Chicago bankruptcy attorney David M. Siegel answers a few important questions pertaining to Chapter 7 bankruptcy. The questions were made a part of the Legal Action television show which airs in the Chicago market.
Whats a Chapter 7 Bankruptcy?
Interviewer: What’s a Chapter 7?
David Siegel: Chapter 7 is the most common form of bankruptcy. About 75 percent of the cases that are filed are of the Chapter 7 variety, and that’s known as the fresh start bankruptcy. Chapter 7 is where someone has very little in the way of assets, and a lot of debt. Whether it be credit cards, medical bills, personal loans, past due utilities, auto repossessions, foreclosures. Whatever it might be Chapter 7 is a way to eliminate the majority of one’s debt, move forward and get a fresh start. Some exceptions, not every debts eliminated, but Chapter 7 would allow in most cases, either a fresh start completely or the majority of the debt being eliminated, and life goes on. You’re able to wipe the debt away and start fresh.
Why File A Chapter 7 Bankruptcy?
Interviewer: I know I’m going to ask you this just to – a general – the blanket question, but when would – when and why would somebody want to file a Chapter 7?
David Siegel: Let’s say someone who has just lost their job or had an illness or gone through a divorce, some kind of drastic financial situation that all of a sudden took money out of their pocket or took income away.
Discharge Attorney’s Fees?
Interviewer: Would that discharge attorney’s fees, Dave?
David Siegel: You can discharge your own attorney’s fees.
David Siegel: You’ve got to be careful with court orders on other peoples, but basically someone who’s been living credit cards, maybe they took out cash advances, maybe they went and got a payday loan or a title loan, and just they’re not able to make ends meet. They’ve been making minimum payments on the credit cards maybe, and now it’s to the point where they can’t even make the minimum. So you’re going to have a late fee, over the limit fee, and of course creditors when they don’t get paid they have collection mechanisms. That’s harassing phone calls, lawsuits, garnishments, bank citations, they have a way of not only getting a judgement against you and harassing you, but actually taking whatever little you do have on account or wages.
Wages Being Garnished After Payday Loan
Interviewer: Dave, you mentioned payday loans, and that’s maybe unfortunate that’s very, very popular. We get a lot of people that come in and they’re essentially being garnished, there hasn’t been a lawsuit that’s been filed, but they borrow whatever amount of money, and that is coming out of their paycheck voluntarily. So is there – do you have to wait to file the bankruptcy to take care of that or what can you do?
David Siegel: Unfortunately, when someone visits a payday loan store or a title loan store they’re in a situation where they’ve exhausted – typically exhausted all other forms of credit. So there’s no more room on the credit card, they can’t a traditional loan from a bank, they can’t get an equity line; there is no more money. They can’t borrow from family or friends, they’re at the last resort. They go to these stores that will give them money in exchange for repayment of that money at a premium.
Interviewer: Huge premium.
David Siegel: Anywhere from 100 percent to 500 percent or anywhere in between. What happens is the people typically can’t make that loan repayment back, and they’ll roll the payday loan over to another week to another cycle and increase the fees.
Interviewer: It continues to build up.
David Siegel: So when you get into that situation as a consumer one or two things is going to happen. You’re either going to come into some money and be able to pay it off or more likely than not you’re going to fall deeper into debt and eventually have to file a bankruptcy to just wipe the slate clean. But you want to file that as soon as possible once you’re in that terrible situation f owing payday loans. At that point you’re already at the panic mode; so you really need help. You need to talk to a professional to find out what your rights are at that point.
