In Urbana, Illinois, bankruptcy is a legal proceeding in which a person or business has some or all of their debts legally cleared, when they are unable to pay them. This hopefully allows them to start over with a clean slate and move on, after having learned to better manage their use of credit in the process. However, bankruptcy is not a free ride, allowing someone who simply doesn't feel like paying their debts to get out of that legal obligation. It is designed to prevent debt which has slight chance of ever being paid back from ruining the life and finances of the debtor. It also carries significant long-term consequences, which must be carefully weighed against the potential benefits. For example, bankruptcy makes it very difficult for the debtor to obtain credit in the near future.
For that reason, it would be prudent to speak with a good Urbana, 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 specific situation. This determination is highly dependent on the details of each individual case, so an Urbana attorney's advice is really indispensable.
Types of Bankruptcy in Urbana, Illinois
In Urbana, Illinois, there are three basic bankruptcy schemes that are most frequently used. They are identified as Chapter 7, Chapter 13, and Chapter 11. Being a product of federal law, the procedural rules governing bankruptcy in Urbana, Illinois will be very similar to those in any other part of the United States. Chapter 7 bankruptcy involves liquidation of some of the debtor's assets to pay off as much of his or her debt as possible. Once the liquidation is done, 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 varied 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 recognized bankruptcy scheme used by consumers in Urbana 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 arrangements 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 approved, creditors are not allowed to attempt to collect payment under the original agreements. Though applicable to individuals, Chapter 11 bankruptcy is typically used by businesses. Like Chapter 13, Chapter 11 requires the restructuring of debts. Under this system, the debtor must come up with a plan to reduce debt, cut costs, and improve operations. Once this plan is finalized, it is submitted to the participating creditors, who must approve it by a majority vote before it can be implemented.
A main advantage of Chapter 11 bankruptcy is that businesses can continue their operations while going through the process. Also, they can continue to buy and sell their stock.
How Can a Urbana Bankruptcy Lawyer Help?
Filing for bankrtuptcy in Urbana is an influential decision with costs and benefits that must be weighed carefully. Before filing, it would be a good idea to speak with a good Urbana bankruptcy attorney.