Additionally, when married couples file jointly, each spouse is entitled to the full exemption for a total of $30,000.  This is known as doubling.

So, assume for example, a couple filing Chapter 7 owns a $150,000 home with $125,000 remaining on the balance of their mortgage.  Their equity in the home is $25,000. Each spouse can exempt up to $15,000 of equity in their homestead from the bankruptcy estate.  The couple can protect their entire $25,000 of equity in the home.

On the other hand, if the couple only owed $110,000 on the home, they would have $40,000 in equity but would still only be able to protect $30,000.  The trustee could then liquidate the home, pay the couple their exempt equity of $30,000, and use the remaining $10,000 to pay their creditors.  However, considering the expenses of selling a home, if there was little to gain by liquidating the home, the trustee may abandon the property and allow them to keep the property if there is only a small amount of non-exempt value.

Illinois also recognizes tenancy by the entirety with limitations.  Tenancy by the entirety is the subject of another post.

There have been many great figures in history who took advantage of the fresh start that the bankruptcy laws provide for.  Perhaps one of the greatest is Abraham Lincoln.  Considered by many historians to be America’s greatest president, good fortune did not always smile upon Abraham Lincoln.

At age 22, Lincoln arrived in New Salem, Illinois where he earned a living doing odd jobs around the village and working as a shopkeeper.  In 1832, the shop where he worked went out of business.  Lincoln and a partner opened their own general store in New Salem.  They purchased their inventory from other stores on credit and incurred a great deal of debt.

In 1833, the shop failed and Lincoln’s partner died, leaving him saddled with the debt.  Lincoln declared bankruptcy later that year.  Fortunately for debtors today, the bankruptcy laws now provide for the discharge of most unsecured debt.  However, Abraham Lincoln took nearly 17 years to pay off the debt from his failed shop.

Obviously, Abraham Lincoln overcame his financial obstacles.  However, many people who should consider filing for bankruptcy do not even see it as an option because of the conditioning that bankruptcy is the worst thing that can happen to them and should only be turned to as a last resort.

But in reality, bankruptcy is the best option for a lot of people.  Lincoln is historical proof that people can overcome personal bankruptcy and achieve great things in their lives.  In fact, Lincoln helped a number of people declare bankruptcy in his law practice.

Bankruptcy, in most situations, can completely clean the slate of credit card bills and other unsecured debt.  And, thanks to bankruptcy exemptions, most people do not lose any of their property in bankruptcy.

People living with the “weight of oppressive indebtedness” can get the fresh start that the bankruptcy laws intend, and move on with life to achieve all of their financial goals.

This client had already received a discharge in her case, but she was afraid that she could lose her house regardless because her lender was insisting that she had to sign a reaffirmation agreement.  This prospective client could not remember if she had done so or not.  So she did the natural thing and sent her former attorney an email asking whether she had or not.

The lawyer’s response was what I would consider less than warm and barely helpful.  He basically replied that she had received a discharge and that he wasn’t hired to do anything beyond that.  He went on to say that if she wanted to enter into a reaffirmation agreement with her lender, she could hire him again to perform that service.

I was shocked when I read this story.  Now granted, it is not uncommon for there to be an additional legal fee for negotiating reaffirmation agreements.  However, I believe that these are the types of details that every client deserves to have explained to them before an issue like this one comes up.

My colleague’s post was inspired by a blog post by Ohio bankruptcy lawyer Bill Balena called “Is your cheap bankruptcy attorney doing what you need?”

I’ve posted previously about the lowest bankruptcy fees often resulting in the lowest levels of service.  This person’s story just goes to show that, while affordable fees are always an important consideration, you have to be comfortable with your attorney and confident that you’ve chosen one you can count on to be there for you when you choose a Chicago bankruptcy lawyer.

I’m working hard to build a reputation as a thorough bankruptcy attorney that provides personal attention to every client’s case.  I’m proud to be a sole practitioner that handles every detail of every case.  I want to make sure that everyone that I deal with would be happy to refer their friends and family to me.  There are too many Chicago bankruptcy law firms to choose from for anybody to settle for anything less.

