If you are in serious financial trouble, you likely need professional assistance to get out of debt. Some Illinois residents choose to renegotiate their debts privately or with the assistance of a qualified credit counselor. Others may opt to file for full or partial bankruptcy under federal bankruptcy laws. No matter which option you choose, you can have some type of credit counseling; this will help you plan your budget better in the future to avoid repeating such problems.
Debt Negotiation
You can try to settle your debts directly with the involved creditors or hire a credit counselor to do so. If you enter a credit counseling plan, you will make one monthly payment to your selected agency; the funds will be distributed as agreed to your creditors. But debt negotiation agencies cannot help resolve recent tax bills, court fines or familial support debts like alimony. You, or an attorney, must directly deal with the court or taxation agency on such issues.
Chapter 7 Qualification
If you economically qualify and have lived in Illinois for at least six months, you can request Chapter 7 bankruptcy to eliminate most of your pre-existing debts. But this will negatively impact your credit rating for 10 years from the date of filing and you risk losing some of your assets. As of 2011, a single Illinois resident who earns less than $45,941 economically qualified to file Chapter 7, according to the U.S. Trustee Program. A family of four could bring in up to $81,175 and the head of household could file Chapter 7. People earning more money must either prove they cannot pay their bills and their familial support obligations or request a Chapter 13 bankruptcy.
The Chapter 13 Option
Chapter 13 allows a partial debt repayment plan over a three- to five-year period. Illinois residents cannot legally get new credit while in a Chapter 13 bankruptcy; the fact that they filed for Chapter 13 will harm their credit ratings for seven years from the date of case filing. Chapter 13 filers are also more likely to resolve past due mortgage problems without foreclosure, according to the United States Bankruptcy Court.
About Chapters 11 and 12
Chapter 11 bankruptcy allows self-employed Illinois residents or business owners to restructure personal and business debts while keeping most of their assets. Chapter 12 offers similar protections to family farmers. However, unlike other types of bankruptcy, an Illinois debtor must hire an attorney to file Chapter 11.
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