With Chapter 7 (also called "straight bankruptcy") the court grants relief from most types of debt including credit card balances, medical bills and finance company loans. Some types of debts like recent income taxes, student loans and child support obligations are not removed. On secured debts, like a home mortgage or vehicle loan, you have the option to keep the property and keep making the payments, or surrender the property to the lender and have your liability removed. You generally are able to keep all of your property, unless you have substantial equity in the property beyond what Illinois law allows you to protect.

Do You Qualify: If your income is high enough that the court thinks you have the ability to pay your debts back in full within a few years you will not be eligible for Chapter 7. You can also only file Chapter 7 once every eight years.

Procedure: Once the Chapter 7 petition is filed, all collection attempts by your creditors including telephone calls stop. Approximately thirty days after your case is filed you have one short court appearance which lasts four to five minutes with a court appointed trustee. It is the trustee's job to look to see if you have large assets that could be sold to pay your debts, like business equipment or substantial equity in real estate. About eight to ten weeks after the court appearance you receive the order of discharge of your debts by mail.

Credit Reporting:  Chapter 7 stays on your credit report for a ten year period from the date that it is filed, most Chapter 7 cases are also printed in the Monday edition of the newspaper.

COMMON QUESTIONS

1. What about my regular payments like house, car, utility and insurance bills?

If you want to keep the house or car, you just keep making the regular payment. You will be "reaffirming" these debts in the Chapter 7 case, meaning that they will pass through bankruptcy unaffected. The same goes for utility and insurance payments. If you are behind on utility bills like electric or telephone, bankruptcy can stop a shutoff and start you fresh with a zero balance.

2. Can I get rid of second mortgages on my home or lower the payments on my vehicle in Chapter 7?

No. Chapter 7 does not eliminate these liens against the house or car. Your options are to keep paying these debts if you want to keep the house or car, or surrender the item to the lender to have your liability removed from the loan. If you are behind on the house or car loan, or if your mortgage is in foreclosure or a vehicle has been repossessed, Chapter 13 gives you options to keep the property that are unavailable in Chapter 7.

3. Will I lose any property in Chapter 7, like my retirement or pension plan?

Generally no, as Illinois law gives you "exemption" protection over most types of property unless you have large amounts of equity. It is important to seek competent legal advice to make sure that you do not place your property at risk.

4. What do I do if creditors keep calling me after I file?

Once a case is filed with our office you refer any telephone calls to us. If you continue to receive calls you let us know the name and telephone number of the creditor who is not obeying the court order, and if necessary we sue the creditor. Usually the calls will stop immediately and this is not a problem.

5. What if I have additional questions?

We suggest that you call our office for a free, no obligation office consultation to have your questions answered. Call our office at (309) 673-5535 or (800) 248-7212.