Bankruptcy is never anyone’s first choice. Bankruptcy can affect your ability to get a good job or buy a new house. Bankruptcy will be on your credit report for up to 10 years. In addition to the stress it causes, there is a social stigma attached to it as well. Before you take such a drastic step, review what gets people into trouble in the first place and how Chapter 7 and 13 work. Then, consider the alternative that would allow you to avoid personal bankruptcy Chapter 13 and 7 altogether.


5 Common Reasons People Go Bankrupt


  1. Job Loss. The loss of income caused by termination, layoff, or resignation can have devastating consequences especially when it comes with little to no notice. It’s estimated that only 3 out of 10 families in the United States have an emergency fund to help them withstand the financial crisis job loss creates.


  1. Medical Expenses. Two-thirds of the bankruptcies in the United States are the result of medical issues. Medical bills resulting from serious diseases and accidents often run into the hundreds of thousands of dollars.


  1. Credit Card Debt. There are people who just can’t control their spending. Credit cards make it easy and tempting to buy things you couldn’t otherwise afford. Debt can spiral out of control until even making minimum payments is out of reach.


  1. Divorce. Divorce can spur the financial pressure of attorney’s fees, child support, alimony, and cost of maintaining two households. Living in such circumstances can become untenable.


  1. Unexpected Circumstances. Fire and natural disasters like earthquakes, floods, and tornados can leave the under-, or uninsured, desperate, destitute, and seeking shelter, food, and clothing just to survive.

avoid personal bankruptcy Chapter 13

What you need to know about Chapter 7 and 13


Chapter 7 Bankruptcy – The Fresh Start

Chapter 7 is called liquidation bankruptcy because it wipes out unsecured debts like medical bills and credit card balances. It does not eliminate debt like delinquent income tax or support payments. In order to qualify for Chapter 7, your income cannot exceed a certain level (This is determined by a means test which generally compares your income with the median income where you live.)


Once you file for Chapter 7, your creditors will stop calling. You will be assigned a bankruptcy trustee whose job it is to dispose of all your nonexempt assets and repay your creditors. Nonexempt assets are those that can’t be protected under a bankruptcy exemption. The amount of property you are allowed to exempt depends on the state where you live.


Chapter 7 is intended for low-income individuals who don’t have many assets or whose debts exceed the value of the assets sold.


Chapter 7 at a glance

  • Individuals and business entities both can file
  • Disposable income is required to be low enough to pass the means test
  • The trustee sells nonexempt assets and repays creditors
  • Takes 3 – 4 months

Benefit: Allows debtors to dispose of qualifying debt and start fresh

Drawback: No provision for avoiding foreclosure or repossession by catching up on missed payments. Trustee disposes of nonexempt assets


Chapter 13 Bankruptcy – The Repayment Plan


Chapter 13 gives debtors the chance to reorganize and pay back at least part of the debt they owe through a repayment plan. It’s designed for people who have income and enough money left over at the end of the month to make payments to their creditors.


Debtors who make too much money to file Chapter 7 can file Chapter 13. Many choose to file Chapter 13 because of the benefits it offers, like the option of catching up on mortgage payments and eliminating junior liens from real estate property.


The people most likely to file Chapter 13 are:

  • Those don’t qualify for Chapter 7 but want debt relief (prevent garnishments, lower credit card payments, stop lawsuits)
  • Those with nondischargeable debts (alimony, child support) when they want 3 – 5 years to pay off what’s owed
  • Those behind on house or car payments who want the time to catch up and keep the assets

Chapter 13 at a glance

  • Only individuals can file (includes sole proprietors)
  • Can have no more than $419,275 in unsecured debt or $1,257,850 in secured debt. (as of April 2019)
  • Time to complete payment plans typically takes 3 – 5 years
  • Debtors keep their property but are required to repay unsecured creditors an amount equal to the value of the nonexempt assets
  • Allows removal of junior liens from real estate
  • Allows reduction of principal on loan balance on secured debts

Benefit: Debtors keep their property and catch up delinquent payments on mortgages, cars, and nondischargeable debt

Drawback: Requires monthly payments to the bankruptcy trustee for 3 – 5 years. A portion of unsecured debt must be repaid.


Sale and Leaseback – If you have equity in your home, you have an alternative to Chapter 13.


Refinancing takes time, even if you can get approved. Getting a home equity loan probably isn’t an option for homeowners who are already in enough financial trouble to be considering bankruptcy.


A sale and leaseback program can be a godsend for individuals who need cash fast, want to stay in their homes, and are suffering from credit issues or job loss. It’s also a viable option for those who want to avoid personal bankruptcy (Chapter 13).


Why is Skydan Equity Partners the best alternative to home refinancing in Chicago?


We aren’t lenders who evaluate your credit score, job history, or tax situation before considering whether or not to help you out. You don’t need good credit, a job, or a clean tax record to qualify for the Skydan home equity loan alternative. All you need is equity in your home.


We’ll buy your home from you for fair market value and give you the cash you need to get caught up on bills. You stay in your home for up to 2 years with no monthly payments and no interest accruing. At the end of the agreed-upon time period, you can buy your house back from us at the original price (plus deferred rent) or sell the house and pocket any profit (minus the amount owed to Skydan). It’s that easy.


We can help, even if you’ve already filed Chapter 13. If you live in one of the following Illinois communities, give us a call today. We want to help you regain your financial security.


Cook County

Will County

DuPage County

Lake County

Kane County

Kendall County