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What Does The Automatic Stay Mean In Illinois?

Posted on: February 21, 2018 by in Bankruptcy
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Bankruptcy gives breathing room to distressed consumers, and that’s very good news for an awful lot of people. It is little wonder that one in four Americans deal with such severe financial stress that it produces PTSD-like symptoms. After only one month, most moneylenders turn into debt collectors, using tactics like constant phone calls and collections letters. These methods quickly escalate and become repossession, foreclosure, and eviction.

No matter what debt collection stage consumers are in, bankruptcy instantly stops them all, at least in most cases.

Mechanics of the Automatic Stay in Indiana

Some aspects of bankruptcy procedure vary among different jurisdictions in Illinois. But Section 362’s operation is almost always the same. Many, if not most, debtors are at their wit’s end when they reach out to bankruptcy attorneys. So, they are accustomed to dealing with issues like:

  • – Foreclosure: The stay is only effective against a particular moneylender once the entity receives actual notice of the filing. In eminent foreclosure situations, the standard notice channels may not be fast enough. So, bankruptcy attorneys often deliver notice directly to the sheriff or other official who conducts the foreclosure sale. Technically, even if the auctioneer receives notice between “going twice” and “sold,” the sale cannot go forward, but most people don’t like to cut things that close.
  • – Repossession: Some people want to know if they can get their repossessed cars back after they file bankruptcy. The automatic stay may not help in this situation, but the redemption option does help. If the vehicle has a $4,000 loan balance but is only worth $1,000, the owner can give the lender $1,000 and own the property free and clear.
  • – Eviction: The 2005 bankruptcy reform act changed the interplay between eviction and the automatic stay. If the landlord filed a lawsuit and has obtained a judgement, the eviction can go forward even if the tenant files bankruptcy. If the landlord has not yet obtained a judgment, the automatic stay stops the eviction process. Special rules apply in cases involving drug use or property endangerment.

In Indiana, the automatic stay also stops other advanced collection activities, like wage garnishment and IRS bank levies. Section 362 applies even if the underlying debt is nondischargeable. So, if a moneylender is garnishing wages because of a delinquent student loan, that garnishment must stop even if the debtor does not qualify for a hardship discharge.

Can Illinois Moneylenders Bypass the Automatic Stay?

A special set of rules governs “serial filers” who repeatedly file voluntary petitions in order to manipulate the system.

  • In Illinois, the automatic stay only lasts thirty days for people who have filed one bankruptcy case in the last year that was subsequently dismissed. The judge will extend the stay, often without a hearing, if the debtor files a motion to extend the stay which shows that this latest case was filed in good faith.
  • If there are two or more file-and-dismiss bankruptcies, there is no automatic stay. The debtor can file a motion to impose the stay, and the judge will grant this motion upon a showing of good cause, but it is an uphill fight.

These rules become even more complex if the debtor was a party to a bankruptcy but did not actually file the petition (e.g. Don Debtor LLC filed bankruptcy).

Once the stay is in effect, moneylenders can only proceed with collection activity if they convince the judge that their collateral is at risk. For example, if Debra Debtor is $20,000 behind on her home mortgage, the moneylender may receive permission to proceed with foreclosure, especially if Debra let the insurance lapse.

Count On Experienced Attorneys

Typically, the automatic stay literally stops moneylenders in their tracks. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Why Do Illinois Bankruptcy Judges Use Trustees?

Posted on: February 15, 2018 by in Bankruptcy, chapter 13, chapter 7
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Most baseball games have umpires and coaches. The umpire calls balls and strikes regardless of whether the call helps or hurts one team or the other; a coach pushes for the best interests of a team.

Bankruptcy judges are like baseball umpires. In any dispute between the parties, the judge determines who is right and who is wrong from a purely legal standpoint. The trustee is not exactly like a coach, but the trustee does look out for the best interests of the creditors.

Trustees in Indiana Chapter 7 Cases

In liquidation bankruptcies, Chicago trustees have basically two responsibilities.

First, the trustee conducts the 341 meeting of creditors, which takes place about six weeks after the debtor files a voluntary petition. In a Chapter 7 341, the trustee essentially verifies the debtor’s credentials (mostly that all the forms are present and the debtor has completed the required debt education classes) and confirms the debtor’s identity (nearly always with a Social Security card and a driver’s license).

