• Knowing the regulations can help bankruptcy filers through the process.Paying Bills image by ne_fall_photos from Fotolia.com
  
  Although many consumers try to avoid it, filing for Chapter 7 bankruptcy protection can be the only way out of a mountain of debt. Filing for bankruptcy protection has been referred to as being a fresh start for debtors, freeing them of debt obligations that are causing financial strain. Each state has its own regulations regarding filing for Chapter 7 bankruptcy, including Illinois, and knowing the guidelines beforehand can make the process smoother and recovering after filing, easier.
  
  

Bank Accounts

• Before filing for bankruptcy protection, consumers should examine their relationships with financial institutions, especially those banks where the consumer has both a checking and savings account, plus a credit product. Under Illinois law for financial institutions, if a consumer has a deposit account at the same bank holding one of his credit products included in the bankruptcy filing, the creditor has the right to set off accounts and retain the funds in either the checking or savings account to pay toward the delinquent credit accounts. Although Illinois bankruptcy law prevents collection activities from occurring after the filing, funds can be retained by the bank after the account becomes delinquent; for this reason. it is recommended that consumers move their deposit accounts to a separate bank uninvolved in the bankruptcy before the case is filed. In Illinois, a checking account must be established by either a minimum opening deposit of $100 or a written direct deposit agreement. In addition, the Consumer Deposit Account Act requires that financial institutions offer a basic checking account to any person who is over the age of 65 who requests one.
  
  

Exemptions

• When preparing for a bankruptcy filing, knowing which property is considered an exemption by the trustee under Illinois law is extremely helpful, as exact exemptions will vary by state. Exempt property is not eligible to be seized and sold by the trustee and can be retained by the consumer. According to the Illinois Bar Association in 2010, examples of exempt property include funds received as a result of alimony or child support, equipment valued up to $1,500 that is required for employment, pensions and benefits like Social Security or disability. Also available for Illinois residents is The Homestead Exemption for real or personal property with up to $15,000 in equity, including buildings, condominiums, mobile homes, farms, lots or co-ops. Illinois residents may also retain personal property such as prepaid tuition, pre-need cemetery funds and trust funds. Consumers in the state may also keep automobiles with up to $2,400 in equity, clothing, proceeds from the sale of exempt property, settlements received in wrongful death cases and settlements up to $15,000 received from a personal injury case.
  
  

Rebuilding Plan

• After filing for bankruptcy, consumers have the opportunity to rebuild their credit rating. In Illinois, there is no time limit for reporting credit information when an individual is applying for a job with a salary over $20,000 or for over $50,000 of life insurance or credit, making the credit report vital. One of the easiest ways to rebuild credit is to make payments on accounts for as long as possible before filing for bankruptcy. It is also recommended to determine what lead to the bankruptcy filing. Illinois residents who were hit with a job loss or financial setback can use funds from discharged debt payments to build up an emergency fund; those who overspent should learn to live on a strict budget. Residents of Illinois also have the option to obtain a copy of their credit report annually under federal law and have the right to dispute inaccurate and incomplete information. In addition, Illinois residents who are looking for credit counseling assistance should only work with an agency that is registered with the Illinois Secretary of State Index Bureau and the Department of Financial Institutions.