Chapter 7/13

One thing about bankruptcy that confuses many consumers is the different Chapters of the Bankruptcy Code from which to choose. Although there are several possibilities, most consumers work with their attorneys to choose between only two choices – Chapter 7 and Chapter 13.

Chapter 7 bankruptcy

(also called a "straight bankruptcy" or a "liquidation") is the simplest way to a fresh start, and it is the most common. Technically, the debtor's assets are to be taken and sold so that the proceeds can be distributed to the debtor's creditors.

In practice, however, most debtors do not lose any of their property. This is because of many important exemptions which protect consumers. The most important exemptions for most Illinois consumers are the following:

  • homestead (most people can keep their houses)
  • motor vehicle
  • retirement and pension funds
  • clothing and health aids
  • personal injury awards
  • $4,000 of any other property

While there are limitations to these exemptions, most consumers are able to keep all of their belongings while reducing or eliminating their debt. You should be aware, however, that certain debts such as income tax bills less than three years old (from the due date), child support, alimony, fines, and student loans cannot be eliminated by filing bankruptcy.

Chapter 13 bankruptcy

(also called a "repayment plan") is generally used for consumers who have property that would not be exempt in a Chapter 7; or for people who are behind on mortgage or car payments; or families with higher incomes. With a repayment plan, the consumer makes payments to a Trustee, who distributes the money to the creditors according to a Chapter 13 plan. The payments can continue for upwards of five years.

A Chapter 13 plan is based on the consumer's monthly income, monthly expenses, debt, and property. Depending on these factors, consumers who qualify pay back either part or all of their debts. As long as Chapter 13 consumers keep up with the plan, they are able to keep their property and get rid of their debt.

  • Which is right for you?

    • Get a Fresh Start


      The bankrupcty laws are in place to help you, you can get rid of debt once and for all. We can assist you to use the laws to your benefit to get the fresh start that bankruptcy can provide. We are glad to discuss your situation with you. Call Now: 630-834-1800 or contact me

    • Both a chapter 7 and chapter 13 bankruptcy will put a stop to any creditor harassment, lawsuit, wage garnishment, or foreclosure.
    Robert Honig, Attorney at Law |Address: 116 S. York Street, Suite 215, Elmhurst, Illinois 60126 | Telephone: (630) 834-1800|
    We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Disclaimer.