Understanding Bankruptcy in Chicago: An Overview
Declaring bankruptcy can be a frightening proposition, especially in a city like Chicago, with its complicated court systems and local regulations3 min read
Declaring bankruptcy can be a frightening proposition, especially in a city like Chicago, with its complicated court systems and local regulations. What’s more, many individuals feel ashamed or embarrassed about the thought of filing for bankruptcy — feeling like they’ve failed at managing their financial circumstances, when the reality is that bankruptcy is often their best chance at getting control of their finances.
But understanding bankruptcy — from its definition and the differences between its types to the consequences and complications that you may encounter if you file for bankruptcy in Chicago — is the key to making sure that you’re able to plan and execute your financial recovery in a stable and secure way.
To begin, let’s look at the definition of bankruptcy as it pertains to the United States. Bankruptcy is a legal action filed by a person or business that is unable to pay their bills and creditors. It formally transfers full or partial ownership of the person’s or business’s assets and liability to a trustee appointed by a bankruptcy court. This is done with the intention of providing a fresh financial start for the debtor.
The various types of bankruptcies available to individuals and companies differs between the states. Some of the most commonly used types in the United States are Chapter 7, Chapter 9, Chapter 11, and Chapter 13 bankruptcies. Bankruptcies that are filed in Illinois, including Chicago, are regulated by the Federal Bankruptcy Code.
Typically, individuals who wish to file for bankruptcy in Chicago will choose either Chapter 7 or Chapter 13. Chapter 7 bankruptcy is known as a “liquidation”, which means that a court-appointed trustee will take control of a person’s assets and sell them off in order to pay creditors. Chapter 13 bankruptcy, on the other hand, is known as a “reorganization” or “wage earner’s plan” which allows individuals to pay back their creditors over time with some of their wages and assets.
There are some major differences between the two bankruptcy types, and it’s important to understand them in order to pick the type of bankruptcy that’s right for you. In general, Chapter 7 bankruptcies are faster and easier to set up, but you may lose some of your property in the process. Chapter 13 bankruptcies may take up to five years to complete, but you’ll likely be able to retain more of your property.
In addition to the different types of bankruptcies available, another important factor to consider is the exact consequences and implications of filing for bankruptcy in Chicago, including which assets of yours may be liquidated and if you will be able to keep your house and vehicle. Additionally, there are certain requirements that you must meet in order to be eligible to declare bankruptcy, including having an income below the median in your state and having debts that are not primarily related to luxury items or a business.
Many of the complexities involved with filing for bankruptcy in Chicago can be overwhelming, and finding the right professional advice is key to making sure that you don’t risk any missteps within the court system. UpCounsel has a database of experienced lawyers located in the Chicago area who have extensive experience in the field of bankruptcy law and can provide the knowledgeable counsel that you need to navigate your potential bankruptcy case.
No matter what kind of debt you’re struggling with, understanding bankruptcy and how the laws that apply to it in Chicago can play a major role in making sure that you’re able to get your finances back on track in the most advantageous way possible. With the help of experienced bankruptcy lawyers on the UpCounsel network, you don’t need to take on your financial recovery alone.