of bankruptcy in the United States – Chapter 7 and Chapter 13. These are the two most common types for individuals and small businesses. How do they differ?
- Chapter 7 bankruptcy. This type is also known as the liquidation bankruptcy. This works because non-exempt assets will be sold to pay off your creditors. Usually, in Chapter 7, unsecured debts like medical bills and credit card debts are discharged. Some assets may be protected and exempted under Illinois law.
- Chapter 13 bankruptcy. Chapter 13 is the kind of bankruptcy that allows you to create a repayment plan to pay off your debts in three to five years. This is a good option for individuals with a steady income stream who want to protect their assets through debt reconstruction.
Eligibility and exemptions in filing for bankruptcy in Illinois
Only some people can file for bankruptcy in Illinois. There is a Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that determines your eligibility for Chapter 7. This Act considers the state’s median income and compares it with your income and ability to settle your debts.
Some exemptions are expressly stated to protect some of your assets from being sold so you can repay your creditors. Here are some of the exemptions:
- Homestead exemption. Primary residences are protected up to a particular value.
- Vehicle exemption. You can keep your car up to a specific value.
- Retirement account exemptions. Retirement accounts that can’t be touched to safeguard your financial future.
- Personal property exemptions. Clothing, furniture, and household goods are protected from sale.
An automatic stay is a legal injunction that stops creditors from acting on your loans. They can’t foreclose, make collection calls, or wage garnishment once you file for bankruptcy in Illinois. Creditors can’t harrass you as you work through your financial situation.
The best thing to do is to look for an experienced bankruptcy attorney who can help you and guide you through your financial decisions in a crucial time like this. A legal expert can help you find other ways before filing for bankruptcy in Illinois.