The chapter that allows for repayment of a portion of the debt would be Chapter 13.  Chapter 13 is bill reorganization through a Chapter 13 trustee.  Chapter 13 is typically used to save a home that’s in foreclosure or to pay a vehicle over time or to reorganize other debts such as non-dischargeable debts: student loans, recent taxes, parking tickets, child support, alimony, debts incurred by some sort of fraud.  

Chapter 13 involves the filing of a Chapter 13 bankruptcy petition, which is filed with the Clerk of the United States Bankruptcy Court. There is a meeting of creditors approximately three to four weeks after the case is filed whereby a Chapter 13 trustee will attempt to make sure that you’re putting all of your disposable income towards a Chapter 13 plan each month.  The Chapter 13 trustee will then either recommend or not recommend your case for confirmation and the case will proceed accordingly.  

Provided you make your current mortgage payment outside of the bankruptcy as well as your Chapter 13 bankruptcy payment, your case will have success.  At the end of three to five years, you will receive a discharge and, technically, your arrears will be reinstated, your vehicle will be paid off and the rest of your debt will be eliminated and they will receive a portion of the debt over those three to five years. 

If you are thinking of filing either a Chapter 7 or a Chapter 13 bankruptcy, I recommend that you strongly meet with a bankruptcy attorney in your local area that practices bankruptcy on a daily basis.  Many attorneys came back into the bankruptcy field thinking that that’s where the gold was.  Make sure that you hire a bankruptcy attorney that’s been practicing bankruptcy for a number of years and who has the requisite experience to handle your case. 

Whatever you do, do not think that you can file bankruptcy yourself.  If you file bankruptcy yourself, you are likely going to have a problem because the law is complex and you need the guidance and assistance of counsel who does this on a daily basis.    

In the state of Illinois, you, as an individual debtor, can protect up to $15,000.00 worth of equity in real estate.  If you are filing a joint bankruptcy case, you and your spouse can protect up to $30,000.00 worth of equity in real estate.  As far as vehicles go, you can protect up to $2,400.00 worth of equity in one motor vehicle as an individual.  If you are filing jointly, you and your spouse can protect up to $4,800.00 of equity in one motor vehicle. 

In addition to the real estate and the auto exemption, you also have in the state of Illinois a $4,000.00 wild card exemption which can be sprinkled over any type of personal property.  In a joint case, this amount doubles to $8,000.00 worth of wild card exemption that could be sprinkled over any personal property. 

Thus, people typically keep their house and car and all of their personal property when they’re filing a bankruptcy Chapter 7 to get out of debt.  They simply have to continue to make the mortgage payment and the car payment.  Otherwise, those items would either be foreclosed or repossessed just as if there wasn’t a bankruptcy case in the first place. What bankruptcy will do is eliminate the unsecured debt from your life in full forever, such as medical bills, credit card bills and personal loans and other services. 

Bankruptcy is probably the only thing that I would recommend for someone who is struggling financially and who needs a fresh start.  There are alternatives to bankruptcy, such as working out a payment plan with a creditor or going into some sort of debt consolidation plan.  However, in my experience as a bankruptcy attorney, I have seen too many clients who have come to my office after a failure with a debt consolidation company.  

Debt consolidation companies attempt to pay your creditors less than what’s fully owed in exchange for a release of the debt.  However, debt consolidation is not mandated under any federal law and creditors do not have to accept the payment plan.  If you get into a situation where some of your creditors are accepting the payment plan while others are not accepting the payment plan, the ones that are not accepting the payment plan have the right to sue you. 

Many people have seen their balances not go down even though they’ve been in debt consolidation for several years.  A lot of their fees got eaten up by the debt consolidation company and it didn’t go to the creditor.  In other cases, one creditor opted out and started a lawsuit or a garnishment to the point where the client couldn’t make the payments anymore to the debt consolidation company. 

In recent years, the debt consolidation companies have been sued by different states’ attorneys because they were taking their fees prior to paying out anything to the creditors. 

What bankruptcy does is it eliminates the debt in full under Chapter 7.  There is no option to pay back a portion of the debt under Chapter 7.  It is just simply eliminated in Chapter 7 in full. 

Bankruptcy laws are provided under the United States Constitution and they are a federal right that is afforded to people who are honest, who just simply need a fresh start.  If you are someone who lost your job or if you are someone who had a medical condition and your insurance did not cover the uncovered portion, then Chapter 7 might be a great way for you to get back on your feet and end all of the harassment. 

You can file a Chapter 7 bankruptcy case once every eight years.  You can even file a bankruptcy case after you file a Chapter 7, but that would be of the Chapter 13 variety where you’re repaying your debt over time. 

Many of my clients have been struggling with credit card debt for over 10 years.  When they come to see me at my office, they’ll tell me that they have perfect credit, they have a great credit score, they’re able to manage their debt without a problem and that they really don’t think that they should file.  However, what they fail to recognize is that they’re carrying a ton of debt on their shoulders.  I basically tell these clients and prospects that I really don’t care what your credit score is or whether you think you have perfect credit.  I care whether or not you are able to function by carrying that debt year after year, month after month, day after day.

I like to see clients get a fresh start because I know that there is going to be a good life after bankruptcy.  Most people who come into my office, they’re struggling financially.  They’re stressed out.  They’re worried about things and they’re mostly worried about, if they file for bankruptcy, will they ever get credit again. 

 Where plaintiff used his equity in first residence to purchase a new home titled in both parties’ names, thereby commingling the properties so as to transmute his equity into marital property, the residence was properly classified as marital.  In re Thacker
 A family residence was properly deemed marital property where the husband purchased the house approximately two months before the parties were married by borrowing $3,000 for the down payment and mortgaging the remaining purchase price, as he never spent any money from personal funds accumulated prior to the marriage, and the mortgage payments were made with marital funds.  In re Ohrt
 Where house was purchased by the parties prior to, but “in contemplation of” their marriage; the parties were living together at the time of the purchase and had discussed acquiring a marital home; they both accompanied the real estate agent to view the property for the first time; they both signed the offer to purchase the property; former wife’s parents provided a loan of $5,000 towards the down payment; and additional $5,000 came from the parties joint funds; they used joint funds in addition to the rental income from the property to make the mortgage payments prior to moving into the home; and during the marriage all mortgage payments were made from marital funds, the house was considered a marital asset.  In re Malters

See Also: Bankruptcy Lawyers Boston

Where do you look for these financial documents? Some of the information may be at your fingertips, but some might require sleuthing. Start looking in the obvious places — where you and your spouse keep important papers in the house and in your safe-deposit box, if you have one. But also watch the mail, and be alert to anything from insurance companies, credit-card companies, banks, brokerage firms, and mutual-fund companies. Go to your employer for work-related documents, such as what you currently have in your pension account. Ask your accountant, attorney and financial advisors for copies of any financial information they have,
such as prior tax returns or documents on ownership of property.

Satisfy Your Credit Counseling Requirement Before Filing Bankruptcy

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