At a Chapter 7 341, the trustee also collects some financial documents, such as recent tax returns and some other papers, such as mortgage notes, house deeds, or insurance policy declarations pages.

Second, the trustee evaluates all nonexempt assets to determine if a seizure and sale would benefit the creditors. Assume Debbie Debtor lives in Illinois and she has a nonexempt used car that’s in below average condition and only worth $500. The trustee may determine that, given the cost of seizing the car, repairing it, storing it, and other costs, the creditors may not benefit from such a transaction and Debbie may get to keep her nonexempt car.

In short, the trustee is not a used car salesman and s/he will not seize nonexempt assets unless the creditors stand to make a considerable profit from such a move.

Trustees in Indiana Chapter 13 Cases

In addition to the aforementioned Chapter 7 duties, Chapter 13 trustees have some additional responsibilities.

Chiefly, these trustees must examine and approve the debtor’s proposed debt consolidation and repayment plan. During the protected repayment period, which is usually five years, the debtor must make regular payments on all past due secured debts, like a home mortgage or a car note. At the end of the period, the debt must have a zero balance, so the debtor must continue to make regular payments during this period as well.

To determine the monthly debt consolidation payment amount, the trustee considers both the amount of the debt and the debtor’s income. Basically, the trustee puts the debtor on an allowance and requires that any money left over after the bills are paid go to debt retirement.

If the debtor and trustee cannot work out an acceptable payment plan, most debtors convert from Chapter 13 to Chapter 7. As a result, they do not need to catch up on secured debts and their bankruptcies close in a few months as opposed to a few years.

Trust Experienced Attorneys

Trustees are important cogs in the bankruptcy machine. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.

Does Bankruptcy Get Rid Of Student Loans In Chicago?

Posted on: February 6, 2018 by in Bankruptcy
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In most cases, a college education is a very good financial investment. However, there are always exceptions. Some people in Illinois make serious mistakes and are unable to practice their chosen professions. Other people obtain their degrees but are unable to clear other hurdles, such as a professional competency exam. Still other people are simply unlucky, and their earnings do not match their expectations.

Consumer bankruptcy lets individuals shed unwanted debts like these, so they may obtain a fresh start. However, student loans are only dischargeable in some limited cases.

Background to Student Loan Bankruptcy Discharge

Once upon a midnight dreary, student loans were dischargeable in bankruptcy just like any other unsecured debt. But in the late 1960s, some people felt, rightly or wrongly, that students borrowed their way through college and never intended to repay these loans. As a result, Congress amended the Bankruptcy Code to make such loans dischargeable only if the debtor had an “undue hardship,” but lawmakers did not define this term.

When a student loan case came before the courts, it had all the aspects that those aforementioned people feared. In Brunner v. New York State Higher Education Services Corporation, the debtor declared bankruptcy only a few months after her student loans entered repayment and she had made no effort to pay off the loan or get more time to pay.

The result was very harsh. The Second Circuit Court of Appeals in New York eventually ruled that student loans in Indiana were only dischargeable in bankruptcy if the debtor:

  • Had made a good faith effort to repay the loans,
  • Has a hardship that is likely to either be permanent or last for the entire period of repayment, and
  • Is unable to maintain a minimal standard of living if s/he must repay the loans.

Essentially, only individuals who encounter a physical or other such disability after they graduate and after they have already made payments are eligible for relief under the so-called Brunner rule.

Discharging Student Loans in Illinois

Some courts have reconsidered the Brunner rule in light of the ongoing student loan crisis, but this case is still the law in Illinois and Indiana, thanks to the Seventh Circuit’s decision in Tetzlaff v. Educational Credit Management Corporation. However, all is not lost.

Forty percent of bankruptcy petitioners with student loans get at least a partial discharge, according to one study. To maximize your chances of success, experts suggest that student loan bankruptcy debtors get aggressive lawyers who will fight for them in court instead of just file the required paperwork. A lawyer can also negotiate with the lender. These negotiations often bear fruit, especially since the Department of Education recently relaxed the rules in this area, at least a little bit.

