njp article - bankruptcy basics
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8/8/2019 NJP Article - Bankruptcy Basics
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ROBBINS, SALOMON & PATT, LTROBBINS, SALOMON & PATT, LTROBBINS, SALOMON & PATT, LT
Attorneys at Law Attorneys at Law Attorneys at Law
BANKRUPTCYBANKRUPTCYBANKRUPTCY
R|S|P
From the Desk of:
Nat Pomrenze(312) 456-0385
RSP CHICAGO5 East Washington Street
Suite 1000
Chicago, IL 60602
Tele. (312) 782-9000Fax (312) 782-6690
RSP GLENVIEW
2222 Chestnut AvenueSuite 101
Glenview IL 60026
Tele. (847) 729-7300
Fax (847) 729-7390
BANKRUPTCY BASICS
Under the United States Bankruptcy Code, you can be discharged from all or part of your debts if you can’t meet your financial obligations. Two types of personal bankruptcy apply to consumer debtors. Chapter 7 bankruptcy allows debtors to discharge all or part of their debts. Chapter 13 bankruptcy requires debtors to repay some of their debts through a court-approved payment plan.
Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, you can have all of your debts discharged after your “non-exempt”assets are used to repay some of that debt.
Definition of Assets
Most people have at least some liquid assets. These are assets that can easily be converted intocash, such as a bank account. Some liquid assets may be turned over to a court to be distributed toa creditor as a partial repayment of the debt you owe. Such assets are referred to as non-exemptassets. Exempt assets are assets that the law protects against being used to repay creditors. Theexemption laws of each state dictate which liquid assets are exempt from the reach of creditors.
After any non-exempt liquid assets have been paid out to creditors, any remaining debt is dis-charged. The debtor is no longer liable for those debts. As a result, neither creditors nor third- party collection agencies may try to collect those debts from you.
Qualifying for a Chapter 7 Bankruptcy
To qualify for a Chapter 7 bankruptcy, a debtor needs to pass a “means test” showing that his or her income is less than the median income for a comparable family in the area. If the debtor failsthe means test, he or she cannot file a Chapter 7 bankruptcy. Instead, the debtor will have to fileunder Chapter 13. In addition to passing a means test, the debtor has to receive credit counselingfrom an approved credit counseling agency.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, a debtor repays all or part of his or her debts as part of a 3- to 5-year repayment plan. After the bankruptcy petition is filed, the debtor submits a repayment plan to thecourt for approval. Once the plan is submitted the debtor will begin making payments to the trus-tee assigned to administer the case. The creditors are then paid through the trustee.
A court hearing is required for approval of the plan. Once the plan is approved, the debtor contin-ues to make payments to the trustee. When the Chapter 13 payment plan is completed, any re-maining debts are discharged and the debtor will no longer be liable.
© 2010, Nat. Pomrenze
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BANKRUPTCY BASICS— Continued
A person may want to file under Chapter 13 instead of Chapter 7 if he or she has property with se-cured debt that he desires to keep, such as a home or an automobile. Because a Chapter 7 bankruptcycould require you to give up those kinds of assets, a Chapter 13 might be a better way to go. Another reason to file a Chapter 13 bankruptcy is if your gross income is higher than the median for a similar family in your local area; under those circumstances you might not be allowed to proceed with aChapter 7 bankruptcy. Finally, among other requirements, a debtor wishing to file a Chapter 13 bank-ruptcy may not have more than $1,010,650 in secured debt and $336,900 in unsecured debt.
Just as in a Chapter 7 bankruptcy, the debtor has to first receive credit counseling from an approvedcredit counseling agency.
Conclusion
Since personal bankruptcy laws are complicated and confusing, it is wise for a person to consult withan attorney before filing. He or she will then know that their paperwork has been prepared and filedcorrectly and in accordance with the law.
Nathaniel Pomrenze is an attorney whose practice concentrates in personal and business bankruptcylaw. He can be reached at (312) 456-0385 and at [email protected].
R|S|P ROBBINS, SALOMON & PATT, LTDROBBINS, SALOMON & PATT, LTDROBBINS, SALOMON & PATT, LTD Attorneys at Law Attorneys at Law Attorneys at Law
BANKRUPTCYBANKRUPTCYBANKRUPTCY