Archive for the ‘ chapter 7 ’ Category

What Happens To Property In A Chapter 7?

Posted on: March 13, 2017 by in Bankruptcy, chapter 7
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Probably because of the procedural nickname (“liquidation”), many people erroneously believe that they will lose most or all their property after they declare bankruptcy in order to pay their creditors. After all, that’s essentially what happens in Monopoly and some other finance-based party games.

This belief does have some basis, because debtors do indeed risk losing their nonexempt property to repay their debts. However, those two key words (“risk” and “nonexempt”) usually make a tremendous difference in a bankruptcy case’s outcome.

Asset Valuation and Exemption

Under the Bankruptcy Code, bankruptcy trustees (people who oversee these cases on the judges’ behalf) have a legal responsibility to evaluate nonexempt assets to determine whether their seizure and sale would benefit the creditors or simply punish the debtors, and in practical terms, a tie goes to the debtors, because the Bankruptcy Code also guarantees them fresh starts. Generally speaking, both Illinois and Indiana have dollar-based exemptions as opposed to item-based exemptions. For example, Illinois exempts an unlimited number of motor vehicles that have up to a $1,200 value and Indiana law exempts houses with up to $17,600 in equity; those values may be higher in joint petition situations.

Those values may seem rather low, but bear in mind that they only measure the amount of equity in an item, so a new car may have a Blue Book value in the tens of thousands of dollars but no equity whatsoever. Asset valuation comes into play as well. Under the Bankruptcy Code, debtors must list an asset’s as-is cash value, and that’s usually very small compared to its economic and emotional value. Home furnishings are excellent examples. An expensive workout machine that cost thousands of dollars originally might have a garage sale value of a few hundred, and a nearly-new microwave oven might have a $30 or $40 as-is value.

Back to the used car. Even if the vehicle has $1,500 in equity, the trustee may leave it alone, because the cost of seizing and storing the vehicle, not to mention the risk of finding a buyer willing to pay fair market value, will probably exceed the $300 that the creditors would divide.

Asset Ownership

Technically, any nonexempt property, such as cash in a checking account, belongs to the trustee. However, the law is not very clear on who “owns” cash.

Most people have very little discretionary income. They are more like caretakers over their money as opposed to owners, because the funds must go to fixed expenses (rent, mortgage, car payment, etc.). The floating check controversy often comes up in these cases. Assume David Debtor has $2,000 in his checking account when he files bankruptcy toward the end of the month. However, most of that money is not his to spend, because he must pay next month’s bills. If the trustee claims that cash is not exempt and tries to seize it, David has no way to pay the mortgage, car note, and other expenses. Therefore, if the trustee takes the money, David will fall behind on his debts, which is the opposite result from the one the Bankruptcy Code is intended to bring about.

Moreover, the trustee would most likely not file a motion for turnover until several months after David filed his voluntary petition. By that time, the $2,000 would be gone, and so there is no money for the court to award. Under the Constitution, judges can only decide cases that involve an actual controversy, at least in most cases. The mootness doctrine is thus an additional defense to many motions for turnover.

Count on Experienced Attorneys

All bankruptcy debtors get to keep most or all of their property. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Indiana Rejects Peabody Bankruptcy Plan

Posted on: February 22, 2017 by in Bankruptcy, chapter 11, chapter 13, chapter 7
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Concerns over future mine cleanup costs have put the energy giant’s Chapter 11 bankruptcy on hold, at least for now.

The state of Indiana, along with some environmental groups, were among the only parties that objected to an $8 billion reorganization plan. Peabody said it would use a controversial though federally-approved plan to clean up contaminated coal mines, but the state and environmentalists, including the Sierra Club, demanded more specifics. Although the process, called self-bonding, has fallen out of favor with many firms, Peabody still uses it in four states, including Indiana. In a statement, Peabody defended its cleanup protocol. “We look forward to continuing to restore the land and provide assurances for future obligations, through a potential blend of both third-party surety bonds and self-bonding,” a company spokesperson insisted.

Other roadblocks included creditors’ objections to the proposed payment schedule and former employees’ concerns about their pensions.

Adversarial Procedures in a Chapter 7

Even though both Indiana and Illinois have rather large wildcard property exemptions that, in some cases, can exempt cash in a checking or savings account from seizure, unprotected cash is the most likely target for a turnover motion. The instant that debtors file their voluntary petitions, their nonexempt property, including nonexempt cash, becomes part of the bankruptcy estate that’s managed by the trustee (person who oversees the case on the judge’s behalf). Although the era of instant payments has mitigated this problem, the floating check controversy is a lingering issue.