Only a miniscule percentage of bankruptcy debtors with student loans (0.1 percent according to the Yale study) even file adversarial petitions requesting discharge. In other words, 99.9 percent of people don’t even try to discharge their student loans. We do not give up without a fight, and neither should you.

Contact Experienced Attorneys

Despite the Brunner rule, student loans are often dischargeable in bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


How Does Bankruptcy Affect Indiana Security Clearances?

Posted on: February 1, 2018 by in Bankruptcy
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Many area families understandably want an answer to this question before they file a bankruptcy petition. In many cases, security clearance revocation, or even a downgrade, could mean the end of a job or at least a considerably lower income stream.

It’s illegal for any Illinois entity, including the Department of Defense, to discriminate against anyone based solely on a bankruptcy filing. However, it is not illegal for the DoD, or any other entity, to take action based on the reasons behind said bankruptcy filing. That’s where Guideline F of DoD Directive 5220.6 comes in. Since the 1990s, this document has established the parameters for when the government may take action against a security clearance.

This document contains both the blueprint for action against a security clearance and a roadmap for defeating such action at a necessary hearing.

Concerns that Lead to Adverse Action in Indiana

In many cases, financial problems lead to problems at work, perhaps because the stress makes it difficult to concentrate or because the moonlighting debtor has less energy. But that’s not the overall concern as far as the DoD is concerned. Instead, the DoD worries that financially-strapped individuals with access to sensitive information might sell that information to unscrupulous people or groups in order to raise cash.

Not all Indiana financial problems create this pressure, which is why the DoD lists some specific examples. In most cases, bankruptcy does not make these issues worse or does not involve them at all.

  • – History of Unmet Obligations: Most all bankruptcies do involve multiple delinquent accounts. However, the issue is not a steadfast refusal to pay bills. Instead, many families encounter one big financial problem, such as a job loss, that creates a snowball effect. That’s not the same thing.
  • – Unwillingness or Inability to Pay Debts: This factor often assumes that the debtor purchased luxury goods on credit and then either would not or could not pay for said items. In most cases, that’s simply not the case with regard to bankruptcy.
  • – Root of Financial Problems: Most bankruptcy debtors file voluntary petitions due to medical bills, divorce, business downturn, or some other purely economic factor, and not due to “gambling, drug abuse, alcoholism, or other issues of security concern.”

The bottom line is that most consumer bankruptcies do not involve any level of fraud or dishonesty, and “honest yet unfortunate” debtors are unlikely to resort to illegal activities to raise money.

Mitigating Circumstances in Chicago

Many bankruptcy petitions support one or more of the listed mitigating circumstances, which include:

  • – Isolated Incident: As mentioned earlier, most people file bankruptcy because of one major financial storm. Furthermore, there are very few repeat bankruptcy filers, especially since there are strict time limits that regulate subsequent filings.
  • – Not Recent: Typically, most families struggle with debt, at least off and on, for several years before they file bankruptcy, because a voluntary petition is usually a last resort after everything else has failed.
  • – Lack of Control: The listed examples (“loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation”) almost precisely mirror the top reasons that people file bankruptcy.
  • – Progress Towards Resolution: Significantly, Guideline F does not require progress towards paying outstanding debts, but “clear indications that the problem is being resolved or is under control.” In a nutshell, that’s exactly what bankruptcy does.

All bankruptcy debtors also receive debt counselling, which is yet another listed mitigating factor.

Reach Out to Experienced Attorneys

A bankruptcy petition may be the best way to block financial-related activity against a security clearance. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Why Do People File Bankruptcy In Illinois?

Posted on: January 22, 2018 by in Bankruptcy
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Over half of Illinoisans struggle with financial problems, and for a substantial number of these people, the issues cause them to worry more than three hours a week, significantly affecting their ability to function at work and at home.

Bankruptcy provides both short and long-term relief from these stresses. Immediately after the consumer files a voluntary petition, an automatic stay goes into effect, in most cases. Under Section 362 of the Bankruptcy Code, moneylenders may not take any adverse action against debtors, from collection calls to foreclosure, without special permission from the bankruptcy judge.

Shortly after the automatic stay goes into effect, most of the debtor’s unsecured debts are discharged. “Unsecured debts” are promise-to-pay obligations, like credit cards, medical bills, most government loans, and even some past-due income taxes.

