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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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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