Q&A

No.  Student loans are not going to be eliminated in a Chapter 7 bankruptcy filing.  Loans for any type of educational purpose are not going to be eliminated.  The one exception would be in cases of undue hardship.  I have never seen a case successfully brought where the loan was eliminated.  They are simply very rare, indeed.  However, that does not mean that filing for bankruptcy is not advisable.  In many cases, if the credit cards and medical bills and personal loans can be discharged, the individual may then be in a better position to repay the non-dischargeable debts such as student loans.  Each case is particular and the advice given will be based upon the case at hand.  If you are thinking of filing for bankruptcy relief, make certain that you fire an attorney that has extensive experience in handling bankruptcy cases.  It is very hard to undue a case once it has gone wrong.  It is always best to get it done right the first time.

Technically, Chapter 13 will stop an eviction action provided that there is not already a judgment for possession entered in the case.  If there is a judgment for possession entered, then the debtor can bring a special motion before the bankruptcy court to try to hold off the eviction and have Chapter 13 bankruptcy apply.  So the first question that I asked the client when they come in and they are being evicted is what step in the process is your eviction?  In other words, has it already gone to a judgment for possession you are just waiting for the sheriff to put you out?  Or is it early in the process where the creditor has not received a judgment for possession yet?  As long as its prior to the possession judgment date, the Chapter 13 stays the proceeding.  If on the other hand, it has already gone to a possession judgment, then the creditor is technically not stayed.  However, in my experience, I have seen many cases where creditors are willing to accept the Chapter 13 payment arrangement in an effort to get paid as opposed to pushing through the court with a modification of the stay if one exists in getting the debtor evicted.  Most landlords are understanding whereby if the debtor can make current payments plus repay over time, the landlord is in a much better position than if they simply evict and try to find another tenant.

The law on this is very technical.  If the case has already gone to a judgment for possession, then there are several steps that the attorney must do to try to get the Chapter 13 to apply.  You definitely want to talk to an experienced Chapter 13 attorney if you’re going to bring any kind of action to stay a possession order after it’s already been entered.  However, in my experience once again, most landlords are accepting of the Chapter 13 stay in don’t try to fight it.

Chapter 13 does not remove a lien.  There are different techniques that your bankruptcy attorney can pursue to have a lien removed.  The most common way to remove the lien is to bring a motion before the court to avoid a judicial lien claiming that the lien impairs some sort of exemption.  That exemption could be on real estate.  That exemption could be on personal property in accordance with the bank account being seized or any other exemption under state or federal law, depending on your state.  If you are paying back a creditor 100%, then that lien should be removed on completion of your 100% payment plan.  Just remember that filing a bankruptcy may eliminate the collection of a debt; however if that debt is not paid in full, the lien will remain to the extent that it wasn’t paid.  In certain circumstances if you don’t have significant equity in your real estate and a lien is put against the real estate, the lien can be removed with a special motion before the court.  I’m referring to a judgment lien in these particular cases.  If you have an IRS lien or a child support lien or a lean other than a judgment lien, then it cannot be removed by way of motion that I’m talking about.  However, the most common lien is a judgment lien and that can be removed under Chapter 13 bankruptcy law if the proper motion is brought and provided the lien does not impair one of your exemptions are allowable under the law.

When you’re making an appointment to see a bankruptcy attorney you want to make sure that you have all the information ready at your meeting so that the attorney can give you the best advice possible. The first item that you are going to need is all the information concerning your debt. This includes credit card statements, medical bills, personal loans, past-due utility bills, auto repossessions, foreclosure documents and any other document evidencing a debt.

Additionally, you’re going to need your most recent federal tax return if you are filing under Chapter 7 bankruptcy law. If you are filing under Chapter 13 bankruptcy law, then you’re going to need your most recent four years of federal tax returns. Lastly, you’re going to need your most recent two months’ worth of paycheck stubs or other forms of pay advices. Pay advices include sources of income whether it be from a job, Social Security, unemployment, rental income, family assistance, or any other type of income Once you have all that information at your meeting, the attorney will be able to interview you and advise you on which chapter is best for you. It could be a chapter 7; it could be a chapter 13 or it could be no chapter in your case. However, for 99% of the clients that I see, there is definitely a solution to help you get out of debt. Most of the time that results in a chapter 7 fresh start filing. However, oftentimes, chapter 13 is the best chapter if someone is trying to save a home in foreclosure or otherwise reorganize nondischargeable debt.

The best advice that I can give is be honest and open with your attorney at your meeting. If you own property, disclose it. If you have an interest in a certain bank account or vehicle or any other type of property, disclose it to your attorney. The last thing you want to happen is to file a Chapter 7 bankruptcy case and lose property that you did properly disclose to your attorney. Your attorney will know how to protect the property under either state exemption laws or by filing the proper chapter. Finally, make sure you visit an experienced bankruptcy attorney to get the best result for your case.

A Chapter 13 filing will provide the automatic stay and stop collection of a judgment. The judgment could be just had or it could be in the Citation to Discover Assets phase or it could be in the Rule to Show Cause phase. Depending on where it is in the phase will depend on what your attorney has to do to get it to stop. If the case is simply gone to judgment, then filing the Chapter 13 is enough to stay the creditor. The creditor has to file a proof of claim and get paid for the Chapter 13 like all other creditors. If, however, you have a Rule to Show Cause against you for failure to show up in court on the collection of a judgment, then you must appear before the judge in a state or civil court, advise that judge that you have filed for Chapter 13 bankruptcy protection. If you fail to appear on a Rule to Show Cause, you can be held in contempt of court and arrested. You are not being arrested for the underlying debt or the inability to pay that debt but rather for your contempt of court.

In most cases, most of my clients are not facing a Rule to Show Cause at the time we filed a Chapter 13. However, there are sometimes when there are cases where the debtor is having to appear on a Rule to Show Cause and must appear even after the Chapter 13 bankruptcy case is filed. I will send an automatic stay to the creditor and/or the creditor’s attorney notifying them of the bankruptcy protection; however the court does not get aware of it. Thus, you as the debtor must appear if you are summoned to appear subject to a Rule to Show Cause. Each jurisdiction is a little bit different; each state is a little bit different. Make sure you contact your local bankruptcy attorney to find out whether or not you would need to appear in court after a judgment has been entered. The underlying collection of the judgment, however, is stayed pursuant to Chapter 13 bankruptcy law and the creditor is paid back at either 100% or less than 100% over the next 3 to 5 years.