Assume the debtor makes her mortgage payment on the first day of the month and files bankruptcy on the second. The debtor’s bank balance will still show those funds in the account, since the check has not cleared yet. If the trustee files a motion for turnover to claim the cash, there is a legitimate question as to who “owned” that “property” on that particular day. Although the funds were in the debtor’s account, she was not at liberty to spend them on anything else.

Adversarial Actions in a Chapter 13

Just like sound prebankruptcy planning can avoid the floating check controversy, sound prepetition planning can obviate objections to the repayment plan. Such objections normally come from either the creditors (who claim they are not being repaid in accordance with the Bankruptcy Code) or the trustees (who claim that the plan is not feasible). Creditors normally file formal objections; trustees usually state their concerns at the 341 and give the debtors an opportunity to either amend their plans or convert to Chapter 7.

Creditors are under a very strict time deadline to file their objections, and courts normally show little grace or understanding over missed deadlines. If the court does allow the objection, many times, the creditor is upset over a technical deficiency that is easily corrected. Plan objections work in much the same way, as most debtors can find additional room in their income/expense balance sheet by trimming expenses even more or by using the more labor-intensive specific allowances as opposed to the generic ones based on the debtor’s residence.

Rely on Experienced Attorneys

There is no reason to panic over postpetition objections. 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.


Prominent Real Estate Investor Files Bankruptcy

Posted on: February 9, 2017 by in Bankruptcy, chapter 13, chapter 7
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A huge shareholder lawsuit in Northern Illinois may have pushed the onetime “King of Downtown Orlando” over the financial precipice.

Ten years ago, Cameron Kuhn employed seventy people, owned twenty choice properties in downtown Orlando, and was expanding into new markets in northern Florida, Georgia, and Louisiana. But then the real estate market crashed and the Great Recession came directly thereafter. A year later, in 2008, Mr. Kuhn told a local newspaper that he had almost no cash. In addition to the aforementioned lawsuit, Mr. Kuhn’s Chapter 7 bankruptcy paperwork listed $22.8 million in debts, including back taxes and past-due Domestic Support Obligations.

First Loft Corporation, one of Mr. Kuhn’s companies, declared bankruptcy the same day.

Why People File Bankruptcy

This is not a schadenfreude piece, because no one’s money problems should ever be taken lightly. Rather, this bankruptcy is an object lesson as to how quickly things can change, and these changes are often almost entirely beyond the debtor’s control. Most consumers do not see their investments sour because of a nearly-unprecedented economic downturn, but similarly, many Chapter 7 and Chapter 13 bankruptcies are caused by:

  • – Divorce: Because of the loss of income and dramatic increase in expenses, marriage dissolution often transforms one household that was just barely getting by into two households that have even more trouble staying afloat.
  • – Job Loss: Moneylenders usually start demanding payment on delinquent accounts after a month or two, so even a brief unemployment period can cause a major financial crisis.
  • – Income Loss: Instead of laying off employees,some employers freeze wages, trim hours, eliminate overtime, and take other cost-cutting measures that inevitably affect the employees’ pocketbooks.
  • – Medical Bills: The majority of Americans either have medical bills they cannot pay or can manage only with great difficulty, and like the other factors mentioned above, people have almost no control over sudden illnesses and other situations.

All these factors have at least one thing in common: most families have almost no savings and therefore almost no way to make it though trying financial periods, especially when more than one crisis strikes at once.

Which Bankruptcy is Best?

The amount and type of debt largely dictates what kind of bankruptcy is best.

Chapter 7 eliminates unsecured debts, like medical bills and credit cards, after just a few months. In some cases, Chapter 7 aso takes care of other kinds of debts, like student loans and past-due income taxes. Debtors get to keep almost all their assets, including houses, cars, retirement accounts, and even cash.

For those who can pay their debts but just need a little more time to catch up, Chapter 13 offers a protected three or five year repayment plan. During that time period, moneylenders cannot take any adverse action without that bankruptcy judge’s permission. If they complete the plan, debtors emerge from Chapter 13 completely caught up on their home mortgage and other secured debts; their unsecured debts are generally discharged.

Contact Aggressive Attorneys

The cause of debt problems may be out of your control, but the solution is within your grasp. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


New Republic Airways To Emerge From Bankruptcy

Posted on: February 9, 2017 by in Bankruptcy, chapter 11, chapter 13, chapter 7
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The Indianapolis-based regional airline submitted a Chapter 11 reorganization plan to a bankruptcy judge, and if it is approved, Republic should emerge from bankruptcy sometime in the first quarter of 2017.

A protracted contract dispute with its pilots meant that the carrier could not fulfill its obligations to United, American, and Delta, forcing the company into bankruptcy. In the last few months, while under the bankruptcy court’s protection, Republic has renegotiated its contracts with all three airlines and phased out its older 50-seat jets in favor of sleek new 76-seaters. Additionally, Republic has partnered with twenty college aviation programs to deepen its pilot hiring pool.

