A Chicago Chapter 7 bankruptcy lawyer at the Therman Law Offices can help you start fresh and get back on your feet, giving you the financial freedom to pursue the future you’ve always wanted. Unlike other chapters of bankruptcy, Chapter 7 doesn’t require that you liquidate all of your assets or pay off debt by paying additional money over time in order to discharge it, so you won’t have to worry about losing any property that is necessary for day-to-day life.
Who Can File
Typically, chapter 7 bankruptcy is for individuals or business owners who no longer have sufficient income to pay their debts. To be eligible for a Chapter 7, you must earn below your state’s median income level and pass a means test that shows you cannot repay your debts through an installment plan. A lawyer can help you determine whether you qualify.
How Long it Takes
The entire process will take a minimum of 4 to 6 months, but usually closer to 8 or 12. It can be expedited, but that can cost more. The first step is figuring out whether it’s right for you. You have to be eligible — if you are behind on your mortgage payments, have recently lost your job, or are facing another financial hardship, then bankruptcy may help. To find out if bankruptcy is right for you (and how much it will cost), schedule an appointment with one of our experienced attorneys at Therman Law Offices today!
Can You Keep Your Home
It’s important to know that most types of assets are off-limits for a traditional Chapter 7 bankruptcy, so you may lose your home if you file. Even if you can hang on to your home, there’s no guarantee that it will be available for you later — that decision will depend on how much equity you have in your house. A Chicago Chapter 7 bankruptcy lawyer can help better determine for sure how bankruptcy will affect your home ownership.
When Can You Stop Making Payments
It all depends on your income, expenses, secured debts (i.e., car loans), number of dependents, etc. If you’re having trouble making your payments, it may be worth exploring a repayment plan or deferment program with your creditors. At Therman Law Offices, we can help you decide which option works best for you.
What’s Involved In Filing
The main thing to know about Chapter 7 bankruptcy is that it does not erase any debt, nor does it forgive any debts. Instead, when filing for a Chapter 7 bankruptcy, you are forced to turn over your nonexempt assets to a trustee who sells them off and then distributes them as payments on your debt. The trick here is that there are exemptions that allow certain types of property to be shielded from being taken by creditors — and getting those exemptions can be very valuable if you’re trying to file for Chapter 7 bankruptcy. For example, if someone owes $2 million in credit card debt but owns a home worth $1 million, they could file for both mortgage relief (i.e., avoiding having their home taken away) as well as student loan relief.
Dischargeable Debts
The final decision you’ll make when filing for bankruptcy is what debts are dischargeable, meaning which will be erased upon completion of your case. The general rule here is that you want to discharge as many debts as possible — but there are some exceptions. For example, if a creditor can prove that you incurred debt with fraudulent intent (for instance, if you bought an expensive car with money from your secret account), it may remain on your credit report even after filing bankruptcy.
Help Is Available
There are basically two kinds of bankruptcy protection: liquidation or reorganization. If you file for liquidation, your assets will be sold to pay off your creditors. Under reorganization, you can retain control over your assets, but you’ll have to make some tough choices. You’ll either have to get rid of certain debts (like credit card bills) or start paying a portion of your income toward those debts (such as mortgage payments). There’s no one-size-fits-all solution here; instead, each situation is unique. That’s why you should contact a Chicago Chapter 7 bankruptcy lawyer from Therman Law Offices today!
Are Student Loans Dischargeable in Bankruptcy?
A Chicago chapter 7 bankruptcy lawyer understands that overwhelming debt issues that going to college have caused many people in this country. According to national statistics, more than 43 million Americans have federal student loan debt. The average amount of that debt is just under $38,000. Unfortunately, these numbers continue to increase every year, with more people being forced to take out loans to help finance their education, as well as the ever-increasing costs of that education.
Given the staggering amount of student loan debt, coupled with employment issues over the economy and the recent pandemic, it should come as no surprise the high number of loan defaults that occur. Many of these borrowers are often forced into filing for bankruptcy, however, one debt that they usually cannot get discharged is their student loans. There may be some exceptions that a chapter 7 bankruptcy lawyer in Chicago can help you with.
The Brunner Test
In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), which amended the Bankruptcy Code. The purpose of the amendment was to prevent undeserving borrowers from discharging their student loan debt soon after graduation. Under current federal law, it is presumed that student loan debt is non-dischargeable in bankruptcy.
However, there is an exception in the law known as the undue hardship doctrine. This allows debtors to discharge some of their student loan debt provided that they can show that such debt would impose an undue hardship on the debtor and the debtor’s dependents. Many courts have established various tests to determine undue hardship as the term is not defined in the Bankruptcy Code.
