Chicago Bankruptcy Basics
You should have a basic knowledge of the building blocks of your case so you know what to expect.
Bankruptcy is the surest, fastest, most affordable, and least stressful way to financial freedom
Important Bankruptcy Provisions, Concepts, and Players
A basic knowledge of bankruptcy fundamentals will help you understand how bankruptcy works, how to use it to accomplish your goals, and what it takes (the burdens) to get there.
The Automatic Stay and the Discharge
Individuals use the Bankruptcy Code for two main reasons: to stop creditors and to eliminate debts.
The provision in the Bankruptcy Code that stops creditors is called the “automatic stay.” And the provision the eliminates debts is called the “discharge.”
We will discuss each provision in turn below.
The Automatic Stay
This is what protects you from creditors and their actions
The automatic stay, or simply the “stay,” is the first of two main reasons why individuals (and businesses) seek relief under the Bankruptcy Code.
This rule of law prohibits creditor from taking collections actions against you and your property: the calls, lawsuits, foreclosures, repossessions, demands, whatever.
The automatic stay is outlined in section 362 of the Bankruptcy Code and is applicable to both chapter 7 and chapter 13.
The protection is automatic because it kicks in automatically the moment you file your case — you don’t have to wait until the judge implements it by court order.
And it’s a “stay” because it stops creditor actions.
This is what eliminates your debts
The discharge is the second main reason individuals seek relief under the Bankruptcy Code.
This is the rule of law that wipes out your debts by:
- eliminating your legal obligation to pay your debts (your “personal liability”). In other words, the discharge voids the contracts you signed with your creditors — forever — so creditors have nothing to enforce
- prohibiting your creditors from taking any kind of action to collect or enforce the discharged debts (i.e. the voided contracts).
A discharge is available under both chapter 7 and chapter 13
Each bankruptcy chapter has its own specific discharge provision.
For chapter 7 cases, the discharge provision is located in section 727 of the Bankruptcy Code.
For chapter 13 cases, the discharge provision is located in section 1328 of the Code.
Each respective discharge provision gives the bankruptcy court the authority to enter the discharge order.
The discharge is what makes the Bankruptcy Code the ultimate form of debt relief.
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.
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.