Chapter 13 will not in and of itself eliminate your joint obligation to pay on a debt in your divorce case. The most common example is someone will be divorced and the divorce decree will say that husband in this example is to pay 100% of the couple’s joint marital credit card debt. If the husband then filed a Chapter 13 bankruptcy, and proposes to pay back less than 1% on those debts, those creditors are free to bring a motion to modify the automatic stay and to pursue the co-debtor, in this case the wife. The only exception would be as if the husband debtor is going to pay back 100% of the debt through the Chapter 13. Chapter 13 has what they call a co-debtor stay which protects a non-filing co-debtor provided that the debtor is paying back 100% of the debt.

So if you are a husband who has joint debt pursuant to a divorce and you think that you can pay back 10% of the debt through a Chapter 13 plan and eliminated, you are gravely mistaken. Not only can the creditor pursue the non-filing co-debtor for the other percentage that you are not paying, but your ex-spouse can bring a motion back into the divorce court to have you held in contempt for not obeying the court order in the divorce court. So it’s very important that you discuss this matter with your Chapter 13 attorney if you have joint debt or debt that you were ordered to pay in a divorce decree to protect the other spouse and you really need to pay that back 100% through the Chapter 13 bankruptcy. If not, you are setting yourself up for more court action either in bankruptcy court or back in the state divorce court.

Have you ever thought that bankruptcy was an extremely difficult process to go through? Did you ever wonder how you can get a fresh start, eliminate your debt and put your debt worries behind you? Do you know people who’ve gone through bankruptcy and seem to be doing just fine now? Do you feel that if you file for bankruptcy that it will follow you all of the days of your life?

The best advice that I can give someone who is struggling financially and who is contemplating filing for bankruptcy is to look at all of the alternatives prior to filing. Maybe you can work out a payment plan with the creditor. Maybe you can borrow money from a family member or friend that you haven’t already borrowed money. Maybe you can purchase a lottery ticket and pray that you are going to be the big winner. In most cases, the best solution is the one provided under federal law known as the United States bankruptcy code.

Chapter 7 of the United States bankruptcy code is liquidation bankruptcy where most people are afforded a fresh start. Filing Chapter 7 involves a bankruptcy petition, one appearance at 341 meeting of creditors, the providing of certain pay advices and tax returns, and the completion of a credit counseling session as well as a personal financial management instruction course.

Chapter 13 of the United States bankruptcy code is known as re-organization. This chapter allows you to repay debt either in full or often at a percentage on the dollar over a three to five-year period. While you are in the payment plan, creditors cannot take certain collection actions against you. Provided you make all of your payments on time pursuant to the chapter 13 plan which is filed on your behalf by your attorney, your creditors must abide by the bankruptcy automatic stay and accept payments pursuant to your plan. Chapter 13 is most commonly used to save a home that is in foreclosure, to repay an auto debt, to pay other non-dischargeable debt as well as any other debt that you may have. The amount that you pay and the length of your payment plan is dictated by your income, expenses, assets and liabilities.

For the best advice, consult with an experienced bankruptcy attorney in your local area. Make sure that the attorney that you hire is capable of handling your case. Make sure to check some references that the attorney provides. Don’t be embarrassed to ask difficult questions of the attorney. If the attorney is unable to answer your questions and is unable to provide references of prior clients that he has helped, then you should choose another attorney. There are likely dozens of qualified bankruptcy attorneys in your city or hometown. By asking the right questions, you can ensure that you’re going to be represented by a quality attorney in the bankruptcy field.

When a chapter 13 bankruptcy case is filed, creditors receive a notice of such filing. Creditors then have the opportunity to file a proof of claim with the clerk of the US bankruptcy court. The proof of claim is evidence of what the debtor owes to that particular creditor up and until the date the case was filed. For unsecured creditors, the proof of claim is not very critical because those creditors are paid back at the end of the case and typically at a percentage on the dollar not in full. A proof of claim is critical for a secured creditor such as a mortgage company or an auto finance company. Under chapter 13 laws and the local rules of the state of Illinois, the amount that the debtor provides in the model plan is going to dictate what that creditor is paid. If the creditor fails to file a claim or files a proof of claim for less than what is actually owed, and does not object to debtor’s plan, then that creditor is going to be paid the amount that the debtor listed in the plan which may be different than the amount actually owed. For this reason, creditors will seek additional time to file proofs of claims in chapter 13 bankruptcy cases prior to confirmation.

If there is a dispute between the debtor and creditor as to how much the proof of claim actually is, then the matter can be sent over for an evidentiary hearing. In the hearing, the mortgage company will have to provide a person who has knowledge of the business records of the Corporation and who can testify as to the truth and accuracy of those business documents. The debtor may dispute some of the charges on the proof of claim. For example, mortgage companies typically provide an expense relating to viewing the property to make sure that it’s still habitable. This is known as an inspection and could cost the debtor two to three hundred dollars per month when in actuality, an actual inspection may not have taken place. This is one area of the law where the proof of claim can be disputed and a hearing can be held.

If you’re in a chapter 13, make sure the proof of claim filed by your mortgage company and or finance company to ensure you’re not paying back more than you actually go to the creditor.

When you file chapter 7 bankruptcy and you have real estate property, you have the ability to either maintain ownership of the property or allow the property to be foreclosed upon. The chapter 7 bankruptcy filing eliminates the obligation to pay on the mortgage. However, the owner of the property is still on the hook for city violations, ordinance violations and any other debt owed to a village or municipality. I received a recent inquiry whereby a person filed chapter 7 bankruptcy three years ago. Due to the location of the property, the mortgage company has decided not to foreclose as of yet. Due to this fact, the city of Chicago is instituting condemnation proceedings against the property and its technical owner. The homeowner would like to get the property out of her name in the worst way. She is constantly battling with the city of Chicago in the condemnation court in an effort to avoid ongoing fees and expenses. I suggested that she attempt to contact the lender to see whether or not that lender would agree to a deed in lieu of foreclosure. If the lender will agree, then the homeowner will no longer be obligated for city violations going forward.

