DO I HAVE TO INCLUDE ALL DEBTS AND ASSETS ON MY BANKRUPTCY PETITION?

Often times, clients will want to withhold credit cards with low balances from bankruptcy so they can keep that account open and continue using it after the bankruptcy case is completed.  However, the law prevents an individual from doing that.  All debts have to be included on a bankruptcy petition, a debtor cannot merely pick and choose which ones to include.  If the debtor would like to keep the debt and continue to pay it off, they could always choose to reaffirm the debt with the creditor, although this is rarely recommended.  Regarding assets, all have to be included on the bankruptcy petition as well, including some instances where previous assets have been disposed of or distributed.  This is to prevent fraud and to allow the trustee the oppourtinity to reimburse creditors if at all possible.  For assistance about completing bankruptcy petitions or any other general questions, contact our bankruptcy attorneys for a free consultation.

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SHOULD I TRY A DEBT RELIEF PRIOR TO FILING FOR BANKRUPTCY?

Due to several different circumstances, there are very few instances when pursuing debt relief ends up with better results than filing bankruptcy.  While it is true that some of these companies can assist people, the vast majority of these programs fail over 75% of teh time leaving you with more debt and a damaged credit score.  First, these companies are not worried about what is in the client's best interest.  Instead, they are worried about their bottom line, and many customer service agents for these companies work on commission and only get compensated for the individuals they sign up in their program.  Also, unlike bankruptcy, the results are very unpredictable when utilizing a debt relief company.  Our attorneys can let you know upfront what the results will be based on your specific situation and chapter of bankruptcy and whether bankruptcy is even your best option.  Contact one of our attorneys today to schedule a free consultation and see how you can become debt-free.

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ILLINOIS HOMEOWNER TAX BREAK SET TO EXPIRE

As of now, Congress has yet to extend the Mortgage Forgiveness Debt Relief Act, which provides a tax break for qualified homeowners on debt forgiven by their lenders through loan modifications, short sales, and foreclosures.  The current legislation is set to expire on December 31, 2012, therefore, if you attempting to complete one of the above-mentioned transactions with your lender, it is best to aim for completing the transaction prior to the end of this year in order to avoid potential huge tax consequences.

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341 MEETINGS

Many new bankruptcy clients are unfamiliar with the purpose and procedure of a 341 Creditor's Meeting. A 341 meeting takes place with the bankruptcy trustee, and the purpose is to determine if the debtor has been accurate and complete in preparing their petition, as well as whether there are non-exempt assets that can be liquidated for the benefit of the creditor's. A "No Asset" finding is the holy grail for a debtor, and will result in a complete discharge of all debts in Chapter 7 bankruptcy.

 

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IF I AM MARRIED, DO I HAVE TO FILE A JOINT BANKRUPTCY PETITION?

The easy answer if no, you do not have to file a joint petition even if you are married, however, before filing, make sure you speak with an experienced bankruptcy attorney who can advise you on  the implications and consequences of joint versus separate filings.  Generally, if you are in a joint property state, if both spouses are liable for a majority of the debts, or if you are contemplating a divorce, it is probably wise to file jointly so both individuals will be discharged of that debt.  Conversely, if there is substantial debt in one party's name or  if one party would significantly affect the eligibility of filing, you may want to investigate filing individually.  One note, when a married individual files separately, both party's income is utilized for the purposes of the Chapter 7 Means Test.

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ILLINOIS SHOPPING MALL COULD BE FORECLOSED

Because the economy is down, many retailers are feeling the pressure just like everyone else.  As a result, malls across the county are experiencing 10-25% vacancies with many stores reducing their overhead.  Because of this, there are some malls that are facing foreclosure, including at least one in Illinois.  The Machesney Park Mall currently owes almost $2 million from the loan that was taken out to purchase the property eight years ago, including an additional $600,000 in real estate taxes.

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GABBY DOUGLAS' MOTHER FILED BANKRUPTCY

Over the past several weeks, American have become very familiar with Gabby Douglas, the young gymnast who become a national hero after winning the all-around gold medal for the United States.  Far from the glory of the Olympics also came news that Gabby's mother had filed Chapter 13 bankruptcy prior to the Olympics, and she was not embarrassed or ashamed to acknowledge that fact during the games.  Given Gabby's success during the games in London, I'm guessing the family's financial problems could be over, given that many experts have estimated Gabby's earnings over the next year to be between $6-20 million through mostly endorsements. 

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WHAT IS A MOTION FOR RELIEF FROM AUTOMATIC STAY?

Soemtimes a creditor will file a Motion for Relief from Automatic Stay in a bankruptcy case.  This commonly occurs when the debtor owns real property that he/she is planning on surrendering.  The purpose of this motion is to lift the automatic stay and allow the creditor the opportunity to continue with collection, or more commonly, foreclosure.  In the above instance, a lender or mortgage holder will be able to continue with the foreclosure process if the motion is granted and sell the property quicker, without having to wait for the bankruptcy process to conclude.