Company officials say that the plan, which details what Republic has done during reorganization and what it plans to do going forward, has the “full support” of the creditors’ committee.

Chapter 13 Endgame

In large Chapter 11 corporate bankruptcies, most of the creditors must approve the reorganization plan. Chapter 13s work basically the same way, because the trustee (person who manages the bankruptcy on the judge’s behalf) must approve the debt consolidation plan. Also, just like companies can renegotiate unfavorable contracts while they’re in bankruptcy, Chapter 13 debtors can renegotiate loans with moneylenders to obtain more favorable terms.

The debtor has leverage in these situations, because truth be told, the moneylenders want money and not banged-up collateral. For example, if a debtor is behind on a car payment and files Chapter 13, the bank does not want a used car that it must repossess, store, clean up, and sell at auction for a price that will probably be less than the outstanding loan balance. These factors are even more pronounced if the dealer has sold the note to a finance company, and that is often the case. Because the creditor knows that the debtor can very easily surrender the collateral and force the moneylender down that path, the creditor will often agree to extend the number of payments or take some similar action to make repayment terms a little more manageable.

If the parties legitimately dispute the amount owed, judges often refer these disagreements to mediation. In this forcum, moneylenders must negotiate in good faith to resolve the dispute. This issue comes up a lot in mortgage modifications, because banks often refuse aid based on technicalities. For the most part, judges will not tolerate such intransigence in mediation.

Chapter 7 Endgame

Successful Chapter 13 debtors emerge from bankruptcy with clean current payment histories and a better debt-to-income ratio than before, so they are well on their way towards complete rehabilitation. Chapter 7 rehabilitation requires a little more work, but it is not very daunting.

Most bankruptcy attorneys can refer clients to lenders who work with people that have damaged credit. Taking on an auto loan or other secured debt, and maintaining a good payment history, goes a long way towards rebuilding a FICO score.

By the same token, a credit card is also a good rebuilding tool. Because of the post-filing waiting period, most former debtors receive many credit card offers, since moneylenders know they cannot declare bankruptcy again for several years. As a rule of thumb, about 120 days or so is all it takes to convince creditors that the debtors really have turned over new leaves and are now much better credit risks than they were before.

Reach Out to Assertive Attorneys

Bankruptcy is the best way to rebuild a financial life. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours appointments are available.


Bankruptcy In The Ohio Valley

Posted on: January 10, 2017 by in Bankruptcy, chapter 13, chapter 7
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Although the gross numbers have dropped precipitously, the filing rate for all kinds of bankruptcies remains high in Kentuckiana.

The number of cases has dropped by 40 and 44 percent in Kentucky and Indiana since 2010, but the states still rank eighth and sixth in terms of the number of filings per person. Statistically, lower wage-earning areas usually have higher bankruptcy filing rates, because according to New Albany bankruptcy lawyer Lloyd Koehler, falling behind “only requires one catastrophic event” for households that already struggle to make ends meet. Some other residents of this area are on the other end of the spectrum, as they have more debt than they can realistically afford to repay.

However, most folks from this area are in that first category. “Low-wage jobs punctuate an already difficult situation,” commented U.S. Bankruptcy Judge Joan Lloyd.

Chapter 13 Bankruptcy

There’s a reason this type of bankruptcy is sometimes called the “wage earner” plan, because in a nutshell, Chapter 13 debtors must have sufficient income to catch up on all past-due secured loans, like mortgages and car notes, within the three or five year repayment period. During this time, the automatic stay generally keeps moneylenders from taking adverse action against debtors, so in effect, the bank must accept the repayment terms that the debtor proposes, as long as the trustee (person who oversees the bankruptcy on behalf of the judge) approves of the plans.

In these plans, all past-due secured debts are consolidated into a single monthly payment that goes through the trustee; in some jurisdictions and some plans, regular secured debt payments go through the trustee as well. If the debtor has the funds to pay off these secured debt sooner, the bankruptcy process wraps up sooner as well.

Chapter 7 Bankruptcy

According to the Atlanta Federal Reserve, wage growth plummeted during the Great Recession and it is just now returning to its 2008 levels. So, lower wage earners are caught in a very bad position, because inflation is starting to creep back up as well. With prices rising almost as fast as wages, working-class families seemingly have nowhere to turn if a financial crisis hits, such as a divorce, serious illness, or job loss.

Chapter 7 bankruptcy is normally the place to go in these situations. In addition to the automatic stay’s protection against adverse action, such as moneylender harassment and wage garnishment, Chapter 7 discharges (forgives) most unsecured debts in as little as a few months. Therefore, instead of a death spiral of debt, families obtain fresh financial starts and are able to move on with their lives.