If the lender is not willing to offer a deed in lieu of foreclosure, then the homeowner is really in a tough situation. The homeowner will have to deal with the city of Chicago’s condemnation court and pay whatever costs are associated with said condemnation. I advised the person that although this is a difficult situation and although there is some expense involved, the actions of the city of Chicago will eventually remove your name from any future liability once the process is complete.

In my experience, the only situation whereby a lender is not going to seek a quick foreclosure process is when the property is in a very undesirable neighborhood and they simply do not want to take on the financial responsibility of that property. The key lesson here is that whenever you feel that you want to be part of the real estate market and become a landlord or investment property owner, you really need to examine the neighborhood in which that property will sit. The case highlighted above is a perfect example of someone who sought to be a real estate investor and invested in the wrong property in the wrong neighborhood.

Filing for Chapter 7 bankruptcy is a bad idea if you are going to be losing significant assets in the process. Under chapter 7 bankruptcy law, the trustee, appointed by the US bankruptcy court, oversees your case from start to finish. The main job of the chapter 7 trustee is to determine whether or not there are any significant assets that can be administered for the benefit of creditors. Each debtor is allowed a certain amount of property free and clear from the long arm of the trustee. Each state has exemption laws which protect property while someone is going through the bankruptcy process. In the state of Illinois, you can protect up to $15,000 worth of equity in real estate. One can also protect up to $4000 in any miscellaneous property known as the Illinois wildcard exemption. One can also protect up to $2400 worth of equity in one motor vehicle. Your bankruptcy attorney should be able to advise you whether or not any of your property is subject to administration by the chapter 7 panel trustee.

If you have significant non-exempt property that is subject to administration by the chapter 7 trustee, then your attorney should make you aware of this fact and may even advise you against filing for chapter 7. Under chapter 13 law, you protect all of your property while you’re in your repayment plan. Chapter 13 is the case that you want to file if you’re trying to protect non-exempt property. Many people make the mistake of not advising their attorney of all of their personal and real property. At the 341 meeting of creditors, the trustee will inquire of the debtor under oath. At that time, the debtor may make the trustee aware of particular pieces of property or assets that were not made known to the chapter 7 bankruptcy attorney at the time of filing. Once this occurs, the trustee can bring a motion to appoint himself or another attorney counsel and administer the asset for the benefit of creditors. That attorney and/or trustee is going to make a percentage on the dollar of what is administered as well as an administrative legal fee. If the amount of non-exempt property is diminimis, then the trustee is not likely going to bring an action to try and have the asset administered. If, on the other hand, the asset is large, then the trustee will be forced and incentivized to bring an action to administer that asset.

If you are thinking of filing for Chapter 7 bankruptcy and you are concerned about whether or not your assets are going to be safe, meet with an experienced bankruptcy attorney in your local area to find out your rights.

Believe it or not, you do not have to wait to purchase a vehicle after filing a chapter 7 bankruptcy. This concept is known as open bankruptcy financing and it is being done all over the country. Here in Chicago, we recommend economy auto Mart. Economy auto Mart is one of those companies that specializes in helping people who have recently filed for Chapter 7 bankruptcy relief. Once you have your case number, you can proceed to purchase a vehicle.  Financing is reasonable, and the amount that you pay is dependent upon your income status. The key to purchasing a vehicle is to get a reliable vehicle after you file for bankruptcy. Many people trying to get into a vehicle that is over their head and they only wind up falling back into debt if the vehicle winds up being repossessed. Once that happens, there is an auto deficiency that the lender can pursue since you are no longer protected under the bankruptcy stay.

My advice is to find a dealership that deals with open bankruptcy financing who you can trust. Check out the company on the internet; make sure that you check some references and asked the right questions. If you do your homework, you will be able to get yourself into a relatively decent car at an affordable rate and at a decent interest rate.

This ability to finance a vehicle immediately after a bankruptcy filing should put some people’s fears to rest. Many people feel that once you file for bankruptcy, you will never get credit again. This is simply not the case. If you are wise about your budgeting after you file for bankruptcy, and you find a trustworthy auto lender, you’re going to find yourself in a reasonably decent car at a great monthly rate.

If you are someone who is struggling financially, maybe you have a vehicle that you owe more than what it’s worth, maybe you’re struggling financially and in many other different ways, and then filing a chapter 7 bankruptcy may be your best option. Knowing that you can refinance or finance a used vehicle immediately after filing a chapter 7 bankruptcy should be a very welcoming idea.

It is possible to keep a car while filing Chapter 7 bankruptcy. If your vehicle is paid in full, then whether or not you can keep the car depends upon the value of the car. In the state of Illinois you are afforded an exemption amount of $2400 in one motor vehicle. In essence, the vehicle would have to exceed $2400 for a chapter 7 trustee to show any interest in administering the asset. You also maintain in Illinois a $4000 miscellaneous wildcard exemption which can be applied to any personal property such as an auto. If you have a vehicle that has far in excess of $2400 worth of equity, then your attorney should advise you that the vehicle is potentially at risk of being taken for administration by the chapter 7 trustee. You also have the ability to buy out the trustee’s interest in lieu of giving the vehicle up.

If your vehicle is financed, then you have the ability to reaffirm the debt on said vehicle.  Reaffirming the debt on the vehicle means that you are going to be liable for that debt going forward. This means that if something happens to the vehicle, such as the inability to pay for it post-filing, then the vehicle may be repossessed, sold at auction, and you could be held responsible for the deficiency amount. If you choose to reaffirm a vehicle debt, you must realize that you are taking on that obligation that was formerly eliminated in the chapter 7 filing. You want to make certain that you have the financial ability to maintain current payments from the date of filing going forward.

If you’re bankruptcy petition and schedules reveal the inability to make the payment, then the court may set a reaffirmation hearing. The court is basically looking at schedules I and schedules J, which correlate to monthly income and monthly expenses to determine whether or not you have the financial ability post-filing, to make your auto payment. If you are spending more than you are bringing in per month, then the court very well may set a reaffirmation hearing to have you elicit testimony under oath as to how you plan on being able to keep that vehicle. Should the court deny your reaffirmation agreement, then the lender will have the ability to repossessed the vehicle, modify the automatic stay, and sell a vehicle at auction. If this were to occur, you will not be responsible for any deficiency since the debt was technically eliminated in your chapter 7 filing.

