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Do I Qualify for Bankruptcy?

Mundelein Bankruptcy Eligibility Lawyers

Chapter 7 and Chapter 13 Bankruptcy Lawyers in Lake County

If you are facing a mountain of debt and cannot see a way to pay it off, you might be thinking about filing for bankruptcy. Despite its reputation, bankruptcy can offer a path toward financial recovery and a fresh start. At Newland & Newland, LLP, we help clients determine whether bankruptcy is appropriate and which type will best suit their circumstances. The process starts with determining the chapter or chapters for which you might qualify.

Qualifying for Chapter 7 Bankruptcy

In 2005, the federal government made changes to the U.S. Bankruptcy Code, making it a little harder to qualify for bankruptcy under Chapter 7. The changes were meant to force those who could afford to repay their debts to do so rather than seeking protection through bankruptcy. Qualifying for Chapter 7 bankruptcy will require a "means test" if the debt in question is mostly consumer debt like credit cards, medical bills, and personal loans. If the bulk of your debt is business debt, you qualify for Chapter 7, regardless of your income, under the business debt exception. The means test begins with a comparison of your household income to the median income for households of the same size in Illinois. In the state of Illinois, the median income can vary from year to year, but for 2018-2019, the annual median income was:

  • $52,945 for a single person;
  • $69, 871 for a couple;
  • $81,199 for a three-person household; and
  • $96,252 for a family of four.

If your income is less than the Illinois median income, you qualify for Chapter 7. If your income exceeds the median income, the remaining portion of the means test is required to determine if you have enough income to pay at least some of your debts. Attorney Stephen S. Newland and his team will help you analyze your situation and determine if Chapter 7 is a reasonable possibility for your case. You will not qualify for Chapter 7 if you have filed for bankruptcy in the last eight years.

Eligibility for Chapter 13 Bankruptcy

Due to the nature of the proceedings, Chapter 13 bankruptcy has much different qualification rules than Chapter 7 has. In order to qualify for Chapter 13, you will need to show that you have sufficient income to be able to afford the plan for debt repayment that you develop and submit to the court. The court will not approve a reorganization plan unless you can demonstrate that you will make enough money.

Chapter 13 also maintains a debt limit that is adjusted every three years for inflation. The current limit for secured debt is $1,257,850, including mortgages, auto loans, equipment loans, and tax liens. The current limit for unsecured debt is $419,725. These limits became effective April 1, 2019, and are valid until March 31, 2022. If your debt exceeds these limits, you may have the option of filing for Chapter 11 bankruptcy instead of Chapter 13. It is important to speak with a qualified bankruptcy attorney before you make any decisions.

Call 847-549-0000 for a Free Phone Consultation

To learn more about qualifying for bankruptcy or to get started with your case, contact our office. Call 847-549-0000 for a free, no-obligation consultation at Newland & Newland, LLP today. Our firm serves individuals, families, and businesses in Libertyville, Waukegan, Vernon Hills, Mundelein, Lake Bluff, Grayslake, Arlington Heights, Lake County, and throughout Northern Illinois.

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