The Basics Of Consumer Bankruptcy

It is usually exceptionally tough for a person that has been affected by personal debt and overdue bills to reach the understanding that they might be in a financial predicament that is not going to simply fix itself. Though this sort of scenario can seem to be close to hopeless, there is a way out that the legal system allows for to help most people get out from underneath the impediment of overwhelming consumer debt. In my Chicago bankruptcy practice, I help individuals to find out whether or not the decision to file for bankruptcy is proper with respect to their specific circumstances.

Lots of people believe that changes to the bankruptcy law that were handed down in 2005 made it pretty much impossible for people to meet the criteria for debt relief through consumer bankruptcy. Even though the 2005 law, the Bankruptcy Abuse Prevention and Consumer Protection Act or BAPCPA, makes it more complex, the reality is that most consumers who need to file for consumer bankruptcy can still do so.

So exactly what is bankruptcy? Generally speaking, bankruptcy is a legal proceeding that permits individuals with more debt than they're able to repay to start over - in financial terms. This is the reason why bankruptcy is known as a "fresh financial start." Once you file for bankruptcy, lenders have to immediately stop attempting to recover the debts that you owe. Based on what bankruptcy chapter someone files under, the majority of unsecured debt can be cleared - removing the legal responsibility to repay them. Unsecured debts are the type without any collateral, for instance credit cards. Secured debts, such as auto loans and home mortgages, must be repaid if the person wishes to maintain the property. However should they be behind on monthly payments, filing for bankruptcy will be able to prevent a repossession or foreclosure by making it possible for the past due amount to be paid back gradually while the regular payments continue.

While there are different local rules and state laws that come into play in bankruptcy proceedings, the key source of bankruptcy law is Title 11 of the U.S. Code. As bankruptcy is federal law, bankruptcy cases are filed in the federal court for the district in which the debtor lives. For example, since I'm a Chicago bankruptcy attorney serving Chicago area people, my clients' bankruptcies are filed in the United States Bankruptcy Court for the Northern District of Illinois.

You will find four different varieties of bankruptcy cases under Title 11: Chapter 7, Chapter 11, Chapter 12, and Chapter 13. Of these 4, Chapter 7 and Chapter 13 are the most typical and most beneficial to individuals. Chapter 7 is called straight bankruptcy or a liquidation and requires people to give up property to pay off their creditors. Due to the many state and federal exemptions that provide protection to certain property from liquidation, almost all people who declare Chapter 7 bankruptcy never lose any property at all.

Chapter 13 is known as a reorganization. Chapter 13 permits families to pay back all or some portion of their debt over time by means of future earnings. No property is liquidated under a Chapter 13.

While this overview provides a basic overview, it's not legal advice. Consumer bankruptcy law is complicated and individuals contemplating bankruptcy really should consult with legal counsel within their jurisdiction. Should you reside in Illinois and are seeking a Chicago Bankruptcy Attorney, remember to consider The Law Office of John C. Kunes, P.C.