Frequently Asked Questions about Personal Bankruptcy in Mount Prospect, IL
Frequently Asked Questions about Personal Bankruptcy in Mount Prospect, IL
Bankruptcy represents a longstanding commitment in this country to helping people get a fresh start.
- Tim Johnson
Bankruptcy is a legal procedure that allows an individual or company to eliminate debt and stop their creditors from harassing them.
What does "Chapter 7" and "Chapter 13" bankruptcy mean?
There are different types of bankruptcy, referred to as "chapters" because of their chapter location in the bankruptcy laws. For example, Chapter 7 refers to the seventh chapter in the Bankruptcy Codes. Bankruptcy Chapter 11 is for business reorganization, while Chapters 7, 12, and 13 can apply to families and individuals.
What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?
Chapter 7 bankruptcy is known as a "fresh start "or "liquidation bankruptcy." It is used to sell off assets in an attempt to satisfy the outstanding debts. On the other hand, Chapter 13 bankruptcy does not require assets to be sold. Instead, the filer follows a payment plan which typically gives them several years to pay off a percentage of their debts based on their income.
What are the advantages and disadvantages of choosing to file Chapter 7 rather than Chapter 13 bankruptcy?
Under Chapter 7 bankruptcy, the basic principle is to sell off the majority of your assets and properties so that creditors can reclaim part of the money that is owed to them. Certain assets, such as a primary residence or a vehicle, can be declared exempt and may be retained even after Chapter 7 bankruptcy has been filed. Certain debts, such as taxes and student loans, may not be eliminated under Chapter 7 bankruptcy. By contrast, under Chapter 13 bankruptcy you may be able to keep all of your assets, and are only required to pay off a percentage of the debt over time.
You only qualify for Chapter 13 bankruptcy if you have a regular source of income and your debt is below a certain amount. This ensures that a restructured payment plan is workable. If you don't have the means to pay off your debt over time, then Chapter 7 bankruptcy may be the only option for you.
How does filing for bankruptcy help me deal with creditors?
After you have filed your paperwork, the court clerk will inform all of your creditors that they may no longer contact you in pursuit of payment.
What happens to my assets during Chapter 7 and Chapter 13 bankruptcy?
If you file for Chapter 7 bankruptcy, you are required to make a complete list of all of your assets and properties. There are a limited number of assets that you may keep, depending on the laws of your state. If you file for Chapter 13 bankruptcy, you are able to keep all of your assets.
Can I keep any of my current or old credit cards once I have filed for Chapter 7 or Chapter 13 bankruptcy?
Your credit card company will decide if you can keep your credit cards after you file for bankruptcy.
Can I apply for new credit cards after filing for bankruptcy?
Credit card companies may perceive you to be a greater credit risk once you have filed for bankruptcy. This may cause them to offer you lower credit limits, higher interest rates, and additional fees and penalties. As an alternative, some companies may offer you a secured credit card (or prepaid card) in which you are required to pay a specific amount of money up front. That money acts as the credit limit for your credit card.
Do I have to file for bankruptcy if I am in debt?
If your debts are significantly higher than the value of your assets and income, then you might consider filing for bankruptcy.
Do I have to disclose all of my assets and property when I file for bankruptcy?
Yes. Full disclosure of all of your assets is required by the bankruptcy law. In fact, it is a felony to fail to list all of your assets or to transfer them to another party in an attempt to hide them.
Does filing for bankruptcy require that I go to court?
If you are able to resolve all issues between you and your creditors, it is not necessary to go to court.
Will everybody know about my bankruptcy?
Bankruptcy filings are public, but personal information is withheld. Your creditors and co-debtors will be given direct notice of your bankruptcy. If you have an ex-spouse who receives child support from you, he or she will receive a letter regarding your bankruptcy and what to do if child support cannot continue.
If I am married, does my spouse have to file for bankruptcy too?
If you and your spouse have co-signed debts together, then you can file for a joint-bankruptcy petition and eliminate or restructure the debt for both spouses. If the debts are only in your name, then you can file for bankruptcy individually.