In the many years since the bankruptcy laws were changed in 2005, I have only had the occasion to see one or two reaffirmation agreements denied by the court. Despite the fact that there have been many reaffirmation hearings, the court was very reluctant to deny that debtor the use and the obligation to pay for the vehicle.

Chapter 13 cannot eliminate or reduce a domestic support obligation.  Domestic support obligations are monies owed to a spouse, former spouse or child and they take priority in the Chapter 13 hierarchy of who gets paid.  If you are someone who is behind on your child support and you are about to have your driver’s license suspended or you are brought back into divorce court on a Rule to Show Cause, trying to hold you into contempt for failure to pay, you do have the ability to file Chapter 13 and reorganize those debts.  The trick is you are not eliminating the debt, you are not reducing the debt, and you are simply reorganizing the timeframe in which you are going to pay that debt.

Let’s say for example you owe $20,000 in child support arrearages.  You can file a Chapter 13 and whatever that arrearage is, in this case $20,000, you can pay that back over the next 3 to 5 years as long as you are paying it in full you have protection.  If, however, you fail to pay in full, the case will not get confirmed and if you fail to make your payments, the trustee is going to bring a Motion to Dismiss the case.  Current child support obligations are paid outside of a Chapter 13 bankruptcy directly to the spouse, ex-spouse or through an Order of Withholding through your payroll.  It is only the arrearage, the part that you fell behind in child support, maintenance or alimony that we are talking about reorganizing through Chapter 13.  That’s a Chapter 13 is a way to repay, however you cannot reduce the amount that you owe on a domestic support obligations under current bankruptcy law.

A Chapter 13 bankruptcy case will last anywhere from 3 to 5 years typically.  I say typically because a Chapter 13 at 100% can pay off much earlier.  If somebody comes into money whether it be an inheritance or lottery winnings or some sort of windfall and there may be one year into their five-year payment plan at 100%, that debtor does have the ability to pay off 100% of the debt and extract themselves from the Chapter 13 process.  That scenario that I mentioned is very rare.  The more common scenario is the debt is being paid back at either 10% or somewhat greater than 10% but less than 100%.  In those cases, the Chapter 13 debtor must be in the plan for at least 36 months.  At that point, 10% will have been paid; or until such time 10% has been paid.  So the case can last anywhere from 3 to 5 years typically because sometimes at the end of 36 months, the unsecured creditors have not reached the 10% point.  Sometimes and often times it takes the full 60 months to pay off what’s required under the bankruptcy plan.  Since bankruptcy is a long process, you want to make sure you get off to a good start.  You want to make sure you have payroll control in effect if you are gainfully employed.  And you want to make sure that you budget continuously so that you have success going forward.  Chapter 13 is a long, difficult process.  If you are in a repayment status for 3 to 5 years, you have to be perfect.  If you are not perfect, the creditor and/or the trustee will bring a Motion to Dismiss your bankruptcy case or modify the stay to be able to recover property.  Your bankruptcy attorney will be able to give you an estimate on how long your bankruptcy case is going to take based on your income and your expenses and your total debt.  The typical timeframe is anywhere from 3 to 5 years.

One of the many benefits to filing Chapter 7 bankruptcy is that almost every collection effort will be stayed.  This is true for wage garnishments provided the debt is not one in the nature of spousal support or child support.  Those particular debts survive a bankruptcy filing as they are non-dischargeable.  Most other debt such as medical bills, credit cards, personal loans and others are eliminated in the bankruptcy case.

An automatic stay is created which prohibits creditors from taking or continuing with certain collection actions.  A wage garnishment is one of such actions that has to cease.  This means that upon filing, the debtor will see an immediate termination of all non-support garnishment deductions.  What a relief it is to finally receive the full amount of wages earned by a debtor in a pay period.

Trust

The most important thing you should look for in a bankruptcy attorney is someone you can trust. By trusting your attorney, you are putting all of your legal matters in his hands. If you struggling financially and you want to get a fresh start, then you want to make sure that you hire a bankruptcy attorney who has experience. Experience in bankruptcy goes a long way toward the success of your case. You want to make sure that you hire someone who is knowledgeable, caring, supportive and dedicated to helping people get out of debt.

Many Claim To Be Competent

There are many attorneys who hang a shingle and claim to be able to help you get out of debt. Most of these attorneys can file the proper documentation and get you a fresh start. However, if your case is the least bit difficult, or a serious issue arises, you are going to want to make sure that you have competent help.

Number Of Cases Filed

When you meet with an attorney, ask that attorney how many cases they file on a yearly basis. If the attorney files a handful of cases, you probably do not have the most experienced attorney. My office handles approximately 600 bankruptcy cases per year. You can rest assured that when we are handling your case, and you are getting the utmost in professional, experienced legal knowledge. If you ever have a question, my office will know the answer.

Written Works

You also want to take a look at what that attorney has written such as books, publications, and articles. Take a look at the attorney’s website. Is the website full of information or is it full of fluff? By doing a little research you can learn quite a bit about the law firm you are going to hire.  And most importantly, what type of attorney is going to handle your case from start to finish.

Chapter 13 Payments

Chapter 13 plan payments are basically a mathematical formula based on a number of different factors.  Obviously it’s based on your income minus your expenses.  Whatever a dollar amount that is known as your disposable income amount and that’s required to be paid back through Chapter 13 trustee.  However, your assets are also important in determining how much you have to pay back and how much your plan payment needs to be.  There’s a liquidation analysis which says under Chapter 7 law, there is a certain dollar amount that creditors would get if you filed that Chapter.  That dollar amount is pretty much the equivalent of what creditors must get under Chapter 13.  In many cases, 10% is sufficient to pay off the creditors in terms of that liquidation analysis.  In other cases and in the means test, you might have to pay more than 10%, maybe 40%, maybe even 100%.

Final Determination

It is not until your cases filed and it is not until you’ve been examined by the trustee and it is not until all the creditor claims commission that we can accurately determine how much your plan payment is going to be.  We certainly can estimate a plan payment based on your income, your expenses, and your assets in your liabilities.  However, we can’t officially determine what a plan payment is going to be until a plan is proposed and confirmed by the court after all the creditors have had an opportunity to file claims.

