How Will Bankruptcy Affect My Life?

Joliet Lawyer Explains the Impact of Filing for Bankruptcy

Filing for bankruptcy is a major step that should be given serious thought and consideration. The purpose of bankruptcy is to allow those facing hard financial times to eliminate or consolidate debt. At the end of the process, you will have fewer outstanding creditors, and you will have the opportunity to re-establish your credit by showing future lenders that you are now creditworthy.

Individual Bankruptcy Options

The specific effect bankruptcy has on your life depends largely on the type of bankruptcy you file. The two main bankruptcy options for consumers are Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7 is a straight bankruptcy that eliminates most of your unsecured debts. This option is best for those with a high amount of unsecured debt such as credit cards, personal unsecured loans, payday loans, most wage garnishments, a low income, and few assets. After your Chapter 7 bankruptcy is discharged, you will be forgiven of most unsecured debt, giving you a fresh start and a new lease on your financial life.

Chapter 7 bankruptcy does not eliminate every type of unsecured debt. Student loans, child support payments, and most federal and state income tax debts cannot be discharged through this process. In addition, Chapter 7 will not help you avoid a home foreclosure or auto repossession. You may be able to delay these processes, but secured creditors still have the right to repossess your property if you fall too far behind on your payments.

Chapter 13 Bankruptcy

Chapter 13 is a court-approved debt consolidation plan that allows you to repay your debts in three to five years. Debts are consolidated into a lower, more manageable payment, and they can often be repaid at a lower interest rate and at less than 100% of what is owed. To qualify for Chapter 13, debtors must have some form of income, so they are able to make the required monthly payments.

Assuming the debtor makes the monthly payments as agreed, the end result of the Chapter 13 process is being debt-free in a relatively short period of time. This type of bankruptcy also allows debtors to avoid a home foreclosure by paying the amount you are behind on your mortgage through the debt repayment plan and resuming monthly mortgage payments.

Bankruptcy and your Credit Report

Many individuals are concerned about filing for bankruptcy because of how it might affect their credit. While it is true that bankruptcy will likely lower your credit score in the short-term, it can actually be beneficial for your credit in the long-run. The reason is that if you are considering bankruptcy, your credit has probably already been damaged by late payments and other derogatory information.

If you remain in your current situation, your creditworthiness will continue to decline. By filing for bankruptcy, you can essentially "stop the bleeding" and end the cycle of late payments and delinquencies. After the process is over, you will have a fresh start and can begin rebuilding your credit. We will consult with you and provide guidance on how to best re-establish your credit once your current situation is under control.

Speak With a Skilled LaSalle County Bankruptcy Attorney

Bankruptcy can positively impact your life. At Scheinbaum & West, LLC, our single area of focus is bankruptcy. For a free consultation with a seasoned attorney, contact our office today at 815-729-9860.

We represent clients for Chapter 7 and Chapter 13 bankruptcy in Joliet, Will County, Bolingbrook, Plainfield, Naperville, Cresthill, Lockport, Homer Glen, Mokena, Ottawa, LaSalle County, and surrounding Illinois communities.