Different Types
of Bankruptcy For Individuals
Chapter
7
The purpose of a Chapter 7 is to discharge
(wipe out) most debts and allow the debtor
a "fresh start." A person can
file a Chapter 7 only once in 6 years. The Court fees for
filing a Chapter 7 are presently Two
Hundred ($200.00) Dollars.
The fact that you filed a bankruptcy
can stay on your credit history for up to 10 years.
There are two kinds of creditors in a
bankruptcy: secured and unsecured.
1. A secured
creditor is one who has the right to get his collateral back if he is
not
receiving
payment for it.
Examples
of secured debts include: loans for cars, furniture, major appliances,
jewelry and a mortgage on a house. Even in a bankruptcy, these creditors
have a right to the return of their property if they are not getting
paid.
2. An unsecured
creditor is one who has no right to the return of any property, no matter
how much is owed.
Examples
of unsecured creditors include Visa, Mastercard, medical bills,
utility bills, and most (but not all) store charge cards.
Some debts cannot be discharged in a Chapter
7 bankruptcy. These include alimony, child
support, certain kinds of taxes, and student loans, which became due
less than 7 years ago. These debts must
still be listed on the bankruptcy schedules, but they cannot be
wiped out.
A chapter 7 bankruptcy requires a debtor
to list not only what he owes, but also what he owns.
This is because a debtor can only keep certain things in a Chapter 7.
These things are called exemptions. The
most common exemptions are the following:
1. Up to
$7500 worth of equity in a piece of real estate in which the debtor
lives.
Equity is the difference between what something is presently worth and
what
is owed on it.
2. Up to
$1200 worth of equity in one motor vehicle.
3. Necessary
wearing apparel.
4. Up to
$2000 worth of personal property of any kind.
5. Up to
$7500 recovery for a personal injury.
If a debtor has assets (owns anything)
above the exemptions allowed, those assets
may be taken, sold, and the money used to pay
back the creditors. See below for a
list of
Illinois exemptions.
Chapter
13
Chapter 13, also known as a Wage Earner's
Plan, is a form of bankruptcy. It is heard by the
same judges in the same courtrooms. The Court fees for filing a Chapter
13 are presently One Hundred Eighty-Five
($185.00) Dollars.
There are several differences between
a Chapter 13 and a Chapter 7. The most
important are:
1. In a
Chapter 13 the debtor attempts to repay his creditors rather than wipe
out their claims with no payment. Generally a secured creditor is entitled
to
payments totaling 100% of the present value of the secured property.
Unsecured creditors may receive 100% of payment, or less, depending
upon the debtor's income.
2. Unlike
the exemptions allowed to the debt in a Chapter 7, there are no limits
as to what a debtor can keep in a Chapter 13. However, a creditor cannot
receive less in a Chapter 13 than he would have received from the sale
of the
non-exempt assets in a Chapter 7.
3. In a
Chapter 13, the debtor must propose a payment plan to the court.
Payments under this plan are made to the Trustee (who charges 10% of
all
funds collected as his/her fee). The trustee gives the money to the
various
creditors.
In order to present a plan, the debtor must first show the court that
he/she is able to meet his/her monthly living expenses. These expenses
include rent, food, clothing, utilities, transportation costs, etc.
out of his/her
regular monthly income. It doesn't matter what the source of the income
is,
as long as it is stable and regular. The debtor must then still have
sufficient
funds left over to make payments on his/her proposed plan to resolve
his/her debts.
4. Almost
all debts can be included in a Chapter 13, even those that cannot be
discharged
in a Chapter 7. However, many of these debts will have to be
paid off at 100% of the amount owed.
5. A Chapter
13 plan can be extended for up to 60 months (5 years). A debtor
can go into a Chapter 13 as often as necessary. There is no 6-year limitation
as in a Chapter 7.
List
of Illinois Exemptions
1.
Social Security Benefits (Including SSI) (42-407) (1001)(g)(1)
2.
Veteran's Benefits (38-3101) (1001)(g)(2)
3.
Federal Employees' Retirement Benefits (5-8346)
4.
Federal Employees' Workers Compensation Awards (5-8130)
5.
Postal Employees' Retirement Benefits (5-8346)
6.
Postal Employees' Worker's Compensation Awards (5-8130)
7.
Public Aid Benefits (23-11-3) (1001)(g)(1)
8.
Unemployment Compensation Benefits (48-540) (1001)(g)(1)
9.
Worker's Compensation Awards (48-138.21)
10.
Crime Victim's Awards (1001)(h)(1)
11.
Circuit Breaker Property Tax Relief Benefits (320-25/1)
12.
Private Pension or Retirement Benefits (1006) (735 5/12-704)
13.
Life Insurance Payments (1001)(f) and (h)(3)
14.
Private Disability, Illness, or Unemployment Benefits (1001)(g)(3)
15.
Maintenance or Child Support Payments (1001)(g)(4)
16.
Wrongful Death Awards (1001)(h)(2)
17.
Personal Injury Awards (Up to $7,500.00) (1001)(h)(4)
18.
Up to $2,000.00 in Personal Property As Chosen By the Defendant,
Including Bank Accounts. (1001)(b) (See accompanying
"Defendant's Estimation
of Other Personal Property")
19.
Up to $1,200 in value in any one motor vehicle (1001)(a)(c)
*Exemptions
1-6 refer to U.S. Code Title and Section numbers and
IL. Rev. Stats., Ch. 735, Sec. 5/12-1001.
**Exemptions
7-10 and 12-19 refer to Ill. Rev. Stats Ch. 735, Sec. 5/12-1001.
The above information
provided by Land of Lincoln Legal Assistance Foundation