What Causes Bankruptcy in Illinois?

Although the extent of the financial problems that Chicago residents face may vary, the root of these problems is usually very much the same. Most people who have financial problems race them to one of the following:

  • Illness/Injury: Most people lack the means to pay these emergency obligations in cash, and medical inflation has consistently outpaced regular inflation over the past several decades. The end result is often bankruptcy.
  • Divorce/Separation: These events also create unexpected expenses, such as attorneys’ fees and family support payments, that often cannot be postponed. Moreover, the division of households dilutes the family’s income while significantly increasing expenses.
  • Credit Cards: Typically, credit card problems begin with one or two months of only minimum payments, and that soon becomes five or six months and a mound of unpayable debt.

As a rule of thumb, if you have more than $5,000 in unsecured debts or secured debt delinquency (“secured debts” include home mortgages and car loans), consumer bankruptcy is probably an option, because it is almost impossible to pay down that debt without dealing with adverse action from moneylenders.

Legal Debt Relief Options in Chicago

Most people who have issues with unsecured debt file Chapter 7. About six weeks after the voluntary petition is filed, a trustee (person who oversees the bankruptcy for the judge) ensures that all the paperwork is in order. About six months later, the judge discharges all dischargeable debts.

People who struggle with secured debt usually opt for Chapter 13. This form of bankruptcy gives debtors up to five years to erase delinquency on their secured debts. During this time, the moneylenders may not take any adverse action, such as repossession or foreclosure, in most cases. Furthermore, instead of just checking paperwork, the trustee puts the debtor on an allowance, so any extra money goes to catch up on past-due secured debt.

Some people file a test-the-water Chapter 20 bankruptcy, especially if they are extremely far behind on their secured debts. If the Chapter 13 debt consolidation payment turns out to be too much, the debtor can voluntarily convert the case to a Chapter 7.

Reach Out to Savvy Attorneys

Bankruptcy is often the best way out of financial problems. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Handling Tax Debt In An Indiana Bankruptcy

Posted on: January 17, 2018 by in Bankruptcy, debt
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Full or part-time freelancers currently constitute over a third of the U.S. workforce. Keeping up with income taxes is sometimes a problem for these individuals, especially given the changing nature of the law and the uncertain responsibilities of quarterly tax payments. Many times, people fall a little behind for various reasons, the problem snowballs, and a serious delinquency results.

Consumer bankruptcy is an excellent way to deal with such income tax debt because it has both short-term and long-term solutions to tax problems in Illinois.

The Importance of the Automatic Stay in Chicago

Section 362 of the Bankruptcy Code prohibits most moneylenders or debt collectors from taking adverse action against most bankruptcy debtors for as long as their cases are pending. In the case of a Chapter 13, that could be up to five years or even longer. Although the IRS is no ordinary debt collector and it has sweeping powers under federal law, the automatic stay prohibits any taxing authority from taking adverse action against most debtors. Such action includes:

  • Wage garnishment,
  • Bank levy, and
  • Forced property sales.

If a consumer has filed bankruptcy within the last several years, the automatic stay may not fully take effect, or may not take effect at all.

Discharging Past-Due Income Taxes in Illinois Bankruptcies

Income tax debt is like credit cards and medical bills in that all these kinds of debt are unsecured. In each case, the debtor only made a promise to pay the account. Generally, unsecured debt is dischargeable in both a Chapter 7 and a Chapter 13, but special rules apply to some forms of government debt. For example, child support arrearage is nondischargeable in almost any case, and student loans are only dischargeable if the debtor establishes a hardship.

When it comes to tax debt in Chicago, a bankruptcy discharges said debt only if all of the following apply:

  • Income Tax: Property taxes, payroll taxes, and any other kind of taxes are not dischargeable. The taxing authority usually has the final say on what constitutes “income tax” and what constitutes something else.
  • Three Years: The income tax debt must be at least three years old. Tax day is not always April 15, and the IRS has been known to contest discharge in Indiana because the petition was filed just a few days too early.
  • Two Years: The returns must have been on file for at least the last two years. They must be taxpayer-filed returns. Substitute returns, which the IRS or another taxing authority files on the taxpayer’s behalf, don’t count.
  • 240 Days: The taxing authority must not have assessed the account in the 240 days preceding the petition’s filing. In plain English, that usually means that the taxpayer has not received a letter with the balance on it within the past eight months.

