Limitations of Chapter 7 Bankruptcy

If you are considering bankruptcy protection, it is important to know that filing for Chapter 7 bankruptcy in the Chicago area can help you to get a fresh start financially. It is equally valuable to understand some of the limitations of bankruptcy, too. According to a recent article in TheStreet.com, there are some pitfalls when it comes to choosing Chapter 7 bankruptcy, and consumers and small business owners should be sure that they understand the consequences of bankruptcy before they file.
What do you need to know before you seriously consider Chapter 7 bankruptcy? We can help you to better understand the potential limitations of liquidation bankruptcy as they are discussed in the article.
Co-Signers are Impacted When You Seek Bankruptcy Protection
While you may be able to have an unsecure debt discharged for which you had a co-signer, that co-signer likely will remain responsible for all or part of that debt.
Specific Exemptions in Illinois
Generally speaking, every state has its own set of bankruptcy exemptions, or the property of yours that will be exempt from liquidation. It is important to understand how the specific exemptions in Illinois could end up limiting your ability to recover from financial hardship. As the website for the Illinois Attorney General’s Office makes clear, Illinois law determines what possessions a debtor may keep when she files for Chapter 7 bankruptcy, which include but are not limited to:
  • Up to $15,000 of equity in your home;
  • Up to $2,400 of equity in your car;
  • Up to $4,000 of general personal property; and
  • Certain benefits or pensions.
While these exemptions can allow Chicago debtors to keep quite a bit of property when they file for Chapter 7 bankruptcy, the exemptions may not actually help a debtor who has a significant amount of equity in her home, for example. In such a case, the debtor may have other options that do not involve bankruptcy that she should consider. Bankruptcy law and exemptions are complex, and you should always discuss your particular situation with a Chicago bankruptcy lawyer.
Bankruptcy and Your Credit Report
It is often easier to recover financially from a liquidation bankruptcy than most consumers initially believe, but that recovery will take time. A Chapter 7 bankruptcy filing can remain on your credit rating for up to a decade, and it can be difficult to obtain approval for major purchases that require that you find a lender.
Secured Creditors and Your Property
When you file for Chapter 7 bankruptcy, liens are not eliminated. In other words, if you currently have a secured debt (in which the lender has a lien on your property), the lender can repossess the property if you fail to pay what you owe. While Chapter 7 bankruptcy can eliminate the debt you have not paid on a secured loan, it will not prevent the creditor from repossessing the property. For instance, if you have not been making car payments and you file for bankruptcy, you will not owe back payments, but the lender can repossess your automobile.
If you believe that Chapter 7 bankruptcy is your best option, you should not hesitate to contact an experienced Oak Park bankruptcy attorney to discuss your situation. Contact the Emerson Law Firm today to learn more about the many ways in which we can assist you.
See Related Blog Posts:
Should I File for Bankruptcy During the Holidays?

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