Bankruptcy in Illinois, Part 1
Prairie State has three U.S. bankruptcy courts
Misconceptions about bankruptcy
If you are considering filing for bankruptcy, you probably have many questionsand deservedly so. For many people, the image of someone who goes bankrupt invokes spectres of deadbeats and neer do wells.
For other people, the image of someone who files for bankruptcy protection is at the opposite end of the spectrum, namely winners, that is, those who keep their mansions, fancy cars, etc.but winners who nonetheless game the system in order to protect vast personal wealth at the expense of others, which in some cases could be taxpayers, although usually its any number of investors, bond-holders, hedge funds and so forth who wind up directly on the short side of a real players stick (obviously, that ripples through the economydont get me wrong).
In that category, Donald Trump comes to mind.
Truth is, bankruptcy code designed for honest, second-chance
But the reality is this: the U.S. Bankruptcy Code is designed neither for losers nor for schemers. The code is designed for stand-up, honest citizens who need a break, who deserve a way to hit the reset button. We in the United States of America have long ago resolved to spurn the Old World model of debtors prisons, in favor of a much more sympathetic and business-minded model that keeps people in their homes and with their jobsthose hard-working, civic-minded people who venture out everyday and work and pay sales tax and payroll tax and local and community taxes.
Not to mention buyers of local goods and services. However, sometimes circumstances dictate that you can no longer afford services, and maybe not even local goods. When its that tight? If youre buying groceries or paying rent or other regular bills with credit cards or borrowed money? Thats a big, red flag indicating that your credit rating may be already in the tank. So the scare stories about bankruptcy ruining your credit rating are simply more propaganda from the Big Banks and their subsidiary credit-card companies.
The three districts
Filing for the powerful protection of the U.S. bankruptcy code in Illinois requires you/your attorney to interact with one of the three, federal bankruptcy courts in the state:
- United States Bankruptcy Court, Northern District of Illinois (locations and directions);
- United States Bankruptcy Court, Central District of Illinois; (locations: 8th link, left hand side)
- United States Bankruptcy Court, Southern District of Illinois (locations and contact info).
Effects of BAPCPA, the reform act of 2005
Under intense pressure from credit-card companies (and the banks that own them) and their lobbyists for about five years of hard-corner, back-room negotiations, Congress in 2005 passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), designed to make it more difficult for consumers to file for bankruptcy protection. The idea was to make it tougher for individuals to file Chapter 7 (so-called liquidation bankruptcy), steering them toward Chapter 13 (so-called reorganization bankruptcy).
Trustees and the 'means test'
According to the Justice Departments BAPCPA page, the act gave the U.S. Trustee Program new responsibilities in a number of areas, including:
- implementing the new means test to determine whether a debtor is eligible for chapter 7 (liquidation) or must file under chapter 13 (wage-earner repayment plan);
- supervising random audits and targeted audits to determine whether a chapter 7 debtors bankruptcy documents are accurate;
- certifying entities to provide the credit counseling that an individual must receive before filing bankruptcy;
- certifying entities to provide the financial education that an individual must receive before discharging debts; and
- conducting enhanced oversight in small business chapter 11 reorganization cases.
Median income vs. finding of abuse
The trustee is now charged with more areas of ensuring the accuracy of filings and the determinations made under the means test and the disposable income test.
Before BAPCPA, income had no bearing on eligibility for Chapter 7. What comes into play now is the states median income, as determined by the Census Bureau (see Illinois QuickFacts, Census Bureau). Basically, if your household income is higher than the Illinois median income, you must satisfy the criteria of the means test in order to file under Chapter 7. This also puts you in the category of being subject to provisions against abuse of the bankruptcy code, whereas pre-BAPCPA law was framed in terms of substantial abuse. If abuse is foundsubject to an appeal hearingthe Chapter 7 case can be dismissed (thereby exposing you once again to creditors) or converted to a Chapter 13 (or Chapter 11) filing.
Safe-harbor provisions, IRS criteria
If your household income (also relative to number of dependents) is below the median for Illinois, you have what is known as safe harbor from the abuse provisions and allows you to file under either Chapter 7 or Chapter 13. A sidenote: although Chapter 11 is commonly perceived as restricted to business reorganization, individuals with unsecured debt more than $336,900 are not eligible for Chapter 13 but can file under the more expensiveand more flexibleChapter 11.) The means test uses the IRS national and local collection standards for determining household and living expenses.
[Note: Continued in Bankruptcy in Illinois, Part 2.]
Court can provide limited help
The bankruptcy court can provide limited help filing bankruptcy for yourself, such as which forms you need and so on. But no personnel in the court can provide legal advice or opinions, other than to recommend that you retain an attorney.
Consider free case evaluation
If youre interested in learning more about the power of bankruptcy protection, please, browse our site for more information; if you need help filing for bankruptcy protection for yourself, consider signing up for a free case evaluation.
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