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Bankruptcy in Illinois

Alternatives to Bankruptcy in Illinois

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Consolidation of Debt as an Alternative to Bankruptcy in Illinois

Before you break down and decide to file for bankruptcy, you should look into and research some other alternatives to bankruptcy in Illinois. How useful these alternatives to bankruptcy in Illinois are and whether or not they are available for you depends upon the state of your employment and what assets you possess and the types of assets they are. The other alternatives to bankruptcy in Illinois will involve the consolidation of your payments into a debt consolidation loan or the consolidation of your payments through a type of service for credit counseling.

There are two kinds of loans for consolidation of debt.

  • One is secured by equity contained in your home.
  • One is not secured by equity contained in your home.

When you use acquire a loan for debt consolidation that is not secured using your home, the company basically loans you money and you use this money to pay off your debt. You simply make a payment each month to the company of consolidation and they use this money to handle the debt to your creditors.

This kind of loan may also enable you to lower the cost of credit and improve your circumstances financially by consolidating the debt you have through an equity line of credit on your home or a second mortgage on your home. You should think extremely carefully before you do this. This specific loan puts your home up as collateral meaning you could lose it if you fail to make your payments or if they are late.

This is extremely important to consider if you have more equity invested in your home than you can protect under the home exemption of Illinois. If you have more than you can protect, then you will have to create a payment plan under a Chapter Thirteen bankruptcy in order to keep your home or surrender it under a Chapter Seven bankruptcy. The debt consolidation as an alternative to bankruptcy in Illinois is probably better for you to look into if you are considering a Chapter Thirteen bankruptcy in order to be able to keep your home.

Consumer Credit Counseling as an Alternative to Bankruptcy in Illinois

Another alternative to bankruptcy in Illinois is consumer credit counseling. Under a plan such as this, your creditors may accept a reduction in payments and lower your interest rates. As a general rule, you make a deposit to the credit counseling service each month and the service uses this money to pay your creditors using a schedule that was created by your counselor. Sometimes, you will have to agree to not use any more credit or apply for any more credit while you are a participant in a program such as this.

If you want your plan to be successful, you must make your payments regularly and in a timely manner. It could take up to two years or even longer to complete. You can ask the credit counseling service for an estimate on how long it will take to complete your particular plan. Some services for credit counseling charge little or nothing for management of the plan while others may charge a monthly fee that could potentially add up to a significant sum given enough time. Contributions from creditors are what fund some services of credit counseling.

A plan for repayment of debt can eliminate much stress when it comes to dealing with overdue bills and creditors that seem to continually harass you. This does not mean that you can forget about all of your debt. The plan does not serve as an eraser nor does it provide for a fresh start as a Chapter Seven bankruptcy might. You yourself are still responsible for the paying of any debts that are not included within the plan and for reviewing your monthly statements to be certain that the creditors are receiving your payments when they are supposed to. You have to make sure that the creditor has lowered your interest rates or finance charges or waived any late fees if these were concessions included within your plan for repayment.

Unfortunately, a plan for repayment of debt will not erase your bad history of credit. Under the Fair Credit Reporting Act, accounts with accurate information can stay on your credit report for anywhere up to seven years while a bankruptcy will stay on your credit report for ten years. In addition to this, creditors continue to report information on any accounts handled through the repayment of debt plan.  In example, a creditor may report that an account has had payments that have been missed completely or that are late or that the account is going through financial counseling. It may also report that there are concessions such as write-offs or lowering of interest rates, cancellations of late fees and such.

Process to File Bankruptcy in Illinois

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If you are considering filing bankruptcy and live in the state of Illinois, there are some facts you will need to be aware of before going through this process. Read through the following important information to file bankruptcy in Illinois.

File Bankruptcy in Illinois

Bankruptcy Acts

There are some financial acts that cover the process to file bankruptcy in Illinois, as well as other states in the US. It is a good idea to become familiar with these to determine if you qualify and what debts are covered.

  • Credit Counseling Act (2005). All consumers that file bankruptcy must participate in credit counseling in the six months prior to filing for relief. They must also complete financial management courses once they file bankruptcy in Illinois.
  • Means Test (2005). To determine if you qualify for either Chapter 7 or if Chapter 13 is needed, all income sources, expenses and debts will be considered. The bankruptcy court will analyze your average household income for the preceding 6 month period and then compare it to the median income for the state. This will determine which chapter is applied to file bankruptcy in Illinois.

 

Paperwork Required to File Bankruptcy in Illinois

When beginning the process you will need meticulous itemization of all your income sources, as well as some other records. Be prepared with all the following information to file bankruptcy in Illinois.

  • Financial Transactions. All major financial records for the previous two years will be required.
  • Living Expenses. Proof of living expenses for a one month period.
  • All Debts. This includes secured as well as unsecured debts owed.
  • Assets. This covers any property or possessions that could be sold and converted to cash.
  • Tax Returns. Courts require a two year tax return history.
  • Deeds and Titles. This applies to real estate holdings that are owned outright and any automobiles that are fully paid off.
  • Loan Documents. Any outstanding loan documents will be needed to determine level of debt and terms of repayment agreements.

 

Steps to File Bankruptcy in Illinois

When all the above documents and information are consolidated, the time has come to determine if any of your property falls under the Illinois seizure exemptions. A two page petition is then filed with the Illinois court by either yourself or your lawyer. There are also several more forms that are necessary to complete the process to file bankruptcy in Illinois. All this paperwork and forms are meant to represent your financial status currently. It is imperative that they be accurate and completely honest, or your petition could be rejected.

There are fees involved to file and you need to be aware of these before you file bankruptcy in Illinois.

  • Chapter 7. The fee for Chapter 7 bankruptcy is $306. You may be able to arrange installment payments, but this fee is not eligible to be waived.
  • Chapter 13. The fee for Chapter 13 bankruptcy is $281. It is ineligible for waiver as well.

 

Requirements for Chapter 13

Those that are eligible for Chapter 13 bankruptcy must submit a proposed plan of repayment. Monthly expenses that are reasonable are subtracted from your income, leaving an amount that could be applied to debt that is outstanding. Taxes and child support are considered priority debts that will be paid entirely, while other unsecured debts will be negotiated for settlements at less than the amount owed.

When you file bankruptcy in Illinois, your repayment plan must meet these requirement:

  • Good Faith delivery.
  • Unsecured creditors should receive the minimal amount covered under Chapter 7 regulations.
  • 100% of your disposable income is applied to the repayment plan for a minimum of three years. The court usually insists on wage garnishment to ensure this requirement is met.

 

Final Steps to File Bankruptcy in Illinois

  • Automatic Stay. Once you have been completed the process to file bankruptcy in Illinois, you are protected immediately from further contact by creditors or any foreclosure actions against you.
  • Bankruptcy Trustee. When you file bankruptcy in Illinois, the court immediately assumes legal management of all outstanding debts and the property and possessions not covered under the state exemption list. A court appointed trustee then fastidiously analyzes and reviews all documents and paperwork that you have filed with your petition. They are also able to challenge any portion of your petition.
  • 341 Meeting. Section 341 of the Bankruptcy act require that a meeting between the court appointed trustee, creditors and petitioner be arranged. Generally, this occurs about 30 days after you file bankruptcy in Illinois. Occasionally, in Chapter 7 cases, creditors may choose not to attend. If objections to any aspect of the plan or exemptions are raised, the trustee can negotiate. When conflicts cannot be resolved the bankruptcy judge will rule.
  • Discharge of Property. All non – exempt possessions and properties are sold by the trustee and the money is then applied toward your debt. Occasionally, low value property is returned to you.