Bankruptcy Q & A

1. What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

A Chapter 7 bankruptcy is commonly referred to as a liquidation bankruptcy or straight bankruptcy. Once a person files a Chapter 7 an estate is created comprised of all the property that you own. Approximately one month after filing a Chapter 7 you will go for a meeting with the trustee (an officer of the court) who has the duty to sell any un-exempt property and pay your unsecured creditors. The trustee’s job is to administer any non-exempt assets for the benefit of your creditors. Approximately 2-3 months after your meeting with the trustee you will receive a discharge order from the court. Discharge is the goal of a Chapter 7 bankruptcy and this means that your unsecured creditors will be wiped away and you will no longer have to pay those creditors.

Chapter 13 bankruptcy does not eliminate your unsecured debt, but is a consolidation of all of your debt. Chapter 13 is also known as a reorganization bankruptcy. A plan is filed with the court to consolidate your debts into a monthly payment plan to be paid over a period of time, usually three to five years. The amount you pay each month will be determined by how much income you bring home per month, your monthly expenses, your portion of assets that are un-exempt, and how much of your debt has already been paid off. In addition, Chapter 13 bankruptcy also permits you to keep all of your assets and property throughout the entire process, as well as possibly paying off only a portion of your debt and discharging the rest of the debt owed.

2. What debts are dischargeable during bankruptcy?

Dischargeable debts include:

• Credit Cards
• Medical Bills
• Unpaid Rent or Utility bills
• Repossessions
• Consumer Debt
• Judgments and Lawsuits
• Collections
• Pay Day Loans
• Personal Loans
• Some tax debts

Debts that cannot be discharged during bankruptcy are referred to as “non-dischargeable debt,” and include:

• Student Loans
• Child Support
• Alimony/Spousal Support
• Tax Debt
• Debt to the government
• Debt for crimes committed
• Court Fines
• Personal injury related to operation of a motor vehicle or other vehicle while intoxicated or under the influence of drugs
• Parking Tickets or Toll way Fines Liens

3. Will I lose my home or car?

You most likely will be able to keep your home provided that you continue to make your mortgage payments. Because Illinois allows for exemptions that protect certain property during the bankruptcy process, most people are able to keep their home and car. When you come to the Law Office of Marc Wagman we make sure that you do not lose any of your assets.

4. Will my wages be garnished?

As soon as you file for bankruptcy, any wage garnishment should stop. If your wages continue to be garnished even after you have filed for bankruptcy, it’s important to contact us as soon as possible, as this a direct violation of the law.

5. How long does a bankruptcy stay on my credit report?

A bankruptcy will appear on your credit report for anywhere from seven to 10 years after your case has been discharged. However, even though a bankruptcy appears on your credit report, it does not mean that you will not be able to obtain credit. There a many ways to build credit even after you have filed for bankruptcy.

6. Does non-bankruptcy related credit consolidation work?

90% of all bill consolidations fail. The reason that most fail is because there is no law forcing all the creditors to enter into the consolidation, nor force them to stop charging interest on the money you owe them. In essence, you will not be able to pay less than what you owe and have to pay interest on it. Additionally, your credit will not begin to recover until you make your final payment, which is on average 3-5 years after you begin the process. Bankruptcy on the other hand will help you recover and will force all creditors to adhere to the FEDERAL LAW.