HOW IS A LEASED VEHICLE HANDLED IN A CHAPTER 7 BANKRUPTCY?

In a Chapter 7 bankruptcy, you have three options with a secured debt as previously discussed in this blog: redemption, surrender, and reaffirmation.  If you would like to retain your secured property, such as a house or vehicle, almost 99% of people choose reaffirmation, where you agree to continue making payments to the creditor of that debt.  If you are leasing a vehicle, there is obviously no equity in the vehicle because there is no ownership.  Therefore, the bankruptcy trustee cannot seize the property to settle creditor claims, and therefore, if you wish to retain the automobile, you can simply execute an assumption of the lease with the creditor, and your payments will continue just as they were prior to the bankruptcy filing.

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HOW OFTEN CAN I FILE BANKRUPTCY?

The bankruptcy laws specifically state when you can re-file bankruptcy after previously receiving a discharge.  If you file for a second time and the statutory period has not concluded from the first bankruptcy, you will not be able to obtain a discharge.  For example, you cannot receive a second Chapter 7 discharge within eight years of the filing of your last Chapter 7 bankruptcy.  Also, you cannot receive a discharge on a Chapter 13 bankruptcy case if it was filed within two years from the date your last Chapter 13 bankruptcy was filed.  Finally, if you previously receive a discharge from a Chapter 7 case, you cannot receive a discharge from a Chapter 13 case that was filed within two years of the filing date of your previous Chapter 7 case.  Understandably, this can be very confusing so if you have previously filed bankruptcy, but believe it is currently in your best interests to do so again, please contact one of our experienced bankruptcy attorneys for a free consultation.

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WHAT HAPPENS IF I DO NOT ATTEND MY 341 CREDITOR'S MEETING?

If a debtor fails to attend a 341 Creditor's Meeting, the trustee does have the option to dismiss the case, although this usually will not happen.  In most instances, the trustee will continue the 341 meeting to a future date and give the debtor one more opportunity to attend.  If you do miss a meeting, it is important that you contact your attorney immediately, if you have retained one, in order to resolve the situation and learn of the new meeting time if the trustee decided to continue it.  Either way, if you know you will have a conflict with a scheduled 341 meeting, it is best to have your attorney contact the trustee prior to the meeting date to make the appropriate arrangements.

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CAN YOU CONVERT FROM ONE CHAPTER TO ANOTHER IN BANKRUPTCY?

When a bankruptcy is filed, you must choose under what chapter you are filing.  If the filing individual's or business' circumstances change, many times debtors will want to change the chapter under which they filed.  Federal law allows debtor's one conversion to another chapter as long as it does not involve fraud or bad faith intent.  However, if you are converting to another chapter, you must still qualify for the other chapter.  Also, some bankruptcies will be converted by the trustee or the court under rights provided to them by law.  If you have filed a bankruptcy petition and you believe you would like to convert to another chapter, please consult your bankruptcy attorney for a full list of options.

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CAN A BUSINESS OR COMPANY FILE CHAPTER 7 BANKRUPTCY?

Yes, a business can file a chapter 7 bankruptcy, however, it will not achieve the same result as an individual or joint debtor filing a chapter 7.  Most people seeking debt relief will file a chapter 7 bankruptcy, and if the debtor has no assets above the exemption limit, all allowable debts would be discharged, meaning the debtor would no longer have any liability to those credtiors.  However, if a business files a chapter 7 bankruptcy, it will have to cease operating, and any assets will be distributed to creditors in the correct order.  It is not possible for a company to obtain a chapter 7 discharge and continue operating as a business going forward.

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CAN I CHOOSE WHICH DEBTS TO INCLUDE IN MY BANKRUPTCY PETITION?

The short answer is "no, you cannot select certain debts to include in your bankruptcy petition."  The federal statute clearly states that all debts of a debtor must be included in a debtor's bankruptcy petition, however, if a debtor would prefer that a certain debt not be discharged, he/she can reaffirm the debt if they wish.  Generally, only secured debts are reaffirmed, but legally, you can do so with any debt.  Debtors often ask if they can leave certain debts off their petition because they do not want a certain creditor learning that they have filed bankruptcy or would like to continue use of a certain account.

