Chapter 7 Bankruptcy

Also known as “total bankruptcy” or “liquidation bankruptcy”, Chapter 7 of the Bankruptcy Code allows consumers to erase unsecured debts such as credit cards, payday loans, and medical bills.

Get rid of all of your unsecured debt such as credit card bills, payday loans, medical bills, utility bills, and judgments ! Get a fresh start, and start to REBUILD your CREDIT!

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is a Federal law that offers consumer debtors seeking financial relief two alternatives: Chapter 7 or Chapter 13. In a Chapter 7, most debts are discharged, however certain assets may not be protected and may be liquidated to pay creditors. Filing under Chapter 7 is a very valuable right and can be used every 8 years if necessary.

At Kaplan Law Firm, LLC an attorney will review the value of your home, car and other possessions to determine whether they can be protected under our state exemption statutes to insure that Chapter 7 will get rid of your bills and that you will not lose any of your possessions. In Illinois, the following property may be claimed as exempt and can be protected:

Exemption Schedule

Each Debtor exempts from the property of the estates, pursuant to the State Exemption, Illinois Compiled Statutes, Chapter 735, the following property, although it should be noted that each debtor may not have property, or equity in property, sufficient to exhaust the following allowable State Exemptions:

a. Residence or homestead of individual, includes farm lot & buildings, condominiums, personal property or cooperative. Can be owned or leased.

(includes proceeds of Sale for 1 yr: 5/12-906)

b. Necessary wearing apparel, Bible, school book family pictures and prescribed health aids of debtor & dependents


c. Any personal property of debtor


d. One motor vehicle


e. Implements, books, and tools of trade


f. Proceeds and cash value of life insurance policies and annuity contracts payable to dependents of insured.


g. Social Security benefits, unemployment compensation benefits, public assistance benefits, Veteran’s benefits and disability and illness benefits.


h. Alimony, support or separate maintenance

Amount reasonably necessary to support debtor and dependents

i. Pension and retirement benefits


j. Crime victim’s reparation law awards


k. Wrongful death payments resulting from death of person of whom debtor was dependent

Amount reasonably necessary to support debtor and dependents

l.. Life insurance payments from policy insuring person of whom debtor was a dependent

Amount reasonably necessary to support debtor and dependents

m. Payments on account of bodily injury of debtor or person of whom debtor was a dependent


If a Chapter 7 is filed jointly by a husband and wife, the exemptions can be doubled. Under Chapter 7, eligible debtors may discharge their debts and gain a fresh start. All debts, however, are not dischargeable. Some obligations that are not dischargeable under Chapter 7 include:

  • State and Federal income taxes due within the last 3 years
  • Fines and penalties arising out of criminal acts, parking tickets and traffic offenses
  • Child support, alimony and property settlement
  • Debts arising from willful and malicious acts
  • Debts incurred by fraud or under false pretenses
  • Student loans
  • Drunk driving judgements

Under the new Bankruptcy Act of 2005, many of these debts are also not dischargeable under Chapter 13 unless paid in full. In a Chapter 7 some installment sellers can demand the return of their collateral such as cars, furniture, t.v.’s, stereo equipment, and appliances. Once the property is returned, however, the debt does not have to be paid. If the debtor is able to raise the actual value of the secured item in cash, the debtor may retain possession, this is called redemption.

If cash cannot be raised and the debtor wishes to keep the secured collateral, an arrangement can generally be made to pay the secured creditor in installments. This is called a reaffirmation. Once the reaffirmation is signed and filed with the court the obligation will in effect be renewed and be enforceable as if the Chapter 7 was never filed.

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