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WAGE GARNISHMENTS AND ASSIGNMENTS

Many people decide to file bankruptcy because a creditor has began garnishing their wages, which is when a court order is issued to deduct a portion of a debtor's wages in order to repay the creditor.  Garnishments will be stopped immediately upon filing bankruptcy, where creditors will be immediately notified by our firm of the filing.  Wage garnishments are different than wage assignments, where a debtor authorizes a creditor to deduct a payment from their wages, such as through a Pay Day Loan service.  These can be stopped prior to filing bankruptcy, so if you are in these situations, please contact one of our bankruptcy attorneys today to learn more.

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SHOULD I REAFFIRM A SECURED DEBT?

When you file a Chapter 7 bankruptcy petition, you must submit a Statement of Intention which indicates if you wish to reaffirm any of your debts.  A reaffirmation agreement is a secondary contract where you remain liable on a secured debt, such as a car or mortgage.  On the positive side, reaffirming a secured debt will allow you to retain the secured property and sometimes, reaffirming a vehicle could reduce your monthly payments because creditors would rather have a debtor pay a little less than have to repossess and resell the car.  On the other hand, reaffirming a debt can be dangerous because if you default on your payments following a bankruptcy, you will now be liable for that debt and the creditor can obtain a judgment against you that cannot be discharged.  For more information on this important decision, contact an experienced bankruptcy attorney today.

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HOW CAN I USE A BANKRUPTCY TO DEFEND A FORECLOSURE?

A bankruptcy can be an effective way to avoid or delay a foreclosure.  If you are behind on your payments, but are still earning income, you can file a Chapter 13 bankruptcy in order to allow yourself time to "catch up" on your mortgage payments.  A Chapter 13 bankruptcy could allow you up to 60 months to pay off any previous unpaid mortgages or penalties.  If you are prepared to surrender your property back to the lender, but just want to delay the process a few months so you can get everything in order, a Chapter 7 bankruptcy may be your answer.  While a Chapter 7 bankruptcy is ongoing, a lender cannot proceed with a foreclosure case due to the automatic stay, and as a result, you will be able to continue residing in your property for a feww extra months.  Please consult an experienced bankruptcy attorney before proceeding with any of these avenues in order to ensure you know what to expect in the end.

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HOW LONG IS A CHAPTER 13 REPAYMENT PERIOD?

As discussed before, in a Chapter 13 bankruptcy you are required to repay a portion of the debt to the bankruptcy trustee who then distributes the payment to the creditors.  Exactly how long your repayment plan is depends on your assets, income, and debts.  It will be between 36 and 60 months, and you are required to make that payment every month, or else the bankruptcy will be dismissed without any reduction or discharge of the underlying debts. 

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HOW WOULD A BANKRUPTCY AFFECT A FORECLOSURE?

As I mentioned in a previous post, you have three options as to how to handle secured debts in a Chapter 7 bankruptcy.  If you are willing to lose your house, you could file a Chapter 7 bankruptcy, surrender your property, and have any deficiency discharged throughout the bankruptcy process.  If you are behind on your payments and would like to retain your home, you could always file a Chapter 13 bankruptcy, which delays the foreclosure, and allows you an opportunity to "catch up" on your mortgage payments and bring your loan current.  If this is done, you can stop the foreclosure process and continue living in your house as if you were never behind on your payments.  Contact one of our bankruptcy lawyers today to learn how a bankruptcy can help you out of your foreclosue.

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CAN I FILE BANKRUPTCY IF I AM A BUSINESS OWNER?

The answer to this is probably, although being a business owner complicates things. For example, for an individual, his/her income and assets are relatively easy to determine, however, often times this is not so with a business owner. If you own all or a majority of a business, you could also be respionsible for the assets of the company, meaning the bankruptcy trustee could choose to seize those assets in order to repay the creditors. In order to learn more and protect your business, contact one of our bankruptcy attorneys today for a free consultation.

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CAN YOU USE YOUR CREDIT CARD RIGHT BEFORE FILING BANKRUPTCY?

The answer is dependent on when the credit cards were last used and for what purpose. Generally, any use of a credit card for luxury goods over $500 and debts owed to any one creditor incurred within 90 days of filing will not be discharged. Also, any cash advances made within 70 days before filing or debt incurred without any intention to repay will also not be discharged. Typically, if minimum payments are made to the creditor for the last six months prior to filing, a debtor should have no problem having such a debt discharged as long as no debt was incurred under false pretenses or fraud.

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CAN I TRANSFER ASSETS TO OTHER BEFORE FILING IN ORDER TO AVOID LOSING THEM IN A CHPATER 7 BANKRUPTCY?

