What debts can be cancelled in bankruptcy under Illinois law?

Illinois law does not provide for cancellation of debts. The only way to get debts cancelled is to file bankruptcy, which is governed under federal law. If you live in Illinois and you wish to declare bankruptcy to deal with your debts, you will be able to fill your case in Illinois. All you have to do is file the case in the federal bankruptcy court located within the state. 

What Debts Are Cancelled in Bankruptcy?

So, when you do file your bankruptcy in the federal bankruptcy court in Illinois, what debts can you expect to have cancelled? That depends on what chapter of bankruptcy you file. If you file a Chapter 7 bankruptcy, then all eligible debts are going to be discharged (or "cancelled" in layman's terms). If you file Chapter 13 bankruptcy, however, you will enter into a 3-5 year long repayment program wherein some of the debts you have must be repaid. At the end of your repayment plan, at that point, any remaining balances will be cancelled. 

When it comes to debt cancellation, whether you file for Chapter 7 protection or Chapter 13 protection in bankruptcy court, there are certain kinds of debts that can be dealt with by the bankruptcy and certain kinds that cannot. For example:

  • Most unsecured debts can be "cancelled." These include credit card debts owed, medical bills, and any personal loans that you have taken. 
  • Some types of unsecured debts may not be cancelled. Certain tax obligations, pretty much all student loan debts,  and any back child support that you owe are among the debts that cannot be included in a bankruptcy filing or altered by the bankruptcy. 
  • Secured debts, meaning, debts that have collateral attached to them, like mortgages with houses or cars with car loans, will not be dealt with in the same way as unsecured debts. If you have a mortgage, for example, the mortgage will not simply be discharged or included in your Chapter 13 plan. Instead, generally you will either need to reaffirm the debt (agree to keep paying it) or surrender the asset. 

Getting Help

For help in determining if your debts are eligible for discharge or inclusion in a Chapter 13 repayment plan, consult with an experienced bankruptcy lawyer in Illinois.