What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy allows qualified people to eliminate most of their debt. Many people are able to keep some of their property. These are called exemptions. There are limits on exemptions, but many people are able to keep their home, car and personal belongings. Qualification is based on income. If your income is too high, you cannot file for Chapter 7 bankruptcy, although you may be able to convert your case to Chapter 13.
What's involved in the process?
After you file for Chapter 7 bankruptcy, the court appoints a trustee to oversee your case. You must submit a list of all your assets and debts. About a month after filing, you attend a meeting of creditors, where you will be asked questions about your financial situation. Creditors are allowed to attend this meeting and argue that they should be paid the debt you owe them. Next, it's decided which property is exempt and which property must be used to pay off some of your debt. When the process is complete, all qualified debts are discharged, or cleared. Note that not all debts qualify for discharge -- some may remain even after bankruptcy is complete.
Do I really get to keep my property and clear my debts?
Most people who file for Chapter 7 bankruptcy are allowed to keep their homes and cars, as well as their personal possessions. This isn't always the case. For example, if you have significant equity in your home, the rule is different. As for clearing your debt, it depends on the type of debt. "Unsecured debt," such as credit cards and medical bills, will most likely be discharged. In other words, these debts will be cleared and you will no longer owe anything. Types of debt that do not qualify for discharge include some student loans, child or spousal support, and some types of taxes.
Do I need an attorney?
It's not required, but we'd recommend it. It's probably your first time navigating the bankruptcy process. Why not have someone help you who does it every day? There are many attorneys in Illinois who help people file for bankruptcy. Find someone who focuses their practice on bankruptcy and who handles a significant amount of Chapter 7 bankruptcy cases. Set up an initial consultation and ask a lot of questions, including questions about their experience, strategy and fees. If it doesn't feel like a good "fit," keep looking. People often pick an attorney out of the phone book without thinking twice. While most attorneys will work hard for you, it's best to make an educated decision. Meet and interview your attorney before hiring him or her.