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.

Unexpected events can often result in significant financial stress, leading to a higher amount of debt. Bankruptcy can be a practical and viable option for Chicago area residents who find themselves with debts that have become unmanageable. Deciding to file for bankruptcy is a major decision and the process can be confusing. Therefore, it is important to understand your bankruptcy options, the requirements and the steps involved.

Chapter 7 bankruptcy can be the fastest and best way to eliminate debt, but this type of bankruptcy doesn't work for every person and every form of debt. For instance, credit card debts and overdue utility or medical bills can be discharged, but, debts such as child support, student loans or tax obligations cannot.

Credit counseling is required as part of the Chapter 7 bankruptcy process. The counseling must be done through a Department of Justice approved credit counseling agency and can be completed on the phone or online. The goal of the counseling is to provide an understanding of the bankruptcy process and the impact and potential future consequences of filing for bankruptcy.

Chapter 7 bankruptcy is a liquidation bankruptcy process. There are different Chapter 7 bankruptcy exemptions that can protect some of the filing party's property from the process of selling property to repay creditors. Those interested in Chapter 7 bankruptcy protection should be familiar with what the Chapter 7 bankruptcy exemptions are.

Chapter 7 bankruptcy exemptions

There are several categories of Chapter 7 bankruptcy exemptions including:

• Homestead exemption – the homestead exemption allows the filing party to protect equity in their home. A consumer filing for Chapter 7 bankruptcy protection can exempt up to $15,000 in equity in their home from the bankruptcy process. The amount of equity they can protect goes up if the filing party is a married couple filing for bankruptcy jointly.
• Wage exemption – filing parties can exempt a certain percentage of their wages.
• Vehicle exemption – filing parties can exempt up to $2,400 of the value of their vehicle.
• Tools of the trade exemption – filing parties can exempt up to $1,500 worth of implements necessary for the filing party to perform their trade.
• Personal property exemption – filing parties can exempt certain personal property such as necessary clothing, family pictures, prescribed home health aids, certain books and several other categories of items.
• Wild card exemption – the wild card exemption can be used to protect up to $4,000 in property that would not otherwise be exempt.

Other bankruptcy exemption categories include pension and retirement exemptions, government benefits exemptions, insurance exemptions and some others. Bankruptcy property exemptions are an important protection that is built into the Chapter 7 bankruptcy protection process. For that reason, filing parties should be familiar with the different types of property exemptions they may be able to claim.