Chapter 7 Bankruptcy
The bankruptcy law allows debtors who meet eligibility requirements to obtain a complete discharge of certain types of debt. In most cases, debts owed to general unsecured creditors can be eliminated. During a Chapter 7 case, creditors must stop their attempts to collect debt owed to them. This protection, for most types of debts, will remain in effect until the case is concluded. In most cases, the Chapter 7 debtor is able to keep their property, so long as the applicable exemptions are sufficient to protect the full value of their assets.
Discharge of Debts in Chapter 7 Bankruptcy
Types of debt that are commonly eliminated in Chapter 7 bankruptcy include:
- credit card debt
- unsecured loans
- utility arrears
- debt owed after foreclosure
- debt owed after vehicle repossession
- medical bills
- debt for cell phone services
- unpaid rent
Types of debt not discharged in Chapter 7:
- child support and alimony
- court fines and court-ordered restitution
- liens
- student loans (with some exceptions)
- tax debt (with some exceptions)
- debt arising from fraud
- debt arising from intentional and malicious damage to property
Automatic Stay Stops Collections
When the Chapter 7 bankruptcy petition is filed, the court's "Automatic Stay" immediately goes into effect. This powerful injunction requires creditors to terminate their collection actions. This protection, for most types of debt, normally remains in effect for the entirety of the case. In some instances, though, the creditor can obtain approval from the court to resume certain types of collection actions, such as with repossessions and foreclosures.
After a Chapter 7 case is filed, creditors in most cases must terminate:
- lawsuits against you
- garnishment actions
- collection calls
- demand letters
- pending utility shut-off
- repossessions (often only temporarily)
- foreclosures (often only temporarily)
Asset Protection
In any bankruptcy case, the individual must submit to the court a complete list of all assets, including but not limited to: real estate, cars, household goods, bank accounts, tax refunds and cash. In most Chapter 7 cases, debtors are permitted to keep all of their assets. Whether an individual can keep their assets is determined by the applicable asset exemptions. Click here to see a list of some of the current Illinois exemptions.
In some cases, the value of the debtor's assets exceed the applicable exemption limits. In such a situation, the individual must be prepared to surrender all non-protected assets in order to obtain a discharge. In some cases, the individual with valuable assets will instead file for Bankruptcy under Chapter 13 in order to protect these assets.
The Process
Here is a summary of the Chapter 7 bankruptcy process:
- the individual obtains a free case evaluation to determine that the individual qualifies to file for Chapter 7 bankruptcy and to determine whether all assets will be protected
- the individual provides certain financial records and documents that will be used to prepare the case
- the individual completes an online credit counseling class
- the individual reviews and signs the bankruptcy petition, schedules, and other required forms
- our law firm files all required forms with the court to initiate the case
- creditors are immediately notified that the case has been filed
- the automatic stay goes into effect and stops all collection action
- the individual completes an online debtor education class
- the individual attends a brief hearing (called the "Meeting of the Creditors") to verify under oath the accuracy of the information in the forms filed with the court and to allow the bankruptcy trustee to determine whether any assets will be sold for the benefit of the creditors
- if no objection is filed, the bankruptcy court normally enters an order of discharge (usually about two-months after the hearing)
- after the case concludes, the individual is then able to take steps to rebuild their credit
Schaumburg Bankruptcy Attorney Timothy Brown assists individuals in obtaining debt relief through Chapter 7 bankruptcy. Contact us or call 815-788-9511 your free evaluation