For most consumers, life before bankruptcy is fraught with financial difficulties. It is important to remember that although bankruptcy is not the first resort, it is best not to wait too long to take action. If you are facing what seems to be insurmountable debt, contact an attorney at once in order to begin to formulate a plan of attack to win your financial freedom.
Discharge Your Debts
Through a Chapter 7 bankruptcy, you may be able to discharge credit card debts, medical bills and most other types of consumer debt. To speak with an Illinois bankruptcy lawyer, contact Illini Legal Services.
To schedule a free consultation with an attorney at our firm, call 630-405-5027 or contact us by e-mail. We have been handing bankruptcy cases for more than 30 years.
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Credit card debts, medical bills and other types of unsecured debt can be discharged through a Chapter 7 bankruptcy. Contact Illini Legal Services to learn more. We have law offices in Aurora, Oswego, West Chicago and Geneva.
We handle Chapter 7 bankruptcy and Chapter 13 bankruptcy. At your free consultation, we can discuss your financial situation to determine if either of these options may be right for you.
Alternatives to Chapter 7 Bankruptcy
The term "workout" is used to describe a non-bankruptcy negotiated modification of debt. More simply stated, a workout is an out-of-court agreement between a debtor and his or her creditors for repayment of the debts between them, which is negotiated without all the procedural complications — and perhaps the stigma — of the bankruptcy process. A lawyer at Illini Legal Services in Aurora, Illinois who is experienced in bankruptcy and debtor-creditor law, can advise both debtors and creditors about whether a non-bankruptcy workout is their best course of action.
Why Choose a Workout?
There are a variety of reasons why a debtor might prefer a workout to bankruptcy. By entering into a voluntary agreement with creditors, the debtor avoids the stigma that attaches to bankruptcy but achieves the same results — discharge from all or a portion of his or her debts. In fact, a workout discharge can be even broader than a bankruptcy discharge. In addition, a workout discharge does not affect the debtor's rights to file a future bankruptcy, whereas certain types of bankruptcy discharges do. The main advantage of a workout is that both the debtor and the participating creditors voluntarily enter into it. In a workout, unlike bankruptcy, the majority of creditors cannot cram down concessions on dissenting creditors.
Non-Bankruptcy Alternatives
Compositions and Extensions A "composition" is a contract between the debtor and two or more creditors in which the creditors agree to take a partial payment in full satisfaction of their claims. An "extension" is a contract between the debtor and two or more creditors in which the creditors agree to extend the time for payment of their claims. An agreement may be both a composition and an extension; in other words, an agreement to accept less money over a longer period of time.
There is no requirement that all of the debtor's creditors agree to a composition or extension, but most of them must voluntarily support it for it to work. Creditors that do not agree to the workout are not affected by it and remain entitled to pursue other remedies to collect the debts owed to them. Although they can theoretically proceed to recover the full amount due, they forfeit the right to benefit automatically from whatever partial payment the composition would have allowed had they taken part.
Assignment for the Benefit of Creditors An assignment may be a simpler and cheaper alternative to bankruptcy for a small business that wishes to be liquidated. The debtor assigns all nonexempt property to an assignee who acts as a fiduciary for the benefit of creditors. The assignee liquidates the assets and distributes the proceeds pro rata among creditors who have filed claims with the assignee. An assignment is voluntary, but all creditors must accept it.
Bankruptcy Alternatives
Chapter 11 — Filing for bankruptcy under Chapter 11 may be an option for debtors such as corporations, sole proprietorships and partnerships that are engaged in business. These debtors may wish to stay in business and avoid liquidation. Under Chapter 11, the debtor can have debts reduced or have the time for repayment extended.
Chapter 13 — Chapter 13 may be an option for individual debtors with regular income. Chapter 13 allows individual debtors to save their homes from foreclosure by coming up with a payment plan for past due payments. Sole proprietorships may also be eligible to file for Chapter 13.
Conclusion
Non-bankruptcy alternatives such as compositions and extensions have several benefits. However, in some circumstances, a debtor is afforded greater protection by a formal bankruptcy, and attempting a workout may just prolong the financial agony and delay the inevitable. An attorney who has experience in bankruptcy and debtor-creditor law at Illini Legal Services in Aurora, Illinois can help both debtors and creditors determine whether a workout is the best option for debt repayment, or whether bankruptcy is the better choice in their particular circumstances.
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