Bankruptcy only gets rid of the debt and not the collateral consequences of that debt. So, if the taxing authority has filed a lien, that lien will remain in place even if the debt is discharged.

Reach Out to Experienced Attorneys

Bankruptcy can erase some past-due tax debt. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.

Six Dischargeable Debts In An Illinois Bankruptcy

Posted on: January 8, 2018 by in Bankruptcy, debt
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Many people file a Chapter 7 or Chapter 13 debt relief petition to gain immediate relief from foreclosure, lawsuits, repossession, and other adverse action. While the case is pending, moneylenders can do none of these things, at least in most cases.

Many other people file bankruptcy because the debt discharge gives them a fresh start. Here are the most common dischargeable debts.

Medical Bills

Outstanding medical bills are the number one cause of consumer bankruptcy, according to most experts. Even if the family has medical insurance, copays, out-of-pocket maximums, and 80-20 coverage is nearly always enough to cause financial duress. That usually triggers a snowball effect, since money that used to go to other bills goes to medical expenses instead. Since medical bills involve only a forced promise to pay, they are also the leading kind of dischargeable debt.

Credit Cards

In 2005, moneylenders exploited the myth of the credit card bankruptcy to push through a major reform law that hurt consumers. There is no doubt that some people charge luxury items on their credit cards and then adamantly refuse to pay the bills. But it’s also true that there is often a significant gap between wage growth and inflation in Chicago. They must make up the difference somewhere, and the funds often come from credit cards.

Small Business Association Loans

In their first few years, a majority of new businesses either fail outright or fall well short of profitability expectations. In either case, repaying an SBA loan or line of credit can be a major hardship. These loans are normally dischargeable in either a Chapter 7 or Chapter 13 bankruptcy in Indiana. However, these individuals may have a hard time borrowing more money from the government in the future, because bankruptcy only eliminates the legal obligation to repay the debt and not the debt itself.

Income Taxes

Similarly, if a taxing authority has already filed a lien due to delinquent taxes, a bankruptcy will not eliminate such a lien. However, bankruptcy does eliminate past-due income taxes if:

  • – Returns have been on file for at least two years,
  • – Debt is at least three years old, and
  • – Taxing authority has not assessed the debt in the last 240 days.

In plain English, that last element means that the taxing authority has not sent a collections notice in the last nine months, at least in most cases.

Payday Loans

To dissuade their Illinois customers from filing bankruptcy, many payday lenders insist that their loans are secured because they are attached to a checking account. But that’s simply not true. These loans are completely unsecured and therefore 100 percent dischargeable. As a precaution, many attorneys suggest that their clients close the account related to the payday loan once the petition is on file.

Home Equity Line Of Credit

These debts may be unsecured, if the home no longer has sufficient value to secure both the senior debt (mortgage loan) and the junior debt (HELOC). So, if Harry Homeowner has a $200,000 mortgage and a $10,000 HELOC but his Chicago house is only worth $200,000, an attorney can legitimately argue that the HELOC is unsecured.

Reach Out to Experienced Attorneys

Almost all unsecured debts are dischargeable in bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Keeping Your House, Cars, And Cash In An Illinois Consumer Debt Relief Action

Posted on: January 2, 2018 by in Bankruptcy, debt
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No one can turn back the hands on the clock to that point in time where people had no debt. But bankruptcy does the next best thing. These voluntary petitions discharge most unsecured debts, such as credit cards and medical bills, and create a protected repayment period of up to five years which allows debtors to make catch-up payments on secured debts, like home mortgage and auto loans.

Furthermore, while the bankruptcy is in effect, the Bankruptcy Code’s automatic stay prevents moneylenders from taking any adverse action against debtors, such as collections efforts, wage garnishment, repossession, or foreclosure.

The Bankruptcy Code’s purpose is to give debtors fresh starts. That cannot happen if they lose their core assets, which is why there are some effective strategies available to retain them.

Exempting Home Equity in Chicago

Both Illinois and Indiana have very large home equity exemptions, so if the debtor has less than a threshold amount ($30,000 for an Illinois married couple), the trustee, who is the person who oversees the bankruptcy for the judge, cannot seize the house and sell it to pay creditors.

