When seeking bankruptcy relief most people turn to the internet to get some basic information and find that there are two main chapters under which to file: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.
Should I file for Chapter 7 or Chapter 13?
Some people will have a choice of one over the other but most people will only qualify for one and do not need to examine Chapter 7 vs. Chapter 13. To find out if you have a choice or whether you will be defaulted into one or the other the first step is to determine whether you are above the median income for the State of Illinois for your household size.
The median tables change all the time so it is important to check back right before filing. The median tables are updated at the Department of Justice.
If you are above the median income for your household size then chances are that you do not qualify for Chapter 7 bankruptcy and will only be able to choose Chapter 13. The analysis does not end here and there are many other factors that could leave you with a choice between the two chapters but those are always case specific and should be discussed with a bankruptcy attorney.
Bankruptcy courses
What is the debtor education course?
The bankruptcy code requires that in order for any individual person to get a Chapter 7 Discharge or Chapter 13 Discharge they must complete an "instructional course in personal financial management." This is more commonly referred to as a "debtor education course." This was one of the BAPCPA amendments of 2005 that imposed extra regulations on individuals filing for bankruptcy. There are many online providers of the course that offer it for a very low price.
The debtor education course is usually around 2 hours and you are sent a certificate once you have verified that you completed it. Be careful and complete this course right away after you have filed your case because if you do not then your case will be closed without a discharge.
This means that you will have filed for Chapter 7 or Chapter 13 Bankruptcy but you did not get rid of your debt.
Chapter 7 vs. Chapter 13 vs. Chapter 11
A bankruptcy lawyer in Illinois will evaluate your income, assets, debts, and goals before recommending the best chapter.
Chapter 7
Total discharge of credit cards, medical bills and loans
- Best for
- Low-income individuals
- Key benefits
- Fast discharge, no repayment
- Typical Illinois use
- Eliminating unsecured debt
Chapter 13
Foreclosure defense and debt repayment plans
- Best for
- Individuals with steady income
- Key benefits
- Protect home, repay over time
- Typical Illinois use
- Avoiding foreclosure; keeping assets
Chapter 11
Chapter 11 bankruptcy for small business
- Best for
- Businesses or high-debt individuals
- Key benefits
- Reorganization without closing business
- Typical Illinois use
- Illinois business restructuring
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