Losing a job or getting stuck with unexpected medical bills can upend a financial plan without warning. As the debt adds up and your savings dwindle, the situation quickly gets overwhelming, especially if the bank is trying to foreclose on your home.
If you’re in this position, you’ve probably considered hiring a Chicago Chapter 7 lawyer to help you file for bankruptcy.
While bankruptcy will erase most of your debt, the process can be expensive and you might lose your personal property. Fortunately, there are alternatives.
If you’ve been threatened with foreclosure, Vantage Group Legal can connect you with a Chicago Chapter 7 lawyer through our network of dedicated attorneys.
What Is Chapter 7 Bankruptcy?
Chapter 7 is a type of bankruptcy under Title 11, Chapter 7 of the U.S. Code that allows a person to discharge nearly all of their unsecured debt. Ordinarily, a debtor is liable for the full amount they owe to a creditor.
However, if a debtor is unable to pay, filing for bankruptcy allows that debtor to pay as much as they can and then start fresh, even if some creditors remain unpaid.
After filing, a debtor turns over most of their property to a bankruptcy estate. A bankruptcy trustee then sells that property to pay off creditors according to certain priority rules.
Fortunately, Chapter 7 debtors don’t have to turn over all their property to a bankruptcy estate. The Bankruptcy Code allows debtors to retain certain exempt property, including homes, vehicles, and personal belongings.
These exemptions are subject to certain limits, so it’s important to hire a Chicago Chapter 7 lawyer. They can help you use the categories of exempt property to effectively save your most important belongings.
While it is the most common, Chapter 7 is also just one of several bankruptcy options available. Businesses and individuals often use Chapter 11 and Chapter 13 as well because each offers a different approach to reorganizing or adjusting debt.
One type may work better than another depending on the situation. For most individual debtors, Chapter 7 will be the most appropriate. Hiring a Chicago Chapter 7 lawyer to evaluate your circumstances will help you decide if another chapter is better for you.
Secured vs. Unsecured Debt
When you receive a loan, lenders may require you to provide one of your assets, called collateral, as a way to “back up” your promise to repay the loan. If you default, creditors have the right to repossess the collateral and sell it to recover your unpaid debt.
In that situation, the debt is “secured” because it is linked with collateral. Mortgages are one of the most common kinds of secured debt; the bank retains a legal interest in your home in exchange for the loan used to finance the home’s purchase.
Unsecured debt, on the other hand, is debt for which there is no collateral. One common example is the balance on a credit card. Although the holder is liable for defaulting on credit card payments, no collateral secures that debt. As a result, the credit card company can only try to collect the debt directly.
Benefits and Drawbacks of Filing Chapter 7 Bankruptcy
Even though Chapter 7 does not discharge secured debt, bankruptcy offers much needed relief from the obligation to pay off credit card bills, medical bills, and other unsecured debt. In addition, Chapter 7 debtors have the opportunity to rebuild their credit and start over with their finances.
However, Chapter 7 has some drawbacks debtors should consider. For one, Chapter 7 bankruptcy may not be available to all debtors who could benefit from it. Debtors seeking to file Chapter 7 must pass the means test, which will determine whether a person has enough money to pay off their debts and is therefore ineligible for bankruptcy.
Unfortunately, many debtors who fail the means test still struggle to pay off their debts. If that’s the case, the debtor will have to look elsewhere for relief. Additionally, Chapter 7 does not discharge all unsecured debt.
Debtors still owe unsecured tax debts and child support or alimony even after filing for bankruptcy. Debtors with a large amount of these kinds of debts will find Chapter 7 much less beneficial.
Ultimately, whether the relief provided by Chapter 7 will benefit you depends on your unique circumstances. A Chicago Chapter 7 lawyer can guide you through the process and provide details on how bankruptcy could benefit you.
Do I Need to File for Bankruptcy?
For many debtors, the threat of foreclosure is the primary motivator behind filing for bankruptcy. Many clients ask whether they need to file for bankruptcy to avoid losing their home. Fortunately, the answer is no.
Bankruptcy is a last resort that can unnecessarily complicate matters. Instead, you may be able to delay foreclosure through a lawsuit. Our dedicated network of Chicago foreclosure attorneys can help you explore options to avoid losing your home without the need to file bankruptcy.
Foreclosure Defense as an Alternative to Bankruptcy
Illness, unemployment, or other debt are all reasons why you might default on your mortgage payments. When this happens, the prospect of losing your home to foreclosure seems all too real. As a result, debtors frequently turn to bankruptcy as a known solution to debt issues.
However, the reality is that with the right attorney, foreclosure can be handled in a way that gives you time to reorganize your finances without filing for Chapter 7.
After you receive a notice of foreclosure, the first thing you should do is hire a Chicago foreclosure lawyer to assess your situation. Vantage Group Legal provides a network of dedicated foreclosure attorneys and will find the best one to handle your particular case. Your attorney will then help you respond to the foreclosure notice.
In Illinois, foreclosure lawsuits operate much like other cases. After receiving a foreclosure notice, you have 30 days to respond. Failing to answer allows the lender to file for a default judgment, which is an automatic win for the lender.
In your answer, you have the opportunity to present an affirmative defense and engage in discovery to support your case. Doing so allows your attorneys to stall your foreclosure for months or years while you tame your other debt.
Through foreclosure defense, you can regain some control. Rather than letting the bank or mortgage lender evict you and repossess your home, you can manage the sale of your property or even reinstate the mortgage by paying off the amount owed. Vantage Group Legal will find the right Chicago foreclosure lawyer for you to mount your best foreclosure defense.
Hire a Chicago Chapter 7 Lawyer
At Vantage Group Legal, we provide a network of dedicated attorneys and support staff at an affordable price.
If you’re concerned about filing for bankruptcy, or if you’re worried about losing your home to foreclosure, we can help find an experienced Chicago Chapter 7 attorney or foreclosure attorney that’s best for your case.
Contact us today or give us a call at 773-938-474 for a free case review.