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Why would someone want to file a chapter 7 instead of a chapter 13?

A person would want to file a Chapter 7 bankruptcy if they had unsecured debt and very little in the way of secured debt. For example, a person filing a Chapter 7 bankruptcy and eliminate credit cards, medical bills, personal loans, past-due utility bills and still keep whatever personal property they have provided that property does not exceed specific state exemptions. In the state of Illinois, a person can protect up to $15,000 worth of equity in real estate. A person can protect up to $4000 of miscellaneous personal property and a person can protect up to $2400 worth of equity in one motor vehicle.

For many people who are struggling with credit cards, they simply do not have equity in real estate or equity in vehicles and they are able to get a fresh start and keep those items. The great thing about chapter 7 is that you continue to make your regularly monthly payment on the secured items that you wish to keep such as real estate in vehicles and you eliminate all of your miscellaneous debt except for student loans, recent taxes, parking tickets, child support and debts incurred by fraud.

For the majority of individuals who file chapter 7, it is a complete fresh start or forgiveness of their general unsecured debt. By being able to eliminate unsecured debt and keep secured property, the debtor is basically given a fresh start in life financially. What that person does with that fresh start is entirely up to him or her but most of my clients have found that by filing Chapter 7, they have freed themselves of unnecessary unsecured debt and they are able to keep the property they wish to keep and provide for their family on a day-to-day basis.

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