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What is bankruptcy and where do the bankruptcy laws come from?
Bankruptcy is a legal process in which you say to a court that you cannot pay your bills as your creditors are demanding. The court has the power then to enter an order forgiving, known legally as discharging, some or all of your debts. In return if you have equity in property that is more than state law allows you to protect, the property is sold by the court or you must make payments to a court appointed trustee to keep the property. Bankruptcy law comes from the Constitution, the federal bankruptcy code, and Illinois state laws.
What types of bankruptcy are there?
The two most common types of bankruptcy available are Chapter 7 and Chapter 13. Under Chapter 7 you receive a discharge of most types of unsecured debts like credit cards and medical bills without any payments and you keep paying on, or reaffirm, secured debts that you choose to keep like your home or car. Under Chapter 13 you make a monthly payment to a court appointed trustee to pay some or all of your debts back based on what you can afford to pay, with direct payment by you of some debts like your home or car that you want to keep. There are advantages and disadvantages to each chapter depending on your circumstances, and you should therefore talk to an attorney that does both kinds of cases.
Will I lose property in a bankruptcy?
In most cases you are able to keep all of your property. Illinois and federal law give you protection of most property from creditors. Some types of property are fully protected regardless of value, like retirement or pension plans. Other types of property are only protected up to a certain dollar amount, like equity in your house above the mortgage balance. We strongly suggest that you consult with a lawyer about these rules, and if you are at risk of losing property in a Chapter 7 bankruptcy case we can provide you with options, like a Chapter 13 payment plan, to keep non-exempt property and pay back only what you can afford.
Can I stop foreclosure or reposession with a bankruptcy
Yes. A bankruptcy filing automatically stops these from taking place, but usually only a Chapter 13 case will help to catch the payments back up to allow you to keep the property. Chapter 13 can give you three to five years to catch up back payments on your house or vehicle, and sometimes the loan on your vehicle can be rewritten in a Chapter 13 case to lower your payments.
Can I stop wage garnishments or lawsuits with a bankruptcy?
Yes. A bankruptcy filing automatically stops garnishment of your wages the day that it is filed. We cannot however, in most cases, recover wages that have already been taken out of your check. A bankruptcy also immediately stops any further action or court appearances on a lawsuit, even if a judgment has been entered against you already.
Can a creditor call me or send me collection letters after I file bankruptcy?
No. Once a bankruptcy petition is filed with the court creditors are not allowed to contact you in any way. The court sends written notice of the bankruptcy to the creditor, and you refer any telephone calls from creditors over to your attorney. If a creditor keeps calling you they can be sued for contempt of the bankruptcy court order.
Can I discharge income taxes with a bankruptcy?
Income taxes that are more than three years old can in most cases be discharged in bankruptcy. Income taxes that are less than three years old usually cannot be discharged, but interest can be stopped and payments set up through a Chapter 13 plan.
Can I discharge student loans in bankruptcy?
Generally no, unless you are disabled or otherwise unable to work at all. In some cases the payments can be rearranged in Chapter 13, or you will need to pay the student loan on your own directly.
Can I protect co-signers in bankruptcy?
Yes, under either Chapter 13 or Chapter 7 you can protect a co-signer on a debt by continuing to pay the debt directly. If you are behind on payments of a co-signed debt Chapter 13 can allow you to catch up the back payments or restructure the payments and protect the co-signer.
Can I discharge child support in bankruptcy?
No. Bankruptcy does not eliminate past or current child support obligations. In some cases the back child support can be paid through a Chapter 13 case in payments which stops license suspensions or other contempt procedures, but the obligation must still be paid in full.
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