The decision on whether or not to file bankruptcy is a personal one. For many people, the decision is a difficult one. For others, the decision is very simple. Let’s look at a couple of examples. If you are someone who has very little in the way of income, and thousands of dollars of unsecured credit card debt, then it makes sense to file chapter 7 bankruptcy. You simply do not have the income to stay on top of the high interest rate that the credit cards are charging. You simply won’t have the ability to make more than the minimum payment in an effort to pay down the debt. Thus, if your income is low and your debt is high, filing chapter 7 is a good idea.

However, if you do have significant income and you do have the ability to make a strong payment plan on your debt, then I do not recommend that you file for chapter 7 bankruptcy. The yardstick that I like to look at is whether or not you can pay off your debt within a six-month time-frame. If you feel that you can bail yourself out of debt within six months without causing an extreme hardship upon you or your family, then it makes sense to not file bankruptcy.

There are certain circumstances where you feel that you need to file. This is typically the scenario where someone is garnishing wages or has attached your bank account. You are basically filing because you need to protect something. You need to protect your bank account that is frozen. If you didn’t have anything to protect, then there would be no need to file and certainly no need to file immediately. However, in the two situations that I just mentioned, filing bankruptcy is going to be the quickest way to eliminate the problem. Upon filing bankruptcy, the garnishment on your wages will stop immediately. Your frozen bank account will eventually become unfrozen provided there has not been a previous turnover order already entered into the court system. For this reason, you want to contact a bankruptcy attorney as soon as possible once you know that you are being garnished and once you know that your bank account is being attached.

When most clients or potential clients come to see me, it is clear to me that they have an issue that needs relief. In many cases, I have to advise the client that life will go on after a bankruptcy filing. People genuinely want to get out of debt, but they are concerned about their credit going forward and the perceived inability to rent an apartment. Once the clients and potential clients understand that getting out of debt is not a death sentence, then they are interested in the process. For most people, is not a happy day, but rather, a day that they need to realize.

For information on filing bankruptcy, speak with an experienced bankruptcy attorney in your city. Most attorneys will offer a free initial consultation where you can learn all about filing without having to pay a dime. If you decide to go forward with the case, the attorney will tell you all the details, spell out the payment plan, and give you advice on how to proceed.  My office can be reached at 847-520-8100. The first consultation is always complimentary.

Meeting of Creditors & The Trustee

When you file for bankruptcy under either chapter 7 or chapter 13, you are going to have to appear at a 341 meeting of creditors. The meeting of creditors is an opportunity for the trustee to examine you under oath with regard to the information provided on your bankruptcy petition and your schedules. The trustee in a chapter 7 is looking to see if you have any non-exempt assets that could be sold to pay to your unsecured creditors. The chapter 13 trustee is looking to see that you are providing all of your disposable income per month towards your chapter 13 repayment plan.

Answering The Trustee’s Questions

When answering the trustee’s questions in a chapter 7 meeting of creditors, you want to always answer truthfully and honestly. However, if you have the ability to answer the question in a yes or no format, then that is how you should answer. In other words, if the trustee asks you about your vehicle or your house, you want to answer directly as to the value of the item and to the condition of the item. It is not the opportunity to brag about the item or too overly value the item. The trustee in chapter 7 is only going to make an issue where you have property that exceeds what the state allows you to protect while you’re getting a fresh start. Thus, you want to be very honest about your property when speaking with the trustee.

Sharing Your Financial History

When dealing with the chapter 13 trustee, you want to be honest about your financial situation. Whatever you are earning per month, you want to explain to the trustee that it is your full income per month. This is not the time to talk about what you should be making, or what you will be making, or what other people in your industry are making. This is the time where you simply want to answer the question directly and let your paycheck stubs and your expense schedules speak for themselves. If the trustee feels that you are not being truthful, then he can recommend to the judge that confirmation of your bankruptcy case under chapter 13 law be denied. If confirmation is denied, then you will not be receiving the payment plan for the next 3 to 5 years and the case will eventually dismiss for failure to get a confirmable plan.

Conclusion

You do not have to be nervous at your meeting of creditors. What you appear before the trustee, simply answer the question that is being asked. If you are honest, then you have nothing to worry about under either chapter. If however, you are fabricating information or the information on your schedule is not exactly true, that you are going to have a problem under either chapter. Your attorney will advise you to be honest at your initial consultation and to make sure that the information in your petitioner and schedules is true and accurate. If you follow that advice, you are not going to have any difficulty dealing with the trustee’s questions at the 341 meeting of creditors.

Discharge In A Chapter 7 Bankruptcy

A discharge is an elimination of the debt.  The technical word discharge means the debt is discharged; your obligation to pay is discharged.  A discharge happens at the conclusion of a Chapter 7 bankruptcy case and at the conclusion of a Chapter 13 bankruptcy case.  Under Chapter 7 bankruptcy law, a discharge discharges all dischargeable debt in the case.  That does not mean all debt is eliminated, it just means the debts that are of the type that can be eliminated are discharged.  In a Chapter 7 for example, student loans are non-dischargeable.  Recent taxes are non-dischargeable.  Child support is non-dischargeable in parking tickets are non-dischargeable among many other debts.  When a person goes through a Chapter 7 bankruptcy, they will receive a discharge letter at the conclusion of the case.  That simply means that those debts that were dischargeable under law have been officially discharged.

 Discharge In A Chapter 13 Bankruptcy

The same is true with Chapter 13.  Under Chapter 13 case will receive a discharge in bankruptcy at the end of the payment plan provided to the creditors.  Certain debts are discharged in a Chapter 13 that are not discharged in a Chapter 7.  The area is very technical so you want to consult with your bankruptcy attorney.  For example, parking tickets are non-dischargeable in a Chapter 7 however they are dischargeable under Chapter 13.  At the conclusion of a Chapter 13 case, you will receive a discharge from the clerk of the US Bankruptcy Court.  All of your creditors and your attorney will receive that same discharge.  That discharge is the proof that your case has gone through to completion and no creditors under Chapter 13 can bother you on those debts.  The exception would be those debts that were not included in your bankruptcy and that were paid outside of your bankruptcy by a cosigner or just simply not part of your plan.