Illinois courts use what is known as the Brunner Test to determine undue hardship. The Brunner test is based on a 1985 case, Brunner v. New York State Higher Education Services Corp in which a woman successfully argued undue hardship and the court discharged her student debt.
Under the Brunner Test, the debtor must meet three elements:
- If the student/borrower is forced to repay the student loan, he/she cannot maintain their current standard of living taking into account the debtor’s current income and living expenses. Courts also generally evaluate whether the debtor is eligible for repayment plans that are applicable to federal loans, which can significantly lower payments for individuals with low income. Private loan borrowers do not have as many options for repayment plans.
- The debtor must show that this state of affairs or situation is likely to exist for a significant portion of the repayment period for the student loans. This element is usually difficult to satisfy given that there is a presumption that the debtor’s income will increase over time unless the debtor can prove otherwise.
- The debtor has made a good faith effort to repay the loans.
Contact Our Office Today
If you are struggling with overwhelming debt, bankruptcy may be the solution for you. Call Therman Law Offices, LTD to schedule a free consultation with a dedicated Chicago chapter 7 bankruptcy lawyer and find out how we can help.
Chapter 7 Bankruptcy FAQ
Can All Debts Be Discharged in Chapter 7 Bankruptcy?
No. As a Chicago Chapter 7 bankruptcy lawyer can explain, some debts aren’t dischargeable in bankruptcy. Some of these debts include student loans, child support, debts for criminal restitution orders and certain taxes. Even if the court approves your bankruptcy, you will still be responsible for paying those debts.
Can Employers Discriminate Against People Who File for Chapter 7 Bankruptcy?
Some people may be reluctant to file for bankruptcy because they are afraid for their jobs. They may be worried that their employer will find out and fire them for filing for bankruptcy. They may also be afraid that future employers may discover their bankruptcy. However, you will be happy to know that it is illegal for employers to discriminate against you for filing bankruptcy.
Can Creditors Still Call Me After I Declare Bankruptcy?
No. Once you file for bankruptcy, the court will issue an automatic stay. This order will prohibit credits from contacting you by phone or mail. This can be a huge relief and take a lot of your stress away. However, if creditors still try to contact you, let your lawyer know right away.
What Are Debtor’s Responsibilities to the Trustee?
Before you file for bankruptcy, it is important to understand your responsibilities to the trustee. This individual represents your estate during the bankruptcy process. As a Chicago Chapter 7 bankruptcy lawyer can attest, you are required to abide by the trustee’s instructions during bankruptcy proceedings, including allowing him or her to collect nonexempt property. If you do not cooperate, your bankruptcy case may get dismissed.
What Should I Do if a Creditor Tries to Collect a Debt That Was Discharged?
If a discharge has been approved in bankruptcy, the court will prohibit creditors from attempting to collect the debt in the future. However, some creditors may still try to collect debts that have been discharged. This can be quite frustrating. If this happens to you, give the creditor a copy of the order of discharge. If the creditor still tries to collect a discharged debt, they may be fined.
Can Chapter 7 Bankruptcy Stop Wage Garnishment?
If you are behind on your debt, some of your creditors may have tried to garnish your wages, which can cause you a lot of stress. Fortunately, once you declare Chapter 7 bankruptcy, a Notification of Stay can be sent to your employer and creditor.
Will Everyone Know I File for Bankruptcy?
Unless you are a famous person, it is unlikely that anyone will find out about your bankruptcy unless you tell them.
Does My Spouse Also Have to File for Bankruptcy?
No, but the spouse who does not declare bankruptcy will not be able to receive the benefits of it. As a Chicago Chapter 7 bankruptcy lawyer can confirm, if the non-filing spouse is also responsible for the debts, he or she will still be responsible for paying those debts after the other spouse files for bankruptcy.
