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Debt Collectors and Bankruptcy in Illinois

Posted on in Bankruptcy

Bankruptcy can be an effective way to discharge debt and get back on your feet, no matter the specifics of your personal finances. One of the most common misconceptions about bankruptcy, according to The CPA Journal, is that a person must be completely broke to file. “With limited exceptions,” the CPA Journal reports, “the only requirement to file for bankruptcy is that the debtor cannot pay bills as they come due.”

There are two types of bankruptcy that a person can file for to “get a fresh start,” according to the U.S. Bankruptcy Court. Chapter 7 bankruptcy provides for liquidation, which means that a debtor's property will be sold to pay off creditors. A Chapter 11 bankruptcy provides for debt reorganization, which means that a person's debts will be reconfigured so that the debtor can handle the monthly payment.

In Illinois, according to the Illinois Attorney General, “claims that aren't paid through liquidation are discharged,” and “in reorganization cases, the court approves a repayment plan that provides for partial payment of debt over time.” Both of these give debtors protection from creditors. According to the Illinois Attorney General, protections from creditors include (but are not limited to):

  • That new lawsuits may not be filed;
  • Pending lawsuits are usually discharged;
  • Creditors must stop attempting to collect.

The CPA Journal states that no matter which type of personal bankruptcy you file, it is not true that you will never qualify for credit in the future. “The fact than an individual files for bankruptcy will,” however, “appear on an individual's credit report for up to 10 years,” Perhaps surprisingly, the CPA Journal reports that a person who has recently filed for bankruptcy may actually receive several new credit card offers. This is because he will not be eligible to receive a Chapter 7 discharge for at least the next six years—making him less of a risk, in some cases, than someone who could file for bankruptcy the next day.

If you or someone you know is considering bankruptcy in northern Illinois, the most important step is to seek counsel of a bankruptcy attorney. Contact Newland & Newland, LLP today.

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