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If you’re at the point where you’re having a difficult time making ends meet, there are options to get financial relief and at the same time not ruin your credit. Federal bankruptcy laws were designed to help those in financial straits manage or eliminate debt.

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Don’t Hesitate Filing for Bankruptcy

No matter what the reason is that you are financially challenged, know that you’re not alone. Many people file for bankruptcy every year and, in fact, Illinois ranks as one of the top five states for filings.

Whether you lost your job, found yourself with reduced hours or you were injured and now have mounting medical bills, our attorneys will review your situation, help you understand the bankruptcy filing options available and if you decide to move forward, our firm will help facilitate the process.

Personal Bankruptcy Filings Chapter 7 And Chapter 13

The two most common programs consumers can use to reduce or eliminate debt are Chapter 7 and Chapter 13 bankruptcy.

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Chapter 7 bankruptcy or liquidation bankruptcy includes selling your property to pay off debts. Most cases fall under this type of bankruptcy and they are typically for those people who have limited income and therefore unable to pay back all or some portion of their debts. This type of filing can be completed quickly and is the least expensive option and reserved for those who meet the means ratio for income (meaning lower income).

Chapter 7 bankruptcy will stay on your credit report for 10 years but filers often experience a shorter amount of time to get their credit rating to “good” — which can open doors to some lending options. Chapter 7 requires a two year wait period after discharge for a mortgage loan.

Chapter 13 bankruptcy or reorganization bankruptcy does not require the selling of your property but rather you must successfully complete a court-mandated repayment plan including paying creditors a portion of outstanding debt over a fixed period of time. Any unsecured debt or debt not associated with physical property may be discharged, meaning you will not be required to pay it back. The amount required to payback is determined by your income as well as the payback period depending on whether your income is below or above the median.

While chapter 13 is more expensive due to repaying creditors, you will retain your assets and you can also re-negotiate terms of your loan(s) (for example, reduced interest rates on your home or car loan). Chapter 13 can also be leveraged to re-amortize payments and/or remove voluntary liens. Chapter 13 stays on your credit record for seven years but you only need to wait one year after payments start before getting a mortgage loan vs two years with chapter 7.

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Automatic Stay Protects Your Assets

Filing for bankruptcy doesn’t stop a lender, at some point, from foreclosing on your home or repossessing your car but it can temporarily stop both action and it doesn’t matter which chapter you file under. When you file for bankruptcy, a court-ordered injunction, called automatic stay, will stop most creditors from continuing collection activities including repossessing your car and foreclosing on your home.

On the flipside, lenders can also file a motion for relief to lift the automatic stay and therefore allow them to continue with the foreclosure process even while your bankruptcy case is live.

Wipe Out Unsecured Debt

One advantage for filing chapter 13 bankruptcy is you have the benefit of Lien Stripping. Lien Stripping allows you to wipe out junior liens on your home if they are wholly unsecured. A junior lien is anything other than your first mortgage (equity loan, second mortgage, etc). If your first mortgage is greater than the equity in your home, then there’s nothing left to cover second or even third mortgages. It’s important to reiterate that Lien Stripping is only available if you file chapter 13 bankruptcy.

Free Confidential Bankruptcy Consultation

Take the first step and talk to one of our debt relief lawyers about your specific situation. We offer confidential and free bankruptcy consultation.

Call Today – Get a Fresh Start

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