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Living beyond your means may result in financial hardship. It may be stressful as a consumer to face a mountain of phone calls, letters, creditor harassment, debt collection lawsuits, and the prospect of wage garnishment or foreclosure. Federal law allows debtors to get a fresh start by taking advantage of bankruptcy laws. If you are interested in filing for Chapter 7 or Chapter 13 bankruptcy, you should retain a Chicago bankruptcy attorney. This process requires attention to detail. A failure to follow the many rules involved may result in your not obtaining the discharge of debts that you need.

There are two types of bankruptcy that individuals commonly file: Chapter 7 and Chapter 13. Both are filed under the federal bankruptcy statutes. When you file either type of bankruptcy, an automatic stay goes into effect. The stay stops most of your creditors from trying to collect debts and conduct collection activities, at least for a certain period. Creditors may ask the court to lift the stay. For people who are facing foreclosure, eviction, or the loss of utilities, an automatic stay may be a sound reason to file for bankruptcy.

Generally, however, you should only file for bankruptcy after giving it serious consideration and consulting with an attorney. Sometimes there are better solutions to the problem of creditor harassment. For example, if you have just a couple of big bills, you may be able to negotiate an individualized payment plan with creditors.

An experienced bankruptcy attorney can evaluate your financial circumstances and tell you whether Chapter 7 or Chapter 13 is a better option. This determination is based in part on the means test, which looks at whether you have the financial ability to pay off your debts or not. It was designed to restrict the use of Chapter 7 bankruptcy to people who are unable to pay their debts. The means test deducts certain monthly expenses from your average income over the six months prior to filing to get a figure that represents your disposable income. If your disposable income is high, you will not be able to use Chapter 7 bankruptcy and will need to file Chapter 13 bankruptcy.

Chapter 7 bankruptcy is also known as liquidation bankruptcy, and it is what most people have in mind when they think of bankruptcy. In this type of bankruptcy, your nonexempt property is sold and used to pay as much of your debt back as possible. You may keep the property that is "exempt," as well as property that the trustee decides to abandon. When the trustee is finished paying creditors’ claims to the extent possible, your remaining consumer debts will be discharged, and you will obtain a fresh start.

Chapter 13 bankruptcy reorganizes your debt. With this type of bankruptcy, you create a debt repayment plan and try to pay off as much of your debt as possible over a 3-5 year period. When you complete your debt repayment plan, you will be able to get the remainder of your dischargeable debts discharged by the court and obtain a fresh start.

There may be many sound reasons to file for bankruptcy if you are overwhelmed with consumer debt. Among other things, obtaining an automatic stay may result in short-term relief so that you can get your finances in order. You are limited in how often you may file for bankruptcy, so it is important to do it right the first time. If you are thinking about filing, it is important to seek assistance from a Chapter 7 or Chapter 13 attorney. Our firm also helps with credit repair and addressing issues such as the need for tax transcripts. Chicago bankruptcy lawyer Rae Kaplan represents debtors throughout Cook, Kane, Will, DuPage, and Lake Counties. Call us at (312) 294-8989 or use our online form to set up a free appointment.