Chicago Bankruptcy Basics
The building blocks of your bankruptcy case: crucial legal provisions, concepts, and players.
How Does Bankruptcy Work in Chicago?
If you want know how bankruptcy works in Chicago? You must first learn about a few fundamentals. Start here.
I’ll help you understand how bankruptcy works, how to use it to accomplish your goals, and what it takes (the burdens) to get there.
Why Do People File Bankruptcy?
This question will introduce us to two crucial bankruptcy provisions.
Individuals file bankruptcy for two main reasons:
- to stop debt collections (including lawsuits), and
- to eliminate or reduce debts.
The bankruptcy provision that stops collections is called the bankruptcy “automatic stay.”
The provision that eliminates debts is called the bankruptcy “discharge.”
The Bankruptcy Automatic Stay
This is the bankruptcy protection everybody keeps talking about
The automatic stay, or simply the “stay,” is the name for the bankruptcy protection you get when you file your case.
The automatic stay is probably the main reason why individuals (and even businesses) file bankruptcy.
It’s the main reason for filing bankruptcy because the automatic stay stops creditors and debt collectors from taking collections actions against you and your property — this includes calls, lawsuits, foreclosures, repossessions, demands, you name it.
The bankruptcy protection is automatic because it kicks in immediately when you file your case — you don’t have to wait, all you have to do is file your case.
To get into the details of the automatic stay go to Bankruptcy Protection: The Automatic Stay
The Bankruptcy Discharge
The discharge is what eliminates your debts
The discharge is an order entered by the bankruptcy judge that eliminates your debts. It’s also the other main reason why people file bankruptcy.
The bankruptcy discharge wipes-out your debts by:
- eliminating your legal obligation to pay your debts (your “personal liability”) by voiding the contracts you signed with your creditors so creditors have nothing to enforce, and by
- prohibiting your creditors from attempting to collect the discharged debts — forever!
The discharge is available under both chapter 7 and chapter 13
You can get a discharge by filing chapter 7 or chapter 13.
Each respective provision give the judge the the power to enter the discharge order — which is generally entered towards the end of a bankruptcy case.
If you want to learn a lot more about the discharge go to The Bankruptcy Discharge
The Bankruptcy Estate
The most important bankruptcy concept you must understand
The property of the bankruptcy estate is a fundamental concept of bankruptcy law.
You have to keep this concept in mind before you file your case, when you file your case, while your case is pending, and for a short time after your case is over.
The Bankruptcy Players
Debtors, creditors, trustees, U.S. Trustees, and judges
Learn about the bankruptcy players who will generally have a role in your case.
The debtor is the person who files the bankruptcy case. Married couples can file together under one case as joint debtors.
Creditors get divided into classes and their claims receive different treatment. Your creditors will have an impact on which chapter you should file under.
A trustee is appointed to every bankruptcy case.
A chapter 7 trustee will be appointed to your case is you file under chapter 7. And a chapter 13 trustee will be appointed if you file under chapter 13.
However, the chapter 7 trustee and the chapter 13 trustee serve different functions and have different roles.
Office of the United States Trustee
Commonly referred to as the U. S. Trustee or “UST”, the Office of the U.S. Trustee is a component of the Department of Justice.
The UST oversees the administration of all bankruptcy cases and monitors the system for bankruptcy abuse and bankruptcy fraud.
The judge presides over the bankruptcy case, resolves disputes, makes rulings, and enters orders to effectuate the Bankruptcy Code.