While the 2005 amendments to the bankruptcy code have made filing for Chapter 7 somewhat more complicated, and therefore more expensive, it is still an affordable option for people facing significant financial obstacles.  For example, the filing fee to file a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court is $299.  While $299 is certainly not a small amount of money, it is less expensive than the $350 filing fee required to file a civil law suit in a United States District Court.

The bankruptcy laws also require people seeking bankruptcy relief to take two courses – one before filing for bankruptcy, and one after.  The pre-filing credit counseling generally costs $30 to $50.  The post-petition financial education course also typically costs between $30 and $50.  There is one company that I know of that charges $35 for the pre-filing course and $15 for the post-filing course.  At $50 for both courses, this is the best value I’ve found.

There are several other possible expenses.  These include a merged three-bureau credit report, home or vehicle valuation, tax transcripts, and an asset search.  These expenses usually come to around $100 if they are all required in your case.

The largest expense involved in filing for Chapter 7 bankruptcy is attorney’s fees.  Consumer bankruptcy attorneys charge a wide range of fees for a Chapter 7 bankruptcy.  The average fee for a basic, single-filer Chapter 7 is around $1,500 – although I’ve seen bankruptcy attorneys in Chicago advertising fees as low as $650 on Craigslist.  One thing to keep in mind, however, is that in most instances you get what you pay for.  Rock-bottom fees typically equate to bare-bones service.  Many discount bankruptcy firms hire contract lawyers to attend the meeting of creditors with the client and paralegals do most of the work on the petition.

Consumers should look at cost as well as level of services and comfort with the attorney.  The savings of $300 or $400 won’t mean much if your case is not handled correctly or you find it dificult to work with your attorney.

All in all, most people should be able to file for Chapter 7 for less than $2,000 total.  While there are factors that could make the costs higher or lower, most consumer bankruptcy attorneys will give you a quote for a flat fee before you make any kind of commitment.

Many people believe that changes to the bankruptcy law that were passed in 2005 have made it virtually impossible for individuals to qualify for debt relief through bankruptcy.  While the 2005 law, the Bankruptcy Abuse Prevention and Consumer Protection Act or BAPCPA, has made it more complicated, the reality is that most people who need to file for bankruptcy can still do so.

So what exactly is bankruptcy?  Basically, bankruptcy is a legal proceeding that allows people with more debt than they can repay to start over – financially speaking.  This is why bankruptcy is often referred to as a “fresh financial start.”  Once you file for bankruptcy, creditors must immediately stop trying to collecting the debts that you owe.  Depending on what bankruptcy chapter a person files under, nearly all unsecured debts can be discharged – which eliminates the legal obligation to repay them.  Unsecured debts are those with no collateral, such as credit cards.  Secured debts, such as car loans and home mortgages, must still be repaid if the debtor wants to keep the property.  But if they are behind on payments, filing for bankruptcy can stop a repossession or foreclosure by allowing the past due amount to be repaid over time while the regular payments continue.

While there are various local rules and state laws that come into play in bankruptcy proceedings, the primary source of bankruptcy law is Title 11 of the U.S. Code.  Because bankruptcy is federal law, bankruptcy cases are filed in the federal court for the district in which the debtor resides.  For example, because I am a Chicago bankruptcy lawyer serving Chicago area residents, my clients’ cases are filed in the United States Bankruptcy Court for the Northern District of Illinois.

There are four different types of bankruptcy cases under Title 11:  Chapter 7, Chapter 11, Chapter 12, and Chapter 13.  Of these four, Chapter 7 and Chapter 13 are the most common and most helpful to individuals.  Chapter 7 is called straight bankruptcy or a liquidation and requires individuals to give up property to repay their creditors.  Because of the various state and federal exemptions that protect certain property from liquidation, most people who file for Chapter 7 bankruptcy don’t lose any property at all.

Chapter 13 is also known as a reorganization.  Chapter 13 allows people to repay all or some portion of their debts over time using future income.  No property is liquidated under a Chapter 13.

While this overview provides a basic overview, it is not legal advice.  Bankruptcy law can be complex and people considering bankruptcy should consult with an attorney in their jurisdiction.  If you live in Cook County, Illinois and are seeking a Chicago Bankruptcy Attorney, give me a call or contact me online to schedule your free consultation today