Debtors have an absolute right under the Bankruptcy Code to convert from Chapter 13 to Chapter 7 at any time, assuming they meet the means test qualification. Conversion is an excellent tool for those families who are on the borderline between repayment and liquidation.

A common strategy involves filing a Chapter 13 and then making the first few debt consolidation payments, to see how things work. Many times, the financial sacrifice is not nearly as bad as the family expected, and three or five years later, the family is essentially out of debt. However, if the payments are too much and the trustee refuses to modify the plan, the conversion to Chapter 7 is almost seamless and the entire matter is concluded quickly.

Rely on Experienced Attorneys

Bankruptcy eliminates debt. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We have offices in both Indiana and Illinois.


Bankruptcy Month

Posted on: December 28, 2016 by in Bankruptcy, chapter 7
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Some observers believe that venerable retailer Sears may be getting a head start on the unofficial holiday that does not involve a gift exchange or warm nostalgic feelings, and so no one wants to celebrate it.

Just as the busy holiday shopping season started, Sears announced that it was closing several K-Mart locations and that two of its top executives had left to “pursue other career opportunities.” Over the last fifteen years, the retailer’s sales have dropped from $41 billion to a scant $15 billion; over the same period, partner K-Mart has fared no better, as its sales have declined from $37 billion to $10 billion. Spinoff Sears Hometown and Outlet Stores is doing even worse, and is expected to lose over $93 million this year. Citing concern about their financial health, several suppliers have reduced shipments to the retailers, and Moody’s recently downgraded the stores’ liquidity rating.

Former Sears Canada CEO Mark Cohen bluntly stated that “business is terrible” and that the company is not likely to recover.

Why People File Bankruptcy

Some practitioners call January “Bankruptcy Month,” because cash-on-hand and accounts payable are typically at their highest levels of the year in the month after Christmas. If they plan to stay in business, most large companies file Chapter 11 reorganization, because they come out with a fresh start. In fact, when General Motors recently emerged from Chapter 11 bankruptcy, the company unsuccessfully argued that it was the “new GM” and not legally responsible for the mistakes of the “old GM.” Those mistakes included selling cars with defective ignition switches. Economic downturn drives most corporate bankruptcies.

Families file bankruptcy for basically the same reason: to get fresh starts. However, the causes are much more diverse and can strike at any time of the year. Some common ones include:

  • – Medical Bills: The government estimates that 20 percent of people have economically burdensome medical bills, and 10 percent of people have medical bills they cannot afford to pay.
  • – Unemployment: Most families have virtually no savings, so most households simply cannot deal with a short-term income change.
  • – Divorce: Similarly, the unexpected legal bills coupled with the added expense of maintaining two household forces many people into bankruptcy.

Chapter 7 normally eliminates unsecured debts within a few months, and Chapter 13 gives debtors up to five years to catch up on house payments and other delinquent secured debt.

Warning Signs

If sales fall off a cliff over a period of a year or more, the company is obviously in financial trouble and should at least make contingency plans for bankruptcy. Although illness, job loss, and divorce can strike at any time, it may be several months before the financial ramifications of these events sets in. So, most families probably know they should file bankruptcy long before they call lawyers.

There are some specific warning signs. If the household has less than about $10,000 in unsecured debt, most people can afford to pay that amount over time. But if the debt is larger, it is essentially impossible to pay it off, and delay only makes the problem worse. Similarly, if people are a month or maybe two behind on their car or mortgage payments, it is possible to catch up. However, a larger delinquency is simply too much to overcome, in most cases.

Count on Experienced Attorneys

If you see the warning signs of bankruptcy in January or any other month of the year, reach out to an experienced Chicago bankruptcy attorney from the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Can I Keep My Sports Memorabilia In Bankruptcy?

Posted on: December 28, 2016 by in Bankruptcy, chapter 7
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Former basketball phenom and erstwhile actor Darius Miles, who made over $60 million in his brief professional career, may have to part with his sports memorabilia collection at an upcoming bankruptcy auction.

The Los Angeles Clippers selected the 18-year-old East St. Louis High School standout in the first round of the 2000 draft; in 2001, Mr. Miles was the first prep-to-pro player to make the NBA’s all-rookie team. But a knee injury shortened his career, and poor business developments ate away at his assets. Some observers speculate that the young Mr. Miles also lacked maturity; for example, he was once suspended two games for arguing with coach Maurice Cheeks and later sat out ten games for violating the league’s drug policy. When Mr. Miles filed Chapter 7 in September 2016, he listed a $240,000 IRS debt and over $100,000 in “business debts.” Now, the bankruptcy trustee (person who oversees the bankruptcy on behalf of the judge) wants Mr. