Nothing makes you feel more alone than realizing you are in deep financial trouble and can’t find your way out. What was once a stream of small debts has turned into a raging river of large debts, and you’re trying to row your way to financial safety without a paddle.
No matter how much it may feel like it, you are most certainly not alone. In fact, more than 31,000 Illinoisans found themselves in the same boat as you in 2020, and they chose bankruptcy as the paddle they needed to get back to shore.
You can do what they did. You can file bankruptcy to start rebuilding your life. Bankruptcy is a financial fresh start — not a failure. In this post, we discuss how to file bankruptcy in Illinois so you can make the right financial decision for yourself and your family. To learn more, keep reading or contact A Bankruptcy Law Firm, LLC.
Types of Bankruptcy in Illinois
In Illinois, you can file several types of bankruptcy. These types include Chapter 7, Chapter 9, Chapter 13, Chapter 11, and Chapter 12, as well as Subchapter V. However, the two types of bankruptcy most common for individuals are Chapter 7 and Chapter 13. Those are the types of Illinois bankruptcies we will discuss in this article.
Illinois Chapter 7 Bankruptcies
Also called a liquidation plan, a Chapter 7 bankruptcy allows you to liquidate most of your assets to pay as much of your debt as possible. Any qualifying debts you have left after the liquidation and repayment process are discharged, and you get a financial reset.
Illinois Chapter 7 bankruptcies tend to be relatively quick. The process usually takes no more than a few months from start to finish. This option is often ideal for people who need debt relief quickly and don’t own a lot of high-value assets.
Illinois Chapter 13 Bankruptcies
Chapter 13 bankruptcy is sometimes called a wage-earner’s plan. That’s because you develop a debt repayment plan based on your income. This plan, which lasts three to five years, covers some of your debts, and whatever is left over is discharged at the end. In other words, Illinois Chapter 13 bankruptcies can take three to five years, but they let you keep your assets.
What Bankruptcy Can Do
At A Bankruptcy Law Firm, LLC, we’re big fans of bankruptcy. We have seen this process work wonders for countless Illinois families, and we believe it is an excellent financial move for many people who are in debt. Here’s what bankruptcy can do for you:
- Stop collection actions and harassment from creditors
- Stop wage garnishment
- Halt repossessions and foreclosures
- Put an end to utility shut-offs due to non-payment
- Get your driver’s license reinstated if it was suspended because of a debt
- Clear your qualifying debts and set you up for a brighter financial future
What Bankruptcy Cannot Do
Those are some wonderful benefits of bankruptcy, but it’s important to understand that, while bankruptcy can feel like a miraculous intervention in your finances, it is not actually a miracle. Bankruptcy can’t do everything or protect you from every kind of financial stress. Here are some of the things bankruptcy cannot always do:
- Allow you to keep all of your property while clearing all of your debts
- Erase your student loans (in most cases)
- End child support or spousal support obligations
- Clear your tax debt (in most cases)
- Prevent financial harms to those who have co-signed on a loan with you
- Stop an active eviction order filed before you filed bankruptcy
Passing the IL Bankruptcy Means Test
Illinois Chapter 7 bankruptcies come with a test. It’s called the means test. This test determines whether you are eligible to file Chapter 7 bankruptcy in Illinois. Here’s how it works: You factor in your annual income and the size of your household; if that income is higher than the median household income for households of your size in Illinois, you fail the means test.
The following are the Chapter 7 income limits for Illinois households as of August 2021:
- One person: $57,983
- Two people: $76,602
- Three people: $91,581
- Four people: $107,226
- Five or more people: Add $9,000 for each household member exceeding four
You probably just did the math in your head. If you passed, that’s great — you likely qualify for Chapter 7 bankruptcy in Illinois. If you failed, you still have another chance. Even if your income exceeds the limit, you can still qualify to file Chapter 7 bankruptcy if your reasonable monthly expenses leave you with too little to pay into a Chapter 13 repayment plan.
Illinois Bankruptcy Court District Requirements
Knowing how to file bankruptcy in Illinois is important, but so is knowing where to file bankruptcy in Illinois. Illinois is divided into three bankruptcy court districts:
You will need to file your bankruptcy documents with one of these three districts, depending on where you live in Illinois. Also, your 341 meeting (covered later in this article) will take place at a court within your district’s coverage area.
Northern District of Illinois
The Northern District of Illinois has courthouses in Chicago, Rockford, Joliet, Park City, and Geneva. This district is split into two divisions, one of which will handle your bankruptcy case. Which division you fall into is determined by which county you live in.
Southern District of Illinois
The Southern District of Illinois is split into three divisions over 38 Southern Illinois counties, but the courts that handle bankruptcies are in Benton and East St. Louis.
Central District of Illinois
Nearly half of all Illinois counties fall into the coverage area of the Central District of Illinois. This large district is split into three divisions — one in Springfield, one in Urbana, and one in Peoria. This district provides a handy map to help you determine the division where you will need to file your bankruptcy documents.
Steps to Filing Bankruptcy in Illinois
Approaching the bankruptcy process as one large task is an almost direct route to failure or feeling overwhelmed. There are so many moving parts to Illinois bankruptcies, and it’s helpful to break those parts down into individual steps. That’s exactly what we’ve done below.
1. Collect Your Bankruptcy-Related Documents
Getting organized right at the beginning of the process is the most efficient and stress-free way to file bankruptcy in Illinois. To get organized, you need to gather all of the documents, forms, and information you will need.