If the debtors have lived in the house for a long time, they may have more than $30,000 in home equity. In these cases, accurate valuation is key.

Assume the homeowners have a $200,000 home with $50,000 in equity. If Schedule A lists the home at that value, the trustee may file a motion for turnover, demanding that the homeowners pay $20,000 or lose their house. But the Bankruptcy Code requires debtors to list the as-is cash value of an asset. For houses, a good place to start is the Quick Sale Value per the Internal Revenue Service, which is 80 percent of the fair market value. So, in this scenario, the home’s QSV is $160,000. After deducting the $150,000 unpaid principal balance on the loan, the owners only have $10,000 in equity, which is well below the exemption maximum.

Keeping Vehicles in an Indiana Bankruptcy

Roughly the same thing applies to personal vehicles. Typically, new cars have a very high value and almost no equity, while old cars have a considerable amount of equity but almost no value. But cars often have a very high turnaround cost.

Assume that the subject vehicle is a used car with a $1,500 value and $1,500 in equity. The trustee would probably not seize and sell the vehicle in this situation, because by the time the trustee pays towing fees, storage fees, hires a mechanic to make any necessary repairs, and so on, the creditors would only see a few dollars. In other words, the bankruptcy trustee is not a used car salesman, and therefore the trustee does not bother with assets that have little value.

Keeping the Cash in Your Indianapolis Bank Account

Cash is hard to protect, because there is no turnaround cost. The trustee can simply take it. In these situations, a legal doctrine called mootness sometimes come into play.

Assume that two people each claim to own a house, but before the case goes to court, the house burns down. Since the house is gone, there is nothing for the judge to decide and the case is moot. Arguably, the same thing applies to cash. If the trustee files a motion for turnover that demands $5,000 in cash and that cash is gone by the time the judge hears the case, the matter may be moot.

Go With Experienced Attorneys

There are a number of ways for debtors to keep nearly all their assets in bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Getting The Most Out Of An Indiana Bankruptcy

Posted on: December 26, 2017 by in Bankruptcy
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Bankruptcy is a golden opportunity for many distressed debtors in Illinois and Indiana. Although it’s impossible to turn back the clock to a time before debt became a problem, both Chapter 7 and Chapter 13 do the next best thing. They stop foreclosure and other kinds of adverse action, end the obligation to repay many kinds of debt, and protect the consumer’s assets all along the way.

Part of a bankruptcy’s success depends on the debtor’s commitment. For example, if a Chapter 13 debtor does not adhere to the repayment plan, the trustee (person who manages the bankruptcy case for the judge) will most likely have the case thrown out of court. But the attorney’s skill level is usually an even bigger factor in success or failure.

Discharging Student Loans in an Illinois Bankruptcy

Student loans are a significant source of financial stress for many area families. Most students leave school with tens of thousands of dollars in loans, and for various reasons, these loans are often difficult to repay. Even though many factors that affect repayment are beyond the debtor’s control, in both Illinois and Indiana, debtors must establish relief under the undue hardship test. These obligations are dischargeable if the following elements are present:

  • – Inability to maintain a minimal standard of living (e. live above the poverty line) if loan repayment is part of the monthly budget,
  • – Long-term problem, such as physical disability, which affects the ability to repay the loans, and
  • – Prior good-faith efforts to repay said loans.

Many judges have questioned this standard because of its harshness and internal inconsistencies, and as a result, some other circuits have adopted a more lenient totality-of-the-circumstances analysis in these cases. Eventually, the Supreme Court will probably permanently resolve this question.

Maximizing the Homestead Exemption in Chicago

Married couples in Illinois may deduct up to $30,000 of home equity. Alas, many families who have been in the same home for several years have more than this much equity in their homes. To avoid issues, it’s important to give the home an accurate value in Schedule A. Under the Bankruptcy Code, the debtor must declare the asset’s as-is cash value, a requirement that works in favor of debtors in these situations.

To determine an asset’s as-is cash value, the IRS uses the Quick Salve Value metric, which in most cases, is 80 percent of the asset’s fair market value. It’s often an even better idea to obtain an offer from a home investor who will buy the house as-is. In most cases, such a cash offer rarely exceeds 50 percent of the home’s fair market value.

