Experienced Chicago Bankruptcy Lawyers

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as liquidation bankruptcy. If your monthly income exceeds the Illinois median income, you will need to pass a means test to file under Chapter 7. This is to prevent people who have sufficient income to repay their debts from filing under Chapter 7. When you file for bankruptcy under Chapter 7, you can protect equity in certain assets by claiming Illinois exemptions. For instance, the Illinois homestead exemption allows you to protect $15,000 in your home. The trustee will gather your non-exempt assets and sell them and then use the funds from the sale to pay creditors. Certain debts are non-dischargeable.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows people to put together plans to repay all or a portion of their debts over three to five years. You must pay at least the amount that your unsecured creditors would have gotten if you had filed under Chapter 7. Chapter 13 plans take 3-5 years; your plan cannot provide for payments to be made beyond five years. During the repayment plan period, your creditors cannot initiate or continue collection efforts. There are several tools that a Chicago bankruptcy attorney can help you use to preserve property under Chapter 13 that you cannot use when filing under Chapter 7. For instance, under Chapter 13, you can use lien stripping to strip away junior mortgages if the amount of the first loan is greater than the fair market value of the home, leaving the junior mortgages unsecured.

Foreclosures

Lenders usually foreclose after a homeowner becomes delinquent on multiple mortgage payments. Filing for bankruptcy may help if you are facing foreclosure. Whether you are filing under Chapter 7 or Chapter 13, filing for bankruptcy triggers an automatic stay. If you are filing under Chapter 7, foreclosure will be delayed, which can give you three to four months to work out an alternative measure, such as a loan modification. If you file for Chapter 13 bankruptcy, you can pay off the mortgage arrearage over the life of your repayment plan, as long as you also keep current on mortgage payments as they come due during that period. If you can keep up with all your payments, you can avoid foreclosure and keep your home.

Asset Protection

Although you may not be able to protect your assets in their entirety when filing for bankruptcy, you can protect them to some extent with the assistance of a Chicago bankruptcy lawyer. If you file for Chapter 7 bankruptcy, you can save some of your property by using Illinois exemptions. For instance, the homestead exemption allows you to preserve the equity in your home up to $15,000, or potentially $30,000 if you are filing with your spouse. Under Chapter 13, there are other tools available to protect your assets. For instance, if your car has depreciated in value so that you owe more on your loan than what the car is worth, you may be able to cram down the loan, such that you pay only the amount that is secured, and the remainder of the unpaid balance is left as unsecured debt that is discharged at the end of the Chapter 13 bankruptcy.

Bankruptcy for Small Businesses

Small businesses can file for Chapter 7 bankruptcy. If you are a sole proprietor, the business debt and the personal debt can be resolved in the same bankruptcy proceeding. If a small business is a limited liability company or corporation, Chapter 7 allows for the company to be shut down and liquidated; the trustee will sell the business’ assets and pay its creditors. However, limited liability companies and corporations cannot obtain a discharge of their debts through bankruptcy. Only individuals can obtain Chapter 13 bankruptcy relief, but if you are a sole proprietor, you can file an individual Chapter 13 bankruptcy that reorganizes both your business and personal debts. Small businesses can reorganize their business debt by filing Chapter 11 bankruptcy; this path is complicated and expensive, but it does allow the business to stay open.

Bankruptcy for Restaurants and Bars

If a restaurant or bar needs to declare bankruptcy, it will need to choose among Chapter 7, Chapter 11, or Chapter 13 bankruptcy. When a restaurant or bar is a sole proprietorship, it can file for Chapter 7 or Chapter 13 bankruptcy relief. When Chapter 7 bankruptcy is filed, all operations will stop, and assets will be liquidated to pay creditors back to the extent possible. Restaurants and bars that take the form of a limited liability company, partnership, or corporation may reorganize their debt under Chapter 11. The purpose of Chapter 11 is to pay most debts owed and also become profitable. Under Chapter 13, a restaurateur or bar owner who is a sole proprietor will need to create a debt repayment plan that allows for the repayment of creditors in 3-5 years.

Discuss Your Options With a Bankruptcy Attorney

Filing for bankruptcy can be a complicated process, and it requires careful attention to detail. If you wish to file for bankruptcy relief in the Chicago area, the bankruptcy lawyers at the Bankruptcy Center of Illinois can advise you. Call us at (773) 993-0024 or contact us via our online form.