Here are answers to some frequently asked questions about bankruptcies:

What is bankruptcy, exactly? 

At Schaeffer & Lamere, we handle Chapter 7 bankruptcy cases, which are designed to wipe away debts and give consumers a fresh start.  Most of our bankruptcy petitions are filed at the federal bankruptcy court in St. Clair County.  Madison County does not have a bankruptcy court.

What is the difference between a Chapter 7 and  a Chapter 13 bankruptcy? 

To put it most simply, Chapter 7 wipes away most debts for good, whereas a Chapter 13 requires repayment of some debts over time.  Sometimes people choose a Chapter 13 filing if they are behind in their home or car payments, because a Chapter 13 filing may allow them to prevent foreclosure.  A Chapter 13 may also allow you to keep more property than a Chapter 7 would.

When your property is not threatened, a Chapter 7 filing is usually the better (and cheaper) alternative. 

 All of the following answers apply only to Chapter 7 bankruptcies filed in Illinois. 

Will bankruptcy stop garnishments and harassing phone calls?

After filing your papers in court, all harassment will come to an immediate and abrupt halt.  This is because a bankruptcy filing causes an "automatic stay," which prohibits creditors from taking any action to collect debts while the bankruptcy case is pending, unless the Court grants relief from the stay.

What can I keep?  What about my house, my car and my retirement plan? 

Generally speaking, bankruptcy is not designed to cause you to lose your property or put you out on the street.  Rather, it's designed to give you a "fresh start."  In a Chapter 7 bankruptcy, you are allowed to keep property listed as an exemption by Illinois.  Examples include:

* Equity in your home.  In Illinois, an individual can exempt up to $7,500 of home equity.  For a couple filing jointly, the exemption doubles to $15,000.

* Retirement plans. Most retirement plans are totally exempt.

* Automobiles.  Each individual is allowed an exemption of $1200 for the equity in one automobile.  When a married couple files jointly, they each get this exemption.  If you have more vehicles, there may be ways to keep them.

* Other personal property. Most of our clients have been able to keep all of their personal property and household goods.  We will tell you in advance if it appears that you have property that might have to be sold, so that you can properly consider the consequences.

The issue of exemptions is complicated and has a lot to do with your personal situation.  This is why we will be able to better answer these questions face-to-face after we discuss your finances.

Go to Page 2 of bankruptcy FAQ