By decreasing the value of the home, the debtor maximizes the equity exemption and minimizes the risk of a forced sale or the need to use part of the Illinois wildcard exemption on the home.

Forgiving Tax Debt in an Indiana Bankruptcy

Whereas the previous two areas involve legal and factual arguments, successfully discharging tax debt is often a matter of attention to detail. Generally, only income tax debts are dischargeable, and they must meet the following guidelines:

  • – Three Years: The tax debt must be at least three years old, and the IRS and other taxing authorities are very particular about this requirement.
  • – Two Years: The returns must have been on file for at least two years, and the substitute returns which the IRS files on the taxpayer’s behalf do not count.
  • – 240 Days: If the debt has been assessed in the last 240 days, which essentially means that the taxpayer has received a collections letter in the last nine months, the debt is not dischargeable.

If the taxing authority filed a lien, bankruptcy does not eliminate this lien. However, if the taxing authority is garnishing a paycheck or taking other such measures, bankruptcy does end such direct adverse actions.

Contact Experienced Attorneys

Bankruptcy results often depend on the lawyer’s skill. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Should I File Chapter 7 Or Chapter 13 Bankruptcy In Illinois?

Posted on: December 18, 2017 by in Bankruptcy, chapter 13, chapter 7
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Over the years, several Supreme Court Justices have declared that the Bankruptcy Code gives an “honest but unfortunate debtor” a fresh start. The vast majority of all debtors are honest, although the occasional fraud cases, like the 2016 Dance Moms bankruptcy saga, always make the headlines. Moreover, the vast majority of bankruptcy debtors are also unfortunate. The tales of people who buy high-priced luxury items with their credit cards and then refuse to pay the bills are largely inventions of the moneylenders’ imaginations.

So, most distressed debtors in Illinois and Indiana qualify for bankruptcy. What path should they follow?

Filing Chapter 7 Bankruptcy in Indiana

The aforementioned credit cards are unsecured debts, because the account holder simply promised to pay the bill. Other examples of unsecured debts include medical bills, which occasion most bankruptcy filings, and Small Business Association loans. Payday loans are unsecured as well, although the moneylenders often try to convince people otherwise.

Most unsecured debts are dischargeable in an Illinois Chapter 7. The largest exceptions are student loans, which are dischargeable if the debtor has a hardship, and back income taxes, which are generally dischargeable if they are at least three years old.

At the same time, most of the debtor’s assets are exempt, at least up to certain amounts, which means that the trustee (person who oversees the bankruptcy for the judge) cannot seize them, sell them, and distribute the proceeds to creditors. Some exempt assets include:

  • – Home equity,
  • – Retirement accounts,
  • – Personal vehicles,
  • – Bank accounts, and
  • – Personal property.

An Illinois attorney can maximize these exemptions by correctly valuing the property. For example, the bankruptcy value of a home is often different from its fair market value, because the Bankruptcy Code requires debtors to declare the asset’s as-is cash value.

Procedurally, most Chapter 7s only last a few months in Indiana, and the debtors quickly receive their fresh starts.

How Does Chapter 13 Bankruptcy Affect Me in Illinois?

If the debtor falls behind on secured debt payments, such as a car loan or home mortgage, the creditor can repossess the asset due to the nonpayment. Chapter 13 bankruptcy puts an immediate stop to any such adverse action, and it cannot resume while the bankruptcy is pending unless the judge grants special permission. Adverse action also includes things like lawsuits and wage garnishment.

Furthermore, Chapter 13 debtors have up to five years to pay any past-due amounts. Significantly, the monthly debt consolidation payment plan is based on what the debtor can afford and not on what the moneylender demands.

After the repayment period, any remaining unsecured debt, which is generally all of it, is discharged.

Pursuing a Chapter 20 Bankruptcy in Indiana

This chapter is not in the Bankruptcy Code, but it is popular with many debtors, especially those with a great deal of past-due secured debt. The debtor initially files a Chapter 13, and if the monthly payment is unmanageable, the debtor voluntarily converts the case to a Chapter 7. The debtor gets a fresh start much faster and is free to rebuild credit.

Connect With Experienced Attorneys

Distressed debtors have several bankruptcy options. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After-hours visits are available.