Illinois Bankruptcy Law: What Happens After Filing

Filing for bankruptcy in Illinois can be a significant decision, often born out of necessity due to overwhelming debt. Understanding what happens after filing is crucial for individuals seeking relief under the state’s bankruptcy laws. This article breaks down the process and expectations following a bankruptcy filing.

Upon filing for bankruptcy, an automatic stay is immediately established. This stop order prevents creditors from pursuing collections, garnishing wages, or initiating foreclosure proceedings. The automatic stay provides debtors with the much-needed breathing space to reorganize their finances without the pressure of creditor harassment.

Depending on the type of bankruptcy filed—Chapter 7 or Chapter 13—the subsequent steps will vary. For those opting for Chapter 7, debtors can expect a relatively quick process that typically lasts three to six months. During this time, a trustee will be appointed to oversee the case. Their responsibilities include examining the debtor’s assets and liabilities to determine which debts can be discharged and which assets, if any, are non-exempt.

In contrast, Chapter 13 bankruptcy involves a reorganization of debts rather than outright discharge. After filing, individuals must propose a repayment plan that outlines how they intend to repay creditors over a three to five-year period. This plan is submitted to the court for approval, and creditors will have the opportunity to object to the proposed arrangement.

In both Chapter 7 and Chapter 13 cases, debtors are required to attend a meeting of creditors, known as the 341 meeting. This meeting is an opportunity for the bankruptcy trustee and creditors to ask questions about the debtor's financial situation. It typically takes place about a month after filing for bankruptcy.

Another important aspect to consider post-filing is credit counseling. Debtors are mandated to complete a credit counseling course before their debts can be discharged. This course aims to provide education on managing finances and avoiding future debt problems.

Once the bankruptcy process is concluded, debtors will receive either a discharge of their debts or confirmation of their repayment plan. In Chapter 7, most unsecured debts, such as credit cards and medical bills, are eliminated, providing a fresh financial start. In Chapter 13, successful completion of the repayment plan will result in a discharge of the remaining eligible debts.

After filing for bankruptcy, it is critical for individuals to begin rebuilding their credit. While a bankruptcy filing can temporarily lower credit scores, many individuals find they can improve their credit rating within a couple of years by managing new credit responsibly. Simple steps like paying bills on time and obtaining secured credit cards can help restore financial credibility.

In conclusion, understanding Illinois bankruptcy law is essential for individuals facing significant financial distress. The journey does not end at filing; there are several steps involved in the process, from the immediate relief of the automatic stay to potential debt discharge or repayment plans. For anyone considering bankruptcy, it’s advisable to consult with a knowledgeable attorney to navigate the complexities of the law effectively.