Nearly 900,000 bankruptcies are declared in the United States each year. Many of these are personal bankruptcies. What is personal bankruptcy? Are there downsides to declaring bankruptcy? What debts may be discharged and which cannot? Are there alternatives to personal bankruptcy?
What is Personal Bankruptcy?
Personal bankruptcy is the means by which individuals may have burdensome debts discharged. Depending on the circumstances, a personal bankruptcy may be either a Chapter 7 or Chapter 13 filing. When someone has become overwhelmed with debt, bankruptcy is an option provided under the U.S. Constitution.
What Are the Downsides to Personal Bankruptcy?
Whereas there are benefits to declaring personal bankruptcy, there are also downsides. Without a doubt, bankruptcy will damage credit. A Chapter 7 personal bankruptcy will appear on your credit reports for 10 years. Any personal property that is not exempt will be liquidated (sold) to pay some of the debts. All credit cards will be forfeit. If you do not already have a mortgage, obtaining one after a Chapter 7 bankruptcy will not be likely.
Because you will not have the option to declare bankruptcy for another six years after a Chapter 7 bankruptcy is discharged, you may face severe difficulties for that time frame. You will still have alimony and child support payments and in most cases, student loans will also remain to be paid. If you keep your home and/or automobile, you will still have your mortgage and vehicle payments to make.
What Personal Debts can be Discharged and Which cannot?
Regardless of whether you file for Chapter 7 or 13, not all debts can be discharged.
Debts which may be discharged include:
- Credit Card Debt
- Medical Debt
- Back rent
Debts which may not be discharged (generally) include:
- Child Support
- Back Taxes
- Student Loans
- Criminal fines
- Restitution rulings
Of course, there is some flexibility to debts which generally cannot be discharged. For instance, it is an Urban Legend that student loans cannot be discharged. In some cases, they may. If the student loan debt can be demonstrated to be a serious burden even with the discharging of all other debt, then there is the possibility of elimination. This is rare, but does happen.
In addition, Federal Bankruptcy Judges have considerable latitude in determining what is to be eliminated and what is not. If you have liquid assets (money) and file Chapter 7, the Court can force Chapter 13 instead. Chapter 13 allows for careful debt restructuring. The judge considers each case individually and generally attempts to resolve the debt problem in whatever way is best for the individual involved.
Are There Alternatives to Filing Personal Bankruptcy?
There are almost always alternatives to filing personal bankruptcy. At Gregory K. Stern, P.C. Bankruptcy and Foreclosure Attorneys for Chicago we will explore all options including…
- debt settlement – often, a creditor will accept a partial payment in lieu of nothing.
- defense litigation – if you are being sued, we can intercede on your behalf.
- debt negotiation – we can also negotiate better debt repayment schedules for you.
- asset protection – if there are assets you need protected, we can advise you on the best way to legally protect these.
- and more
We have been helping our neighbors in Chicago with personal bankruptcies since 1983. We know what the courts look for and how the U.S. Bankruptcy system works.
What Else Should I Know if Filing for Personal Bankruptcy?
If you are planning to file personal bankruptcy, whether Chapter 7 or Chapter 13, there are some important steps to take now. Some of these include:
- Stop applying for more debt immediately.
- Don’t give property away.
- Don’t make “preference payments.” Don’t choose to pay family members over other creditors because this will cast aspersions on your character in court.
- Don’t write bad checks.
- Stop using credit cards and other lines of credit.
- Carefully consider your financial goals once your personal bankruptcy is discharged. It is going to be a long time before you can obtain credit again. Thus, you will need to learn to live on what you earn. As mentioned, you will need to attend classes, but you should get a head start.
- Finally, you need to know how to get in touch with the best bankruptcy lawyer in Chicago.
Gregory K. Stern, P.C. Bankruptcy and Foreclosure Attorneys for Chicago. Our office is located at 53 West Jackson Boulevard, Suite 1442, Chicago, Illinois 60604. The number to call is 312-427-1558.
Other Questions People Ask Us…
The cost to file bankruptcy depends on the specific chapter filed combined with attorney fees. In general, the filing fee for the courts start around $300. Starting in 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act created new requirements which increase the total cost. For instance, participation in a financial management class is required along with debt counseling. At the offices of Gregory K. Stern, P.C. Bankruptcy and Foreclosure Attorneys for Chicago we offer a free initial consultation so that you can determine in advance the total cost of your bankruptcy.
You will need to know the gross income of both you and your spouse. You also will need the gross income filed from your tax return. You will need to a list of all expenses including food and miscellaneous spending. In addition, a list of all debts and debtors will be needed.
No. Although each state is different, in Illinois both spouses do not have to file. However, you should be aware that if your spouse if a co-signer on a debt, he/she will still be obligated to pay. In fact, you should get in touch with any co-signers you may have because that debt will become their obligation should you declare bankruptcy.
A primary home and automobile can be protected when filing for bankruptcy. In general, boats are not exempt unless it is a residence. If you live on your boat, it can be protected. Gregory K. Stern, P.C. Bankruptcy and Foreclosure Attorneys for Chicago can explain in detail what you may and may not keep depending on the bankruptcy chapter filed. To schedule your free consultation now, call…