Understanding how a Chapter 7 bankruptcy works can help you see whether it will be the best solution for the problems you face. Each type of filing has its pros and cons, as well as its own specific requirements.

Speedy process

One of the major advantages of Chapter 7 is its relatively quick timeframe. Typically, you can expect the whole process to take between three and six months. At the end of this period, you can have your fresh start.

How it works

During a Chapter 7, the trustee inventories your assets, sells them off and pays off eligible debt with the proceeds. Any eligible debt still left at this point will be discharged.


Under Illinois and federal law, some of your assets remain exemptfrom the bankruptcy sale for up to a specific amount. Generally, these include personal vehicles, personal items such as clothing, housing, insurance benefits, pension payments, child support and tools you need for your job.

The law limits the amount of equity that is exempt. For example, if you have a house worth $100,000 and you have paid off $25,000, you have $25,000 worth of equity. If your equity falls below the exemption threshold and you are current with loan payments, you can reaffirm your debt and keep the asset.

If your equity in an exempt asset exceeds the exemption amount, the trustee can sell it and return to you the amount of your exemption before distributing the rest of the proceeds to creditors. When a married couple files jointly, they typically each have a full set of exemptions. Thus, the Illinois homestead exemption allows for a value of up to $15,000; a couple can claim up to $30,000.

Nondischargeable debt

Chapter 7 cannot discharge all types of debts. Typically, you will still need to pay anything ordered by a court, such as a judgment, fine, child support or alimony. Debt incurred through fraud is not eligible for discharge. You may also remain responsible for certain types of tax and student loan debt.