A Guide to Your Rights and Options
Ley de Bancarrota en Illinois: Sus Derechos y Opciones
💡 Start Here: What Is Bankruptcy?
Bankruptcy is a legal process that helps individuals and businesses overwhelmed by debt get relief and start fresh. Under Illinois bankruptcy law, you can either eliminate some or all of your debts or restructure them under court supervision.
Bankruptcy is governed by federal law (U.S. Bankruptcy Code), but local rules and exemptions in Illinois also play a big role in how your case is handled.
🧾 Common Reasons People File for Bankruptcy
People in Illinois file for bankruptcy due to:
- Medical debt
- Job loss or reduced income
- Credit card and personal loan debt
- Divorce or family separation
- Business failure
- Foreclosure or eviction threats
Bankruptcy isn’t just for the irresponsible—it’s a legal tool designed to protect people who are genuinely struggling.
🔍 Types of Bankruptcy in Illinois
There are two main personal bankruptcy options:
1. Chapter 7 – Liquidation Bankruptcy
This is the most common type of bankruptcy for individuals.
- It wipes out most unsecured debt like credit cards, personal loans, and medical bills.
- You may have to surrender non-exempt assets (but many people keep everything due to exemptions).
- Takes about 3–6 months.
- No repayment plan required.
To qualify, you must pass the means test, which compares your income to the state median.
2. Chapter 13 – Repayment Plan
This is for people who:
- Have a regular income
- Want to protect assets (like a home or car)
- Need time to catch up on missed payments
You repay part or all of your debts over 3–5 years, based on what you can afford.
🏠 Will I Lose My Home or Car?
Not necessarily.
Illinois has bankruptcy exemptions that allow you to protect certain property:
- Homestead exemption: Up to $15,000 in home equity (or $30,000 if married filing jointly)
- Vehicle exemption: Up to $2,400 in vehicle equity
- Wildcard exemption: Up to $4,000 for any personal property
If your asset’s value minus loan balance is less than the exemption, you can usually keep it.
🧑⚖️ Illinois Bankruptcy Means Test
The means test determines if your income is low enough for Chapter 7.
If your household income is below the median in Illinois, you qualify:
- 1 person: ~$63,000
- 2 people: ~$83,000
- 3 people: ~$100,000
- 4 people: ~$120,000
(Updated annually)
If your income is higher, you may still qualify after deducting living expenses.
📄 What Debts Are Discharged?
Bankruptcy can eliminate:
- Credit card debt
- Medical bills
- Personal loans
- Utility bills
- Payday loans
- Repossession balances
- Collection accounts
However, it does not erase:
- Student loans (except in rare hardship cases)
- Child support or alimony
- Recent taxes
- Court fines or criminal restitution
- Debts from fraud
💳 Can I Keep Any Credit Cards?
Typically, no. Most credit card accounts are closed once you file. But you can rebuild credit later and qualify for new cards after discharge.
🏦 What Happens to My Bank Accounts?
- Checking/savings accounts stay open unless overdrawn or with a bank you owe money to.
- Funds in your accounts are generally protected if under exemption limits.
- Always disclose all accounts to your attorney before filing.
🛍️ What If I Just Used My Credit Card?
If you ran up large debts (especially on luxury items or cash advances) shortly before filing, the court may consider this fraud and deny that portion of the discharge.
Avoid using credit cards at least 90 days before filing.
🧾 Bankruptcy Costs in Illinois
| Expense | Approximate Cost |
|---|---|
| Court filing (Chapter 7) | $338 |
| Court filing (Chapter 13) | $313 |
| Credit counseling course | $10–$50 |
| Attorney fees (Chapter 7) | $1,000–$2,000 |
| Attorney fees (Chapter 13) | $3,000–$4,500 (paid through plan) |
Some filers qualify for fee waivers or installment plans.
📆 How Long Does Bankruptcy Take?
- Chapter 7: 3 to 6 months
- Chapter 13: 3 to 5 years
Once filed, collection efforts stop immediately due to the automatic stay, including:
- Wage garnishment
- Lawsuits
- Foreclosure
- Harassing phone calls
📉 How Does Bankruptcy Affect My Credit?
- A Chapter 7 stays on your report for 10 years
- A Chapter 13 stays on for 7 years
You can still:
- Get credit cards after 6–12 months
- Get a car loan within 1–2 years
- Qualify for FHA mortgages in 2 years
With responsible rebuilding, your credit can recover faster than you think.
🇺🇸🗣️ ¿Habla Español? ¡Le Ayudamos!
En Servicios Legales Abogados Chicago, hablamos español. Si usted o un ser querido está considerando declararse en bancarrota, nuestro equipo le puede guiar paso a paso.
Entendemos lo difícil que es enfrentar deudas. Pero con la ayuda legal adecuada, puede encontrar una solución y empezar de nuevo.
⚖️ Bankruptcy vs. Debt Settlement
| Feature | Bankruptcy | Debt Settlement |
|---|---|---|
| Legal protection | Yes (court-supervised) | No (private negotiations) |
| Stops collections | Yes | No guarantee |
| Credit impact | Severe short-term | Moderate to severe |
| Cost to file | Fixed, may be waived | Negotiated with fees |
| Risk of being sued | No | Yes |
For many in serious debt, bankruptcy offers more protection and finality.
🛡️ Can I Be Denied Bankruptcy?
Yes, if:
- You filed recently and aren’t eligible
- You fail the means test (Chapter 7)
- You hide assets or commit fraud
- You fail to take the required credit counseling courses
But with a qualified attorney, most cases are approved without issue.
📌 Final Insights: Don’t Fear Bankruptcy — Use It Wisely
Bankruptcy in Illinois is not about giving up—it’s about reclaiming control.
If you’re behind on bills, dodging collectors, or facing lawsuits, bankruptcy might be the smartest path forward. It offers peace of mind, legal protection, and a clean slate.
Don’t go through it alone. Work with an experienced bankruptcy lawyer who understands Illinois-specific rules and can protect your rights from day one.
📞 Contact Us Today
At Servicios Legales Abogados Chicago, we help clients file for bankruptcy with confidence and dignity. Call now for a free consultation and learn whether Chapter 7 or Chapter 13 is right for you.
📍 Serving all of Illinois
📞 Hablamos Español
📢 Disclaimer
This article is for informational purposes only and is not legal advice. For help with your specific situation, contact a licensed bankruptcy attorney in Illinois.
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