What Is A Chapter 7 Bankruptcy?
July 23, 2020
A chapter 7 bankruptcy is a filing with the U.S. bankruptcy court to obtain a discharge of listed debts. In other words, at the end of the bankruptcy, the debts listed you will not be owed money anymore. It’s oversimplification because there are debts that are not discharged and there are debts you wish to continue to pay like your car note, but the vast majority of the debt will be discharged.
WHAT REQUIREMENTS MUST BE MET TO FILE FOR A CHAPTER 7 BANKRUPTCY?
The law requires that you list and categorize all of your debts and also list all of your assets. That will be all credit cards and loans, but also your mortgage or car loan, whether you’re current or behind, or don’t owe any money. You will also provide proof of income for the last 60 days and copies of federal income tax returns for the last 4 years unless you’re not required to do so. Finally you must obtain the required credit counseling from an approved agency.
WHAT IS THE MEANS TEST?
The means test is kind of a strict formula used to determine theoretically what you can afford to pay based on averaging of your income over the last 6 months and IRS allowances for expenses and then from there you proceed to decide whether you can theoretically afford to pay your debt. It’s just kind of a guideline but it helps to determine what initially someone qualifies for.
WHAT ARE THE CHAPTER 7 BANKRUPTCY EXEMPTION RULES?
In Illinois, the homestead exemption is $15,000 or $30,000 for a married couple who own a home jointly. As for personal property, the main ones include $4,000 in all personal property, $2,400 on cars. The exemption doubles for married couples who own the property jointly. As to the automobile, if the vehicle is worth more than $2,400 a debtor can use the unused portion of his personal property exemption.
WHAT KIND OF DEBT IS ACTUALLY DISCHARGEABLE IN A CHAPTER 7 BANKRUPTCY?
Typically it is credit cards, medical bills, deficiencies on returned and repossessed automobiles, payday loans, credit union debts and old IRS taxes.
WHAT DEBT IS NOT FORGIVEN IN A CHAPTER 7?
The main debt that is not forgiven in a chapter 7 is student loans in addition to recent IRS debts. Also parking tickets, red light camera tickets and tollway debts are not forgiven in a chapter 7 but can be dischargeable in a chapter 13. Child support arrears are not forgiven in a chapter 7.
WHAT HAPPENS IF A CO-SIGNER ON A LOAN FILES FOR BANKRUPTCY?
A person who has co-signed or co-bought with the individual chapter 7 debtor is not protected in a chapter 7 but can be in a chapter 13.
WHAT ASSETS WILL I BE ABLE TO KEEP IN A CHAPTER 7 BANKRUPTCY?
Generally everything as long as exemptions cover the value of the assets, but it’s best to consult with a lawyer to be sure you have properly exempted your property.
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