Here are some of the most important documents and pieces of information you will need:
- Tax returns for the past two years
- Pay stubs for at least the past two months but preferably the last six months
- Your credit report
- Bank statements
- Vehicle titles
- Copies of bills you have gotten in the past few months
- Your Social Security number and home address
- A list of valuable assets like homes, vehicles, and investment accounts
The bankruptcy forms you will need will depend on which type of bankruptcy you are filing. A qualified Illinois bankruptcy lawyer can help you understand all of the forms you will need.
2. Seek Credit Counseling
At some point in the six months leading up to your Illinois bankruptcy filing, you will need to take an approved credit counseling course. If you don’t take this course or let six months pass between the course and your filing date, you will be unable to file bankruptcy.
To find a list of approved Illinois credit counseling courses, many of which are online, click here.
3. Get Your Bankruptcy Filing Fee Together
To file Chapter 7 bankruptcy in Illinois, you will have to pay a $338 filing fee. However, if you are unable to pay this fee and you are below a certain income threshold, the court may waive the fee.
To file Chapter 13 bankruptcy in Illinois, you will have to pay $313. Because Chapter 13 bankruptcy operates on the concept that you earn an income and will be able to make payments to creditors, you can’t get a fee waiver for Chapter 13. However, you can sometimes convince the court to allow you to pay the fee in installments.
4. Print, Fill Out, and File Your Forms
Once you have made sure you will be able to pay the filing fee (or confirmed that you can have it waived), it’s time to print out and complete your forms. Every possible form you could need for bankruptcy in Illinois is available online.
This is often the trickiest step in the Illinois bankruptcy process. These forms ask for a lot of information, and mistakes could lead to debts being left out when you get your bankruptcy discharge or even make it so you don’t qualify for bankruptcy at all. This is why many Illinoisans work with a bankruptcy law firm that can fill out the forms for them perfectly.
After the forms are filled out, you have to file them with the proper bankruptcy court in your district.
5. Send Your Tax Return to Your Trustee
The court will assign a bankruptcy trustee to you after you file your forms. They will oversee your case and attend your meetings with creditors. They will need to verify the information in your bankruptcy petition, and to do that, they will need the tax return you most recently filed. You can mail your return to your trustee.
Each trustee has their own process for verifying information in bankruptcy cases, so don’t be surprised if your trustee reaches out to request additional information or documents.
6. Take Another Bankruptcy Course
You already took a course on credit counseling at this point, but your bankruptcy-related education is not over. You have to take a second course before your debts can be discharged. This one focuses on debtor education. Keep in mind that not all of the approved credit counseling providers are approved to give this second course. You can see a list of approved providers in Illinois here.
Once you have completed the course, you will need to let the court know by filing this form.
7. Attend Your 341 Meeting
Roughly a month after you file, you will have to attend your 341 meeting, also known as the meeting of creditors. You will have to go to a court for this meeting, but you will not necessarily be in a courtroom. Here, your trustee and creditors who would like to attend can confirm details of your case or repayment plan and ask questions.
You have to go to the 341 meeting, but keep in mind that most of these meetings only take a half hour or less. And in many cases, no creditors will show up. You can also make this step less stressful by hiring a bankruptcy lawyer who can go with you and field all of the questions.
8. Get Your Debts Discharged
The only step left after the 341 meeting is to wind up the obligations of your bankruptcy plan — whether it’s a repayment plan in Chapter 13 or a simple liquidation and funds disbursement in Chapter 7 — and get your remaining debts discharged.
Illinois Bankruptcy FAQ
Learning how to file bankruptcy in Illinois is not easy. Outside of the basic steps of the process, you will likely have many questions about smaller aspects and details of bankruptcy. In the FAQ below, we answer some common questions about those details. To get the answers to all of your questions, reach out to our bankruptcy firm.
Do I Have to File Bankruptcy with My Spouse in Illinois?
You do not have to file bankruptcy with your spouse in Illinois, but keep in mind that the protection that comes with bankruptcy often extends only to the person who is filing. A lot of details and factors can determine whether filing without your spouse is a good idea, so it’s best to speak with a lawyer.
Will I Lose My Home in an Illinois Bankruptcy?
Most of the time, you do not have to lose your home in an Illinois bankruptcy. However, this will depend on whether the property is exempt and whether you make the proper payments. Your attorney can help you build a strategy to keep your home during bankruptcy if at all possible.
What Are the Illinois Bankruptcy Exemptions?
Exemptions allow you to exclude certain assets from your bankruptcy so you can keep them. In Illinois, you are subject to a state-specific set of Chapter 7 bankruptcy exemptions and cannot use the federal exemptions. Illinois bankruptcy exemptions include the following, among others:
- Up to $15,000 of equity in your home
- Up to $4,000 in a “wildcard” exemption to be used on most non-exempt property
- Up to $2,400 of equity in your vehicle
There are other exemptions, and these amounts sometimes change over time. Your lawyer can help you understand which exemptions you can use in your case.
Speak with an Illinois Bankruptcy Lawyer
Anyone who says filing bankruptcy in Illinois is easy is being dishonest, but so is anyone who says it’s impossible. It is possible, and the right Illinois bankruptcy attorney can make the process as smooth, pain-free, and financially beneficial as possible.
That’s our goal at A Bankruptcy Law Firm, LLC. We want to empower you to take back control of your finances, and bankruptcy is often the first step in that process. We can help. Ready to learn more? Give us a call at (800) 7-BENSON or contact our law firm online.