Most Common Chapter 7 Bankruptcy Myths
Choosing bankruptcy is difficult, but as a Chicago Chapter 7 bankruptcy lawyer will share, sometimes, it’s the most viable option for managing debt. Before filing for Chapter 7, those considering the option must speak with a lawyer to determine eligibility. In some cases, those who are not eligible for Chapter 7 may find that other chapters are more appropriate to file for. Filing for bankruptcy is one of the most important decisions a person can make in their lifetime. Because of this, it’s essential to educate yourself regarding the process, as there is much misinformation available. Therman Law Offices, LTD can help provide answers, recommendations, and education regarding bankruptcy filings. The following are the top myths surrounding bankruptcy:
Myth #1: Filers Will Lose All of Their Assets
One of the biggest worries potential filers have when considering Chapter 7 is that they will lose all of their assets once debts are discharged. Will you lose some of your assets? Yes. However, the state grants certain exemptions to ensure that filers are not left destitute. To ensure this process is as effective as possible, it’s important to understand the process and available exemptions clearly. The following is a list of potential exemptions:
- Personal Property such as:
- Clothing
- Family Items
- Percentage of Wages
- Wrongful Death & Personal Injury Recoveries
- Homestead Exemption
- Motor Vehicle Exemption
- Tools of Trade Exemption
- Retirement Accounts
- In Addition to Federal Exemptions
Myth #2: Bankruptcy is Too Expensive
Many may believe that bankruptcy is too costly because of the property and assets they stand to lose. However, it’s important to remember that if you have debts you cannot pay, you don’t actually own many of your possessions. Typically these debts are crushing and nearly impossible to pay off, especially considering that many people filing for bankruptcy may struggle even to make their payments. In reality, the cost of filing for bankruptcy, including legal fees, is relatively affordable, especially considering it’s possible to put many unsecured debts behind you and begin with a clean slate.
Myth #3: All Debts Will Be Settled Through Bankruptcy
Bankruptcy can be a way of wiping away many debts; however, not all debts are discharged during the process. It’s possible to discharge credit card bills, mortgage payments, car loans, medical bills, etc. But, some financial obligations cannot be discharged, including child support payments, alimony, taxes, fines, student loan debts, and more.
Myth #4: Your Credit Will Never Recover
Chances are, if you are considering bankruptcy, your credit score may already be relatively low. Typically when a person or couple first files, their credit score also plummets; however, the number of points will vary depending upon the credit score when they file. Once debts are discharged, filers can begin the slow process of rebuilding their credit. Although it can take time, it’s still possible to rebuild credit in the coming years by making savvy financial decisions, not taking on too many debts, building strong personal savings, and more.
Because bankruptcy is such a significant decision, it’s critical to ensure that you have discussed your case with a legal professional. They can help ensure that you make the best decision for moving forward and starting afresh. Contact our Chicago Chapter 7 bankruptcy lawyer at Therman Law Offices, LTD for more information.
Most Common Chapter 7 Bankruptcy Myths Infographic
Are businesses allowed to discharge debt under Chapter 7?
As a Chicago chapter 7 bankruptcy lawyer can explain, businesses who file for Chapter 7 bankruptcy can only liquidate their assets and don’t receive the same discharge that an individual would. There are advantages to businesses filing for Chapter 7, such as the automatic stay that gets enforced, in which creditors are no longer able to contact the debtor about debts. The automatic stay prevents creditors from collecting against the remaining assets of the debtor and stops them from consistent and persistent calls that are often the source of a debtor’s greatest stress.
Which paperwork is needed to file for Chapter 7?
Businesses and individuals who are filing for Chapter 7 bankruptcy will have to start by filing a petition to the court. The debtor also has to gather paperwork such as monthly income, statement of financial affairs, schedules of liabilities and assets, and monthly expenses list. Individuals may claim certain assets as exempt, which protects those assets from bankruptcy creditors and trustees. Businesses would have to turn over their business operations to a bankruptcy trustee.
When does the automatic stay go into effect?
The act itself of filing a bankruptcy petition causes an automatic stay to become enforced immediately, thereby preventing creditors from pursuing further action and collection on most debts without an order from the court. But as a Chicago chapter 7 bankruptcy lawyer offers, there are limited exceptions to the automatic stay, including student loans and domestic support obligations. But mostly, any collection attempt such as evictions, lawsuits, harassing phone calls, and foreclosures must halt upon the case being filed.
Who is the trustee for Chapter 7 bankruptcy?
When filing for bankruptcy, a Chapter 7 trustee will be appointed to oversee the process. There are many roles that a trustee will have, such as being present during a creditors meeting, which takes around a month to conclude after the bankruptcy case was submitted. A trustee will collect payments, generate reports to the court on how the debtor is meeting obligations, and monitor overall activity for the bankruptcy case. Unless there is a notice or court order, neither a debtor or any other person/business can use or transfer assets that belong to the bankruptcy estate.
What debts cannot be discharged?
There are certain debts that won’t be discharged under Chapter 7 bankruptcy, and they include taxes, child support, alimony payments, debts for malicious or willful injury, debts for personal injury of death caused by an at-fault accident, and debts for criminal restitution orders. If you are considering bankruptcy as the next step, it’s important to understand the differences between each chapter and to make sure that you apply for the most appropriate chapter based on your situation. If you would like more details about bankruptcy, we are ready to assist. We understand how financial stress can impact your life. Contact us at Therman Law Offices, LTD so a Chicago chapter 7 bankruptcy lawyer can get started helping you.