A Chapter 7 Bankruptcy is what is known as a Liquidation. Chapter 7 Bankruptcy is generally the quickest and most efficient way to discharge your debt. Once your case is filed, your creditors must stop all collection activities including lawsuits and wage garnishments. When your case is discharged in approximately three (3) to four (4) months, you will no longer be liable for any debts that were discharged.
Despite its name, your property and other assets will not be sold. Under Illinois law, you are entitled to protect certain assets, with the most common being: $15,000 of equity of your personal residence, $2,400 in equity of a motor vehicle and $4,000 of personal property. Pensions, 401k and life insurance are 100% protected.
Before your Chapter 7 Bankruptcy is filed, you will need to meet with your attorney and provide him or her with the following information:
Your attorney should also be able to obtain your credit reports. Once the information is provided and the legal fees are paid, your attorney will prepare the documents for you to review. Prior to filing the case, you will be required to take a credit counseling class which is typically offered online. The class takes about 1 hour and once the class is completed, a certificate will be issued and this certificate must be filed with the Court along with your Bankruptcy petition and other documents.
Once your Bankruptcy is filed, a case number and hearing date will be assigned. The hearing is called the First Meeting of Creditors and is typically assigned a date 30 to 45 days from your case filing date. At this hearing, you will be required to attend and you must bring proof of your identity and Social Security Number. You and your attorney will meet with the Bankruptcy Trustee (not a Judge) and the Trustee will ask you questions about the information contained in the Bankruptcy documents, specifically about your assets, income and expenses. The hearing generally takes less than 10 minutes. If all goes well, the Trustee will file a no asset report, which means he or she has made a finding that there are no assets to administer for the benefit of creditors and is recommending that you receive a discharge of your debt.
In order to receive a Discharge, you will be required to take a 2nd online course. Again, a certificate will be issue upon completion of the course and the certificate must be filed with the Court. Assuming that the course was taken and the certificate was filed, the Court will enter a Discharge Order in about 60 days after the First Meeting of Creditors.
If you have a car loan or are financing something such as furniture or other personal property, and if it is your intention to keep the car or property, you will be asked by the creditor to sign a Reaffirmation Agreement. By signing the Reaffirmation Agreement, you are contractually bound by the original terms of your financing (or modified terms indicated in the Reaffirmation Agreement) and the underlying debt will survive the Bankruptcy and will not be discharged. What this means is if you default in the future, the creditor may repossess the car or property and file suit against you for any deficiency. Thus, you should put a lot of thought and consideration before you sign a Reaffirmation Agreement. Because of the ramifications, you should never sign a Reaffirnation Agreement for a mortgage or 2nd mortgage.
So, this is Chapter 7 in a nutshell. It may sound easy, but the laws are very complicated. No one should ever file a Bankruptcy without an attorney.
GILBERT R. DIZON - ATTORNEY AT LAW is a boutique law firm representing consumer bankruptcy clients in Chapter 7 and Chapter 13 cases since 1996. With convenient office locations in Geneva, Illinois and Rockford, Illinois, we are able to represent clients throughout the various counties in Northern Illinois including: Kane, DuPage, McHenry, DeKalb, Winnebago, Boone, Ogle, Stephenson, Kendall, Will and Cook Counties.
Please call us at (630) 465-0713 for a free consultation if you are contemplating filing a Bankruptcy.