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HOW ARE THE MONTHLY PAYMENT AMOUNTS DETERMINED IN A CHAPTER 13 BANKRUPTCY?

As you recall from previous posts, a Chapter 13 bankruptcy requires monthly payments to be made to the trustee, who then distributes money proportionally to your creditors.  Many people's next question is, "well how is the amount of this payment determined?"  Generally, this amount is the difference between the debtor's monthly income and his/her necessary monthly expenses.  The bankruptcy court provides a description of what they consider necessary expenses, such as mortgage/rent, car payments, insurance, food, clothing, etc.  Contact one of our experienced bankruptcy attorneys today for assistance calculating a potential Chapter 13 monthly payment.

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HOW MUCH EQUITY IN MY HOUSE IS TOO MUCH EQUITY FOR BANKRUPTCY?

The state of Illinois currently has an exemption level, called a "homestead exemption," of $15,000 meaning that a Chapter 7 trustee cannot touch the first $15,000 of equity in a debtor's house, and that amount is increased to $30,000 for married couples filing bankruptcy jointly.  The question then is, how much more equity beyind the exempt amount will result in a sale of your residence by the trustee.  It will depend on the trustee, but here is the formula that is usually used.  First, the trustee will subtract 10% of the estimated value of your residence for brokerage and closing expenses.  Next, the trustee will subtract the outstanding loan amount on the property.  The trustee will then also subtract the applicable exemption amount, whether it be $15,000 or $30,000.  If the amount reamining is greater than $5000 or so, the trustee will typically be inclined to at least entertain the idea of selling the property.  For a further evaluation, please contact our experienced bankruptcy attorneys for a free consultation.

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APPROVAL OF REAFFIRMATION AGREEMENT

When a Reaffirmation Agreement is executed between a debtor and a creditor, it will generally be enforced unless the court disapproves the agreement.  If the debtor enters into a reaffirmation agreement without an attorney, or if an presumption of hardship exists because the debtor's monthly expenses are greater than his/her monthly income, a reaffirmation hearing will be held so the court can review the agreement.  If the debtor can demonstrate the the reaffirmation agreement is in the debtor's best interest, it will be enforced.  However, the court also has the power to disapprove of the agreement which would render it null and void. 

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HOW SOCIAL MEDIA CAN AFFECT YOUR BANKRUPTCY?

In today's world, social media is taking over.  People are constantly posting information and pictures about themselves on Facebook, Twitter, etc.  However, if you are planning on filing for bankruptcy, this can pose a potential problem.  Creditors in a bankruptcy case have one interest, and that is attempting to recover any and all money owed to them by the debtor.  Increasingly, creditors are using pictures and information posted by debtors against them, such as a picture of a new car, or a posting on Twitter about a gambling or golfing trip.  Creditors are then presenting this information to bankruptcy trustees to investigate whether the debtor has additional funds to distribute among the creditors.  If you are considering filing bankruptcy, be careful what information you distribute to the general public because it could come back to hurt you.

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IS MY TAX REFUND INVOLVED IN MY BANKRUPTCY CASE?

Because it is that time of year, we get a lot of questions from our bankruptcy clients regarding their tax refund.  Generally, a tax refund will be included in a bankruptcy case, however, it is rarely seized by the trustee.  Unless you are expecting a large refund in excess of $10,000 or you have very little left of your "wildcard" exemption, our clients will almost always have their refund protected.  However, the bankruptcy statute does allow the trustee to utilize that money to pay back creditors if it is not protected by the debtor.

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ILLINOIS RANKS THIRD IN FORECLOSURES

Illinois had the third highest rate of foreclosures in 2012, with approximately 160,000 foreclosure notices from lenders sent out last year.  Additionally, every month last year had a higher number of foreclosures than the corresponding month in 2011.  The good news is that both November and December saw a decrease in foreclosures from the previous month.  If you have received a foreclosure notice, contact one of our attorneys to see if bankruptcy is the right choice for you.

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