In a bankruptcy case, trustees have a lot of power and discretion. They are working on behalf of the creditors in order to determine whether there are any assets of the debtor that can be seized and distributed. As a result, the trustee is not going to look favorably upon a debtor transferring property or assets in order to keep them out of the hands of the trustee. In my experience, any transfers done within one year prior to the filing of the petition can be reversed by the trustee or he/she can pursue those assets. This is referred to as the "lookback period." If the transfer was made more than four years ago, those assets will usually be outisde the scope of the bankruptcy proceeding. The gray area comes in between those two periods. If the trustee feels the transaction was performed primarily to keep the assets out of bankruptcy, he will likely pursue them if it was done within the last four years. If the transfer looks like a bona fide good-faith transaction, the trustee will probably have no problem with it provided it occurred over one year ago.

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DOES BANKRUPTCY STOP LAWSUITS OR COLLECTION ACTIONS?

When you file a bankruptcy petition with the court, an "automatic stay" is issued. An automatic stay places a stop or hold on all current lawsuits and current collection activities and continues throughout the case. This means that no creditors can call you, send letter, file or continue with a lawsuit, or contact you in any other way in order to attempt to collect on a debt. Doing so would violate federal statute and the offending creditor could face punitive penalties. If you are tired of creditors contacting you, call one of our bankruptcy lawyers today to see if filing bankruptcy is right for you and get those creditors off your back.

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HOW ARE SECURED DEBTS HANDLED IN A CHAPTER 7 BANKRUPTCY?

First of all, let's define what qualifies as a secured debt. A secured debt is a debt backed or secured by collateral, such as your vehicle loan or mortgage. In a Chapter 7 bankruptcy, you generally have three options on how to handle secured debts: surrender, redeem, and reaffirm. Surrendering a secured debt simply means that you will surrender the property that is securing the loan back to the creditor. For example, you would abandon your house and surrender it back to the lender if you were choosing this option pertaining to your mortgage. The creditor will generally not be able to pursue a debtor for the outstanding amount due under that debt. Redeeming the debt simply means paying off the amount owed on the secured property. So, if you owe $10,000 on your current vehicle loan, you can always tender $10,000 to the creditor of that property in order to redeem the debt. Finally, you can also reaffirm the debt. This requires you signing additional documentation with the creditor and you are essentially committing to the debt again. This means that the debt will not be discharged throughout the bankruptcy proceeding and you will still be liable for the amount owed to the creditor, but you will also maintain possession of the secured property. If you have any questions, contact our bankruptcy lawyers to learn more about your options in a Chapter 7 bankruptcy.

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WHAT DEBTS ARE DISCHARGED IN A CHAPTER 7 BANKRUPTCY?

We are asked many times by clients which debts will be discharged through a Chapter 7 bankruptcy. Typically, all unsecured debt such as credit cards, medical bills, and utilities will always be dischargable. With secured debts such as mortgages, car loans, and home equity lines of credit, it is a little complicated and will be discussed in a later post. However, federal statute lays out certain debts that are not dischargable under a Chapter 7 bankruptcy, such as student loans, alimony and child support, some taxes, and criminal restitution. Contact one of our bankruptcy lawyers today to learn more about your specific situation and what debts may be discharged.

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DO I NEED TO QUALIFY FOR A CHAPTER 7 OR 13 BANKRUPTCY?

Ever since the new regulations took effect in 2005, many people are worried that they no longer qualify for a Chapter 7 bankruptcy. However, over, 90% of the people who qualified for a Chapter 7 bankruptcy prior to 2005, would still qualify today. The major obstacle in a Chapter 7 bankruptcy is the means test. The means test was designed to ensure that only people under a certain income level could file for Chapter 7 bankruptcy. Generally, a single individual living alone must make under $47,000 a year in order to qualify, however that figure is constantly changing so consult a bankruptcy attorney today for an exact amount. If you have additional people living in your house such as a spouse or children, then the income level will rise with each additional person. If you are over the income amount, this does not necessarily mean you cannot file a Chapter 7 bankruptcy as there are still ways to qualify.
In order to qualify for a Chapter 13 bankruptcy, you muct have regular income and secured and unsecured debts under specific amounts. Without regular income, an individual would have no money to repay the creditor, thus defeating the purpose of a Chapter 13 bankruptcy. Contact our experienced bankruptcy attorneys today for a free consultation.

WHAT TYPE OF PROPERTY IS EXEMPT FROM A CHAPTER 7 BANKRUPTCY?

In Illinois, the state has a statutory list of property that is exempt from bankruptcy, meaning it cannot be touched or seized by the trustee. For example, up to $15,000 worth of equity in your house and $2,400 worth of equity in your car is exempt under Illinois law. Also, most retirement savings and unemployment compensation is exempt also. There are also many other categories of exemptions allowed by the state, in addition to everyone's $4,000 "wild-card" exemption. The "wild-card" exemption can be used for any assets or accounts the debtor holds, and those assets will be protected from the bankruptcy proceedings up to $4,000 worth of value. There are several different ways debtors can protect their assets from creditors, so contact one of our bankruptcy lawyers today in order to learn more.

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