Which Chapter is Right for You?

Bankruptcy Lawyer in Chicago

Are you considering filing for bankruptcy to take control over your debt? Thousands of people across Illinois file for bankruptcy each year, and both Chapter 7 and Chapter 13 offer numerous benefits. It is important to understand the differences between the two Chapters so that you can make an informed decision that is most suitable to your financial situation.

Our experienced Chicago bankruptcy attorneys can assess your circumstances to help you determine which Chapter is the right choice for you. Call our team at Law Offices of David Freydin to enlist our knowledgeable guidance for your bankruptcy case.

Chapter 7 vs. Chapter 13

Chapter 7 is often referred to as liquidation bankruptcy, as it involves the liquidation of nonexempt assets to repay creditors. To qualify for Chapter 7 bankruptcy you must be able to pass the means test. If you pass the means test and file for Chapter 7, the court will assign a bankruptcy trustee to your case who will gather your nonexempt assets and liquidate them to repay your creditors. After the liquidation funds are distributed, you will be released from the remaining balances of most types of unsecured debt. This Chapter usually takes between 6 months and 1 year. There are numerous benefits of filing for Chapter 7, such as:

• Faster relief from debt
• Future wages and earnings are not included
• You do not have to keep up with monthly payments
• Most types of unsecured debt will be eliminated once the process is completed

Chapter 13 can be described as the reorganization of debt. Passing the means test is not necessary to file for Chapter 13, which involves you working with a court-appointed bankruptcy trustee to create a repayment plan that will last 3 to 5 years. During this time you will make single monthly payments that will go towards the repayment of your debt. At the end of the repayment plan most of your remaining unsecured debts will be eliminated. Some of the benefits of filing for Chapter 13 include:

• You do not risk losing any possessions to liquidation
• You have more time to repay your debts
• Your credit score will be impacted less
• Your home will be protected from foreclosure

Questions to Ask Yourself Before Filing for Bankruptcy

While both Chapters of bankruptcy offer numerous benefits, it is important to determine which Chapter is best for your situation. You can gain a better understanding of your goals and which Chapter may be most suitable for your circumstances by asking yourself the following questions.

• Can I pass the means test? The bankruptcy means test determines whether you fall within Illinois' median income. If you cannot pass the means test, you still have the option of filing for Chapter 13.
• Am I willing to risk losing my assets to liquidation? If you are uncomfortable with the idea that you may have to give up some of your possessions to repay your creditors, Chapter 13 may be a better option because you can retain all assets while repaying your debt.
• Are my debts dischargeable? Many people file for bankruptcy because they want to have their remaining debts discharged. It is important to know, however, that not all debts qualify for elimination after the bankruptcy process is completed. If the majority of your debt stems from educational loans, child support payments, spousal support payments, or unpaid taxes, for instance, Chapter 7 will not benefit you, as these types of debt cannot be discharged. If your debts do not qualify for elimination, Chapter 13 will provide you with more time to repay them; if your debt is mostly qualifying unsecured debt, Chapter 7 could be more beneficial.
• How soon do I want to be free from debt? If you would like to complete the bankruptcy process as quickly as possible, regardless of the possible impact to your credit, then Chapter 7 could be the right choice. If you would like more time to repay your debts and would like to better protect your credit, Chapter 13 will allow you to steadily pay back your debts over a few years.
• Am I truly comfortable with filing for bankruptcy? If you are still worried or uncomfortable about filing for bankruptcy after carefully considering all your options, you should wait to file. Our firm can help you explore alternatives to bankruptcy and find a solution that you are comfortable pursuing.

If you have would like more information about your options or would like to obtain the guidance of an experienced bankruptcy attorney in Chicago, we encourage you to contact our firm today or take a few moments to fill out a free case evaluation form.