When debt becomes insurmountable, bankruptcy is a way for indebted individuals or companies to get their debt under control. There are many different types, or Chapters, of bankruptcy, each with specific rules and requirements for filers. Chapter 7 and Chapter 13 bankruptcies are the two chapters available to individuals struggling with personal debt. Every bankruptcy chapter is subject to a filing fee, but under certain circumstances, filers facing extreme hardship can file their bankruptcy cases for free.
TL;DR (Too Long; Didn't Read)
If you are facing financial difficulty, you can waive your bankruptcy filing fee with Form 103B.
Filing for Bankruptcy in Cook County
Bankruptcy cases are handled by federal courts. Individual bankruptcy cases are filed with U.S. district courts. Cook County bankruptcies are handled by the Northern District of Illinois U.S. District Court at 219 Dearborn Street in Chicago.
Many, but not all, of the rules that bankruptcy filers must follow are the same regardless of the state in which the filer lives. This is because the U.S. Bankruptcy Code is a federal law that specifies the circumstances that govern where an individual’s case can be held. There are different requirements based on the state where she lives, the most notable of which is the means test.
Chapter 7 Means Test
Only individuals who pass the Chapter 7 means test may file for Chapter 7 bankruptcy. The means test is a relatively straightforward questionnaire used to determine whether an individual has enough disposable income to complete a Chapter 13 bankruptcy. If so, the filer cannot file for Chapter 7 and must file a Chapter 13 case instead. In Illinois, the median income for a single-person household in 2017 was $32,460.
Individuals whose annual incomes are less than their state's median for households their size automatically pass the means test. This is where a person's state rules can determine whether or not she can file for Chapter 7. In 2017, the median annual income for a two-person household in Illinois was $71,687. That same year, the median annual income for a two-person household in Alabama was $55,624. A married couple who earned $60,000 that year would qualify for Chapter 7 bankruptcy if they lived in Illinois, but not if they lived in Alabama.
When a prospective filer makes more than the median income for households his size in his state, he may still be able to pass the means test and file for Chapter 7 bankruptcy. To determine whether he qualifies, he must complete Form B 122A-2, the Chapter 7 Means Test. This worksheet uses relevant data about the filer’s finances to determine whether he has sufficient disposable income to file for Chapter 13 bankruptcy, which requires the filer to follow a repayment plan.
Another notable circumstance under which bankruptcy cases vary from state to state is in the exemptions a filer is permitted to take. When an individual files for Chapter 7 bankruptcy, his nonexempt assets are liquidated to generate cash with which to repay his creditors. Exempt assets typically include the filer’s personal vehicle, tools used to perform his job and money in retirement accounts. Specific assets that can be exempted and their values are determined by state law.
Waiving the Bankruptcy Filing Fee
Filing for bankruptcy is not free. The fee to file for Chapter 7 bankruptcy is $335 and the fee to file for Chapter 13 is $310. However, an individual facing significant financial hardship may have this fee waived if he meets one or more certain requirements:
- He is filing for a Chapter 7 bankruptcy discharge.
- He is an individual filer, rather than a business.
- He cannot afford to cover the filing fee even on a payment plan.
- His combined household income is less than 150 percent of the federal poverty figure.
In 2018, the federal poverty line for single-person households in the 48 continental states and Washington, D.C. was $12,140 per year. This figure was higher in Alaska and Hawaii. Using this data, an individual living alone in New York can have his bankruptcy filing fee waived only if his annual household income is $18,210 or less.
To waive the filing fee, the filer must complete Form 103B, Form to Have the Chapter 7 Filing Fee Waived. On this form, she must provide information about her financial status, including:
- Family size.
- Combined household income.
- Household monthly expenses.
- Liquid cash.
- Previous bankruptcy cases filed.
- Lawyer expenses related to the current case.
Once the filer submits the form and all relevant information to the court, the court has the discretion to accept or deny the waiver. It may also require the filer to attend a hearing and provide additional information to aid its decision. If the court denies the waiver application, the filer must pay the filing fee.
Low-Cost Options for Filers
When a filer does not qualify to have the bankruptcy filing fee waived, she has options for reducing bankruptcy-related expenses. One of these is to pay the filing fee in installments, rather than in one lump sum. To do so, she must fill out Form 103A, Application for Individuals to Pay the Filing Fee in Installments. She may pay in installments only with the court’s permission. If the court grants permission to pay the fee in installments, the filer must pay it in no more than four payments and must pay the entire fee within 120 days of filing for bankruptcy.
Another strategy some filers use to reduce their bankruptcy costs is to work with lawyers who provide pro bono, or free, services. Although an individual can legally file his own bankruptcy case, doing so is typically not in his best interest. Pursuing a Chapter 7 bankruptcy discharge is a complex process and working with a lawyer can make it less stressful and more likely to be successful for the filer.
Chapter 7 Discharge Timeline
Many individuals considering filing for bankruptcy in Cook County wonder how long it will take to have their debts discharged. There is no one-size-fits-all timeline for Cook County bankruptcies, but typically, the Chapter 7 discharge takes about three to four months.
The Chapter 7 discharge timeline is:
- The filer completes an approved credit counseling course no more than 180 days before filing a bankruptcy petition.
- The filer submits the bankruptcy petition to start the case. She is assigned a bankruptcy trustee, a court representative who oversees the case.
- Immediately, most collection attempts against the filer stop. This is known as the automatic stay.
- The filer attends a "341 meeting" with her creditors that occurs within 40 days of filing the paperwork. At the meeting, the filer answers questions from the bankruptcy trustee under oath.
- The filer completes a financial management course within 60 days of the meeting.
- The trustee arranges for the filer to relinquish her nonexempt property.
- The filer receives a written discharge of her debts.
A bankruptcy case is not officially closed, or discharged, until the filer receives a notification from the court stating such. This notification is known as the final decree. Once the final decree is filed, the case is closed, the debts for which the filer sought discharge are gone, and the automatic stay is lifted. A Chapter 7 bankruptcy remains on a filer’s credit report for 10 years after his debt is discharged.