Robert J. Adams & Associates
Can I File a Chapter 7 Bankruptcy?
(Get out of Debt and Get a Fresh Start)
The answer is “Yes.” But the real question is whether a Chapter 7 is in my best interest?
The main questions are:
- Are my debts dischargeable? Most debts are: such, credit cards, medical bills, pay day loans, vehicle repossession debts. There are some that are not: recent income tax (last 3 years), child support debts; parking tickets, red light tickets, toll way fines, criminal fines, actual speeding tickets and, of course, student loans. Often a Chapter 13 is the better option if debts that won’t be discharged can’t be handled after a Chapter 7 is discharged.
- Is my income too high? The vast majority of our clients don’t have a problem. There is what is called a Means Test. The law basically says if you are a high income earner you belong in a Chapter 13. I have a separate blog on the subject: Beat The Means Test
- Do you have assets? This mainly comes into play if you have a great deal of equity in your home. Illinois has skimpy Homeowners Exemptions: $15,000 for a single person and $30,000 for a married couple. There are, of course, other assets that might stop you from filing a Chapter 7: a very valuable car with no liens or a pending Personal Injury case. A Chapter 13 may well be the best avenue; in most instances the pay out to unsecured creditors will be small.
- Do you have a debt that is secured where you are behind but want to keep the asset? Individuals may be behind on their auto loan (including a car that has just been repossessed) and you want to keep the car. Homeowners may be in arrears on their mortgage and want to keep their home. A Chapter 13 would likely be a better option.
The above is very simplified but covers 90% or more of individuals looking to get out of debt. It is always wise to consult with a lawyer who has experience in Consumer Bankruptcy. Experienced lawyers know the “ins and outs” of the Bankruptcy laws: they know how to make the laws work best for you.