A brief look at the Illinois bankruptcy filing process with a list of advantages and cons.
Chapter 7 bankruptcy can eradicate your debts to give you a fresh financial start. It is often used as the last resort to heal your financial problems. In most cases, the bankruptcy can eliminate all of your debts, and you can get back on the track of economic freedom.
The Illinois Bankruptcy law monitors all bankruptcy requests here. Unlike other states of the US, federal laws are not applicable here. You must be living in Illinois for past two years to work under the Illinois Bankruptcy law. If you are not a permanent resident, then the previous state laws will be applicable.
The bankruptcy law requires you to attend credit counseling six months before you contact the court. The trustee wants to know that every remedy has been tried before filing bankruptcy. Only if the advice fails to help, you can qualify for filing bankruptcy. The credit counseling is mandatory whether you apply for chapter 7, chapter 11 or chapter 13.
The 2005 Act of Bankruptcy states that you cannot file for Chapter 7 if you are earning more than the state median. This rule forces you to pay back something if you can.
That’s why you must pass a means test. In simple words, the means test compares your past income over six months with the state median ($59,588). If you are earning less, you can qualify for chapter 7. If not, you need to consult a bankruptcy attorney to see your options.
You cannot avail federal exemptions in Illinois. Here is the list of exempt assets according to Illinois Bankruptcy law:
Homestead: If you have equity in the house, you can keep it for up to $15,000. The amount doubles if you are married and both spouses file for bankruptcy. You will also get the same amount if you sell your house.
Vehicle: You can keep vehicles worth $2,400.
Income or Wages: The Illinois state allows you to have 85% of your gross earning or 45x the minimum federal hourly wage. You are authorized to have the greater amount of the two.
Accounts: Tax-deferred retirement accounts, pension plans and insurance policy proceeds are exempt assets.
Personal Property: Clothes, furniture, and other necessary items worth $1,500 are exempt.
Unemployment Compensation: If you are unemployed, you will receive 100% of unemployment compensation. It is an exempt asset.
You can save your house or the vehicle by re-affirming those loans under a reaffirmation agreement. However, this agreement may not be applicable. In certain cases, if you have nothing in the house equity, the trustee can declare your property as an exempt asset. It depends on how much money can be paid to creditors by selling your home or car.
At the core of the bankruptcy process lies financial freedom. You are free. If you are employed or can find an excellent paying job, then you can build a safe future. The bankruptcy ends harassing calls, foreclosure process and increasing credit card interest rates.
While it is designed to help you, the bankruptcy makes it difficult to build a financially safe future again. You cannot use credit cards for several years as you will lose them all to the bankruptcy court.
Your credit score will see a major drop often by 300 points. This score prevents you from taking new debts especially credit cards. Even if you qualify, you will get credit at crazy interest rates.
The bankruptcy stays on your credit report for ten years. Although time heals the pain, you might not be able to get a new mortgage for several years. Some companies may consider filing bankruptcy as an irresponsible behavior, and it might not be easy to take a new job.
The best way is to be patient, avoid credit cards as much as possible. Stay current with your current financial responsibilities like paying student debt. With a little effort, you can quickly increase your score by 100 points which should help you in getting back on the track.