So a discharge is a conclusion of the case but it means two different things depending on which Chapter you filed on.  There’s a Chapter 7 discharge which doesn’t discharge everything and there’s a Chapter 13 discharge which should discharge everything except those creditors that were specifically excluded from your Chapter 13 payment.

Once your bankruptcy case is filed, the automatic stay kicks in.  The automatic stay basically tells creditors that they cannot take certain actions against you in the collection of a debt.  Your bankruptcy attorney will be able to send automatic stays to any creditor who is bothering you.  In addition, you have the ability to notify creditors of your bankruptcy filing.  You simply give your bankruptcy case number, the date of filing, your attorney’s name and your attorney’s number two that creditor.  Believe me when I tell you the creditor does not want to be collecting on a debt that is involved in a bankruptcy.  Not only is that a violation of the automatic stay subjecting that creditor to sanctions, but they understand that they don’t want to be collecting on a debt that’s already part of a Chapter 13 or already eliminated in a Chapter 7.

Your attorney is the main person that you want to go to if you feel you are being harassed by a creditor after filing.  Keep in mind that the creditors are notified by the clerk of the US Bankruptcy Court anywhere from 7 to 10 days after a cases filed.  However, with big corporations and multiple collecting agencies collecting on debts, it often occurs that they receive the notice but continue to pursue the collection effort.  In those circumstances, advise your attorney that you are being collected upon in your attorney will bring the proper paperwork to get it to stop.  You have the protection of the bankruptcy court in the advice and counsel of your attorney to guide you through the process.  You do not need to be harassed by creditors once you have officially filed for bankruptcy protection.

Most bankruptcy attorneys understand the predicament you are in. Most attorneys realize that you do not have a lot of money, and for this reason you are seeking bankruptcy protection. If you have the ability to work a reasonable payment plan, most attorneys will handle your case. Some attorneys will even file your case prior to being paid in full.

I often ask my clients, what are you paying per month in terms of minimum payments on your credit cards? The clients are thrilled to realize that once they decide to hire my firm, they no longer need to make minimum payments to the credit cards. This frees up plenty of disposable income per month to get a payment plan with your bankruptcy attorney. In my office, we work payment plans of as little as $100 every two weeks. In some extreme cases, we reduce that down to $50 every two weeks. We want to make sure that the individual is on the right track, doing the right things prior to filing, and most importantly, not wasting money on creditors when those debts are going to be eliminated.

The money that would go to the creditors on a monthly basis in terms of minimum payments can be applied towards the payment plan for your bankruptcy attorney. You actually may wind up with more money in your pocket at the end of the month since you are no longer making the minimum payments. This gives you the opportunity to pay your attorney at a faster rate or utilize the additional income for necessities such as rent, vehicle payments, food, clothing, transportation expenses, and expenses for your children.

The total amount of your payment plan will depend upon the circumstances of your particular case. Some cases are very simple and do not require high attorney’s fees. Other cases are very complex, and do require a higher than normal attorney fee. This all depends upon who you owe, how much you owe, and the type of creditors that you have; the more complex the case, the higher your attorney fee is typically going to be. But rest assured, the attorney will be able to work with you and structure of payment plan that you can definitely afford.

You will find that applying for bankruptcy protection may be the best financial move you ever make. Many clients contact me and state that they wish they would have filed sooner. Many clients have wasted countless dollars, exhausted protected property such as retirement accounts, in an effort to maintain minimum payments and pay their creditors. Remember, bankruptcy protection is for the honest debtor who needs a fresh start. If you are someone who is tapping into your retirement account and borrowing money from other people to pay other debts, then you are someone who needs to be avail yourself of the bankruptcy protection under the federal law. For more information on how to file bankruptcy through an experienced attorney, contact my office at 847-520-8100. The first consultation is complementary and you will leave my office with a copy of my latest book, Chapter 7 Success.

If you own your house outright, then you are not going to be able to file a chapter 7 in order to eliminate credit card debt. A recent potential client came into the office with a paid off house worth approximately $125,000. She also had $22,000 worth of credit cards whereby one credit card company was suing her for $9000. There are a couple of options for this type of situation none of which involved chapter 7. The homeowner can file a chapter 13 and repay that debt over a three to five-year period. The homeowner can also sell the property and either pay the creditor in full or work out a payment. The problem is, the court activity is going to continue unless the debtor takes specific action.

In this particular situation, the debtor was planning on relocating to Texas. By doing, so she could probably avoid paying back the creditor if she sells the house prior to a judgment be entered against her. If a judgment is entered against her and the creditor is smart enough to place a lien against the property, then the judgment lien will have to be paid at the time she sells her property. For more information about filing either chapter 7 or chapter 13 bankruptcy, contact the office at 847-520-8100. The first consultation is always free and the advice could be life changing.

The fees are going to vary for a Chicago bankruptcy lawyer. Some charge as little as $750 to $1000, while others charge upwards of $2500 depending upon the case. The important factor is the complexity of the case. If you are a debtor that has a complicated case, then you can expect to pay a higher fee. For example, if you have significant debt, numerous assets, and non-dischargeability issues, the attorney is going to want a sizable retainer to take your case. On the other hand, if you have a simple case with very little assets and standard creditors, then your attorney may be able to charge less because the amount of work involved is going to be less.

Another question that comes up is whether or not the attorney has to be paid in full before a case can be file. There is something called a post-petition retainer which will allow the attorney to file the case prior to being paid in full. The post-petition retainer is a contract to perform certain services after a case is actually filed. By entering into this agreement, the debtor is provided the benefit of a quick filing with the ability to make payments over time to their Chicago bankruptcy lawyer. Please keep in mind that not every law firm will offer this service. In fact, it takes a special attorney to offer a post-petition retainer agreement.

In addition to price, focus on whether or not that law firm or Chicago bankruptcy attorney is qualified to assist you with your case. There are many attorneys who appear to be available to assist in bankruptcy who have very little experience in the business. If you’re filing bankruptcy, you want that to be the only time you ever file in your life. For this reason, make sure that your case is done properly. You can help reduce risk factors by hiring a competent, skilled, experienced bankruptcy attorney in your local area. Most attorneys will offer a free, initial consultation and advise you of their fees up front and in writing. If the attorney who you visit will not do so, then leave that attorney immediately and see a different lawyer.

In order to file for Chapter 7 bankruptcy, you must provide a copy of your most recent Federal tax return.  If you are going to be receiving a sizeable refund, then you want to time your bankruptcy filing so that you do not have the refund forthcoming after your filing date.  This way, you are able to protect your refund from the long arm of the Chapter 7 trustee.  This video talks about the importance of timing as it relates to tax refunds.

Jesse Barrientes: Right now we are in the end of January here.  So taxes are kind of going to be fresh, a lot of people have kind of filed because they want to get their money if they are getting a refund and if you have to pay, then people wait till that time.  So what if we are like in this kind of window period of time?  Do I have to provide 2012 or do I have to provide 2013 as well or just the last one I filed?

David Siegel: Well, as far as tax returns, you have to provide the most recent filing.  So right now, the old taxes, the old tax return is what’s due because we haven’t crossed the April 15 deadline yet.  So if we file early, you can provide your most recent return that you just filed or the one that is currently due.

But I want to bring up a point.  You mentioned about the time of filing.  When people are receiving their tax refund, that’s when they have disposable income.  That’s when they can finally pay off their bankruptcy attorney.  You want to be careful if you are going to be filing that you don’t file with a heavy return forthcoming because the trustee can intercept that return.  You want to make sure that you receive your return, pay your bills, pay your attorney and spend it on living expenses before you file.  You want that liquidated.  You don’t want that to be arriving after the filing because it will be intercepted by a savvy trustee.

This question comes to me from Adrian who lives in Chicago. She has approximately $5000 worth of parking tickets from the city of Chicago. These tickets have accumulated over the years, the amounts have sometimes double, and she claims that a lot of them are fraudulent. The city of Chicago is threatening to suspend her driver’s license with the Illinois Secretary of State if she does not either pay the balance in full or at a minimum, work out an installment payment plan. She came to me to talk about the possibility of a chapter 13 since he has other debt as well as the parking tickets from the city of Chicago.

The great news for Adrian is that parking tickets can be treated a specific way under chapter 13 bankruptcy law. Parking tickets, which are a non-dischargeable debt under chapter 7, can be compromised in a chapter 13 bankruptcy case. What this means to the person owing the debt is huge. For example, Adrian who owes $5000 to the city of Chicago for parking tickets can propose a chapter 13 bankruptcy plan which pays back 10% of that $5000 debt over a 60 month period. Provided she makes all of her payments and completes her plan, the remaining debt owed to the city of Chicago for parking tickets will be eliminated in full. Thus, she will have repaid a total of $500 to the city of Chicago over a period of 60 months and she will have wiped out $4500 worth of parking ticket debt.

This is just one of the advantages of filing a chapter 13 if you have parking tickets. If she were to work out an installment payment plan with the city of Chicago, she would be paying the full amount, for as long as it took to pay off that debt. In addition, the entire time that she was in that installment payment plan, she would be at risk of having her license suspended should she breach in her payment plan. Under chapter 13, you can actually fall a little bit behind before the case would be dismissed. This little extra time gives you the opportunity to catch up on the part you fell behind. Furthermore, if you’re chapter 13 bankruptcy case is dismissed by the chapter 13 trustee; you often have the ability to re-file without any penalty whatsoever. I have helped hundreds of people who file repetitive cases due to job loss, injury, divorce, or other emergencies which cause them to not be able to make the plan payment. Oftentimes, in the second or third filing, the debtor is better equipped to handle the payment plan, and has a greater understanding of how the chapter 13 process really works.

My advice to anyone who has numerous parking tickets with the city of Chicago is to examine your rights under chapter 13 bankruptcy. You may just find that in addition to repaying your parking tickets or a portion thereof, you have the ability to reorganize other debt such as mortgage arrearages and auto payments. By filing chapter 13 bankruptcy and being able to stretch out your payment plan over a 60 month period, you will find that you have room to breathe why you’re repaying your debt or a portion of that debt over time. Without chapter 13 bankruptcy, people would routinely lose their home, lose their vehicle, have their licenses suspended, have their wages garnished, have their bank accounts frozen, and all other collection efforts used upon them.

Lately, the city of Chicago has been cracking down on those who owe parking tickets. If you are receiving collection letters from the law firm hired by the city of Chicago to collect your parking ticket debt, you may want to call me at 847-520-8100. I may have an answer that works much better for you financially.

If you are behind on your mortgage, you still have the ability to file a chapter 7 bankruptcy case. Just keep in mind that the chapter 7 bankruptcy filing is not going to help save your home. Many people think that you can only file chapter 7 if you are current on your mortgage. This is simply not the case. What chapter 7 will do is eliminate other debt and then give you the ability if possible to catch up on your mortgage. There is this misconception out there that basically states that you can only file a chapter 7 bankruptcy case if you are current on your mortgage. Once again, this is simply not the case.

If you are trying to save your home from foreclosure and you wish to stop the sale date and repay your debt over time, then chapter 7 is not going to be the right chapter. For those situations, you are going to want to file a chapter 13 bankruptcy case. Chapter 13 is the case where you can repay mortgage arrearages over a three to five-year period while you are allowed to make your regularly scheduled mortgage payment on time once again. So depending upon whether or not you want to keep your home would dictate in part what type of bankruptcy case you’re going to file.

I believe the misconception stems from the fact that many bankruptcy attorneys attempt to steer people into a chapter 13 bankruptcy case. This is due to a number of factors, not the least of which is the fact that chapter 13 attorneys’ fees are higher than a chapter 7 case. For this reason, attorneys who meet with clients who have mortgage arrearages will attempt to steer them into a chapter 13. However, if you are not looking to keep your home or if you’re not looking to repay the arrearage over time, there is no benefit to filing a chapter 13 when you simply can get the benefit of fresh start.

Make sure that the attorney you meet with is aware of your desires with regard to your home. If you are behind on your home and you have a ton of unsecured debt, it will still make sense to file a chapter 7 to eliminate the rest of your debt. This is especially true if you are not looking to keep that home long-term and if you do not wish to make both a mortgage payment and a chapter 13 payment over the next 3 to 5 years. This is where the attorney that you choose is going to have a huge impact on your financial future.

A chapter 7 bankruptcy filing eliminates most debt. However, if you are an owner of a condominium, your association fees may be due and owing after case is filed. The bankruptcy code provides that you as a homeowner are responsible for your ongoing post-petition association fees for as long as you are the legal owner of the property. This means that you can give up your property, move out of the property, and still be subject to owing the post-filing condo assessment fees until that property is sold at auction or otherwise transferred.

In most cases, the condominium association is not going to chase you down for the outstanding, post-filing assessments. However, there are some associations and aggressive law firms that will pursue you for those fees. One way that you can avoid this situation is to remain in the property and continue to make condo association payments until such time that the property goes to a Sheriff sale. At that point, you can freely vacate the property knowing that you are no longer responsible for those association fees. I understand that some cases this is simply not possible. In some cases the homeowner has already vacated the property prior to filing for bankruptcy. In those cases, the homeowner should continue to maintain the condo association assessments even though they are no longer in the property.

If you need more information on condo association fees as it relates to your bankruptcy case, please give the office a call at 847-520-8100. My friendly staff, including Bernice, will be happy to assist you with your situation.

Chapter 13 is a great way to repay mortgage arrearages over a period of time. In many cases, your mortgage company will not accept a payment plan or give you any opportunity to catch up other than a full payment. This can be very frustrating to a homeowner. After all, the homeowner is making an effort to repay the mortgage arrearages and the mortgage company is simply saying if you can’t paid in full we cannot accept a partial payment. Chapter 13 changes the rules.

When you file a chapter 13 bankruptcy, your mortgage company must now accept the regularly scheduled mortgage payment even if it doesn’t pay the loan in full. You then get to make a secondary payment known as a chapter 13 plan payment. This plan payment will go toward your mortgage arrearages and any other debt that you have at the time of filing. The chapter 13 trustee, much like a dealer in poker, is going to deal out a portion of that plan payment to your mortgage company as well as to your other creditors pursuant to the bankruptcy code hierarchy. Provided you can make your regular mortgage payment on time after filing as well as your chapter 13 plan payment, then you are going to have success with the chapter 13.

The bottom line is simple. If your mortgage company won’t work with you, think about chapter 13 bankruptcy. In chapter 13, you dictate how the mortgage company is going to accept your payment. You dictate the monthly payment amount that you are going to pay to a chapter 13 trustee. You dictate whether or not you’re going to keep your home or surrender your home. You may even have the ability to strip the lien off of the second mortgage if it’s completely unsecured. For this and more information, contact my office at 847-520-8100. You are not alone. You can be helped. Don’t let the mortgage company run roughshod over you and your family.

Whether or not your bankruptcy attorney can represent you in a divorce case depends upon whether or not there is a conflict of interest. In a recent case, I represented both a husband and wife in the filing of a joint chapter 7 bankruptcy petition. While in the midst of the chapter 7 case, I was tendered proposed settlement documents for an uncontested divorce. Since I was currently representing both husband and wife in a chapter 7 bankruptcy case, there existed a conflict of interest with representing one spouse over the other. The only way that I would be able to continue or begin to represent one party would be if the other party signed a waiver of the conflict of interest form. By signing this form, I would be given the authority to represent one party against the other. This waiver of the conflict of interest form is necessary even if the case is going to be uncontested and agreed upon. An attorney simply has to know that you cannot represent someone against the former client without a waiver in place. Also note that that waiver is much like a consent form which can be revoked at any time. Thus, you could be halfway through the divorce case and the party can simply revoke the waiver of the conflict. In that situation, you will have to withdraw from the case and your client will have to seek alternative counsel.

Your chapter 13 trustee needs to verify that the information contained on your petition and schedules is true and accurate. The trustee does this by basically auditing your paycheck stubs, your tax returns and any other source of income that you receive. The trustee wants to make certain that you are putting all of your disposable income towards your repayment plan. By analyzing your paycheck stubs, the trustee can do the math which will either corroborate the information in your schedules or make adjustments higher or lower.

When it comes to confirming a chapter 13 case, the chapter 13 trustee must receive two months’ worth of paycheck stubs prior to your case actually being filed. Most trustees will not be a stickler for detail if you are missing one or two of those paycheck stubs. However, there are certain trustees in Chicago and throughout the country that will not confirm a case unless you have provided all of your paycheck stubs for the two months prior to your case being filed.

When you case is up for confirmation, the trustee’s attorney will let your attorney know whether or not they received all the necessary documentation. If they have not, confirmation can be continued over to a date certain. If by that time you have the requested items, your case will be in a position to be confirmed provided there is nothing else preventing it from being confirmed. For more information on chapter 13, contact the office at 847-520-8100.

There are rare occasions where someone will come into my office who I simply cannot help with bankruptcy. This fact is extremely rare. The typical scenario where somebody would not qualify for either chapter is as follows: the person or family earns too much income to qualify for chapter 7 based on their inability to pass the means test. The means test is a mathematical formula that basically uses IRS guidelines for expenses to determine whether or not based on your income and your expenses you have the ability to reorganize under chapter 13. If the math shows that you have the available money to reorganize, then filing a chapter 7 would be an abuse. In some cases, the income exceeds the chapter 7 allowance however, there simply are not funds left to make a chapter 13 work. This may be due to the high amount of debt that must be paid back to chapter 13 or it could be that there simply is not any money available despite what the means test results show. In those cases we simply don’t file either bankruptcy at the time. We can wait for circumstances to change in one regard or another. For example, the person or household income may go down in the future and provide for a chapter 7 filing. Alternatively, the income may go up or the expenses may be cut to provide for a feasible chapter 13 plan. In either case, it involves some sort of change in either income, expenses, or debt. Please keep in mind that the inability to be helped under chapter 7 or chapter 13 bankruptcy is very rare. For 99% of the people that come to my office for a consultation, there is a solution under one of those two chapters of the bankruptcy code. So if you’re someone who is considering bankruptcy or if you have significant debt, you can rest assured that there’s a very good chance that you are going to be provided with some sort of relief based on the federal laws. It is only in the rarest circumstances where someone cannot qualify for either chapter of the bankruptcy code.