In Columbia, Illinois, bankruptcy is a court procedure in which a person or business has some or all of their debts excused (or "discharged"), theoretically allowing them to start with a clean slate, and move on with their lives no longer drowning in debt (and hopefully having learned to better manage their use of credit in the process). Bankruptcy should be treated as an option of last resort, and should not be viewed as a convenient way to get out of debt that you just don't feel like paying. Bankruptcy can have severe consequences, including but not limited to damage to your credit rating. A bad credit score can impact your ability to acquire loans in the future, to rent an apartment, and possibly even your ability to get hired at some jobs (as some employers now run credit checks on prospective employees).

For that reason, it would be advisable to speak with a good Columbia, Illinois bankruptcy attorney. This attorney will be able to advise you as to whether or not filing for bankruptcy is a good idea, given your particular situation. This determination is highly dependent on the details of each individual case, so a Columbia attorney's advice is truly indispensable.

Types of Bankruptcy in Columbia, Illinois

In Columbia, Illinois, there are three basic bankruptcy schemes that are most commonly used. They are known as Chapter 7, Chapter 13, and Chapter 11. Being a product of federal law, the procedural rules governing bankruptcy in Columbia, Illinois will be very similar to those in any other part of the United States. Chapter 7 bankruptcy involves liquidation of part of the debtor's assets to pay off as much of his or her debt as possible. Once the liquidation is complete, and the proceeds given to the creditors, the rest of the debt is discharged. Liquidation is essentially selling assets to the highest bidder. Only some of the debtor's assets have to be sold, and numerous classes of property are exempt, meaning that the debtor can keep them, including homes, cars, insurance policies, and retirement accounts. It should be noted that certain types of debt cannot be discharged through Chapter 7 bankruptcy, including student loans, child support payments, criminal fines, and recent taxes.

The other frequent bankruptcy scheme used by consumers in Columbia is Chapter 13 bankruptcy. In this system, debt is not discharged. Instead, it is restructured. This allows the debtor to have the terms of the agreements that gave rise to their debts in the first place thrown out, and replaced with new terms that call for a structured repayment plan, designed to allow the debtor to survive on whatever income they have, and allowing the creditors to get paid back eventually. Once a payment plan is authorized, creditors are not allowed to attempt to collect payment under the original agreements. Although it can be used by individuals, Chapter 11 bankruptcy is used almost always by businesses. Not unlike Chapter 13, Chapter 11 focuses on restructuring of debt, rather than discharging it. Chapter 11 requires that the debtor come up with a reorganization plan designed to reduce debt and cut costs. Before being implemented, this plan must be approved by a majority vote of participating creditors.

One major advantage of Chapter 11 bankruptcy is that it allows businesses to continue their operations while the process plays out. Furthermore, their stock can still be bought and sold.

How Can a Columbia Bankruptcy Lawyer Help?

Filing for bankruptcy in Columbia is a very important decision, and should not be made easily. Before filing, one should consult with a seasoned Columbia bankruptcy attorney for advice.