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Bankruptcy in Illinois

If you live in the “Prairie State” (aka “the state where Oprah lives”), there are qualified bankruptcy attorneys who help people like you determine whether bankruptcy is a viable path and, if so, which fork in the path to take.

In this article, we’ll point out Illinois’s unique bankruptcy laws; discuss whether the Chapter 7 path or Chapter 13 path to bankruptcy discharge is right for you; help you find a bankruptcy lawyer; and get you ready to work with your lawyer.

How Illinois Bankruptcy Law Differs from the Laws of Other States

In many states, bankruptcy filers have the option of choosing between their own state’s bankruptcy exemptions and those of the federal government. In Illinois, only the state exemptions are available.

Most people contemplating bankruptcy are concerned about keeping their car and house. In Illinois, there are exemptions that protect some of the equity in both. We’ll list the exemptions below.

In addition to a $4,000 wild card exemption per filer, Illinois law allows bankruptcy filers to protect:

  • $15,000 of home equity for an individual and $30,000 of home equity for a married couple.
  • $2,400 of equity in a car for an individual and $4,800 of equity in a car for a married couple.

Don’t be alarmed if you have greater equity in either your car or home; most people who file bankruptcy don’t lose any of their assets (unless they don’t want to be strapped by future payments). There are ways, other than state exemptions, to protect your assets and a qualified bankruptcy attorney can give you good advice about your individual situation.

Choose between Chapter 7 and Chapter 13 Paths

Although the state of Illinois doesn’t afford bankruptcy filers the opportunity to choose between federal and state exemptions, it does allow you to choose between filing Chapter 7 and Chapter 13 bankruptcies. The numbers, “7” and “13”, refer to chapters of the U.S. Bankruptcy Code. A “code” is a compilation of laws.

  • To qualify for Chapter 7, you must somehow meet the “means test”. The easiest (but not the only way) to do this is to show that your income is less than the median income for the state of Illinois.
    • An individual can earn up to $45,545 and still file Chapter 7.
    • A two-person family can earn up to $57, 964 and still file Chapter 7.
    • A three-person family can earn up to $66,758 and still file Chapter 7.
    • A four-person family can earn up to $79,074 and still file Chapter 7.

If you don’t immediately qualify, it’s worth consulting with a bankruptcy attorney because there are exceptions and other ways to qualify. Qualifying for Chapter 7 is worth the effort because unsecured debts are discharged and the entire process is usually over within 6 months.

  • If you don’t qualify for Chapter 7, ask your bankruptcy attorney about Chapter 13. In Chapter 13 bankruptcy, debts are renegotiated and reorganized under a 3 to 5 year repayment plan. Some debts discharged.

How to Find a Qualified Bankruptcy Attorney

If you are uncomfortable asking friends for a referral to a great bankruptcy attorney and Oprah hasn’t listed one on her “Favorites List”, look for an attorney or law firm that limits practice to bankruptcy law. It’s okay to read up on and call or email a few firms to find the attorney who is best for you. Most bankruptcy lawyers offer a free, no obligation consultation.

How to Prepare to Work with a Bankruptcy Attorney

Get psychologically prepared for a lot of paperwork and disclosure of personal financial information. It will be worth it. You’ll likely feel like a million bucks when the harassing phone calls stop and you’re issued a clean slate. In the meantime, pull out your financial papers including lists of assets, income, debts, and any repayments made.

Where to Get Help Filing Bankruptcy

Unless you’re an experienced bankruptcy lawyer, you likely need help evaluating and proceeding with your bankruptcy case. Any mistake may cause your bankruptcy filings to be refused and cost you a lot of stress and tens of thousands of dollars. Always consult with a qualified Illinois bankruptcy attorney.

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