There are a lot of different reasons that people ultimately choose to declare bankruptcy. Anything from a single unexpected medical emergency to a patch of unemployment can quickly cause a person to rack up debt they will not be able to pay off. Bankruptcy is based on the idea that people deserve a fresh start and there should be a way out of insurmountable debt. However, it is important that bankruptcies are handled correctly so that they do not lead to more legal issues. 

Mistakes during bankruptcy can cause further financial difficulty rather than relieving financial strain. It is quite easy to slip up and make a potentially costly mistake. Your best bet is to have your bankruptcy handled by an attorney. 

What Mistakes Should I Avoid When Declaring Bankruptcy?

Bankruptcy can be a very delicate legal procedure. Everything needs to be done correctly and in good faith. Some common mistakes people make during bankruptcy proceedings include: 

If you are considering filing for bankruptcy, you may feel like you have very little control over your financial life or the bankruptcy process. This is not entirely true - people who file for bankruptcy in Illinois still have options. For most personal bankruptcy situations, there are two different types of bankruptcy your attorney will discuss with you to help you choose the best option. Chapter 7 and Chapter 13 bankruptcy filings can both lead to a new, debt-free life, but in different ways. Both types have benefits and drawbacks. The type of bankruptcy that will make the most sense for you will depend on your personal situation and preferences. It is important to speak with a lawyer to make sure that you have a complete understanding of how each type of bankruptcy will affect you. 

What Happens When I File for Chapter 7 Bankruptcy?

Chapter 7 bankruptcy can create a quicker and cleaner path to freedom from debt, but the major drawback is that your assets will be liquidated. When you file for Chapter 7 bankruptcy, the court will appoint a trustee. The trustee will then be responsible for identifying your assets and selling them off in order to pay off your creditors as much as possible. 

It is relevant here that not all of your property is subject to liquidation - there are statutory exemptions so that you can keep some personal property. An attorney can give you a better idea of which of your assets are or are not exempt. The benefit is that after liquidation, the rest of your eligible debt is forgiven, and you are free to start a new, debt-free life. 

Bankruptcy can provide a way out for many Illinois families and individuals who have become buried in insurmountable debt. Both Chapter 7 and Chapter 13 bankruptcy filings can give you an opportunity to ultimately discharge most debts through different means. If you are considering bankruptcy as a solution to your debt, it is important to understand which debts can and cannot be discharged through the bankruptcy process. Before you file, it is a good idea to consult a qualified attorney who can help you make sure that bankruptcy will help you achieve your goal of becoming debt-free. 

What Types of Debt Are Not Discharged During Bankruptcy Proceedings? 

It may not seem fair that some debts can be discharged through bankruptcy, and you are stuck with others. Unfortunately, this is the reality. Whether bankruptcy would be helpful for you depends heavily on what type of debt you are struggling with. Even in bankruptcy, you will generally not be able to discharge: 

• Family support - This includes both child support and alimony. In particular, a child’s right to be financially supported by both parents is considered extremely important and will take precedence. 
• Legal fines - Fines associated with traffic tickets, or fines that are part of a criminal sentence cannot be discharged in bankruptcy. This includes any restitution you have been ordered to pay to a victim. Otherwise, a good many people could file bankruptcy simply to avoid criminal penalties. 
• Taxes - Tax debts, including recent income tax debts, are generally still owed after bankruptcy. 
• Drunk-driving related personal injury liability - If you owe compensation to someone you injured while driving intoxicated, this debt survives bankruptcy as the victim is still entitled to payment. 
• Forgotten debts - It is extremely important to ensure that you have listed all dischargeable debts in your bankruptcy filing. Any debt that you leave off your bankruptcy papers by mistake will not be discharged during these proceedings unless your creditor happens to become aware that you have filed. 
• Student loans - Traditionally, student loans cannot be discharged in bankruptcy. The law has loosened up just a bit on this rule, however - in cases where paying back your student loans would create an undue hardship, it may be possible for them to be included in your bankruptcy. It is critical to seek the advice of an attorney if you believe this applies to you. 

There are other types of non-dischargeable debts that are specific to either Chapter 7 and Chapter 13 filings. If you are unsure which debts you may or may not be able to discharge in bankruptcy, it is important to consult an attorney before filing. A lawyer can offer you guidance that can help you decide whether bankruptcy is the right solution for you. 

Contrary to popular belief, filing for Chapter 7 bankruptcy does not mean that all your debts are wiped. The possibility of discharging a debt depends on its nature.

Dischargeable debts are those that you are not legally responsible for after filing for bankruptcy. They include most consumer debt such as medical bills or credit card debt.

If you are going into retirement, something that you might be considering is eliminating any of your outstanding debts. Part of the issue that people run into during retirement is that they may not have as much income as they had in the past. As a result, paying the debts that accrued earlier in life may not be as easy as it was before.

If you find that you've fallen behind, then one option may be to file for bankruptcy to get a fresh start. If you can pass the Chapter 7 bankruptcy means test, then you may be able to have your unsecured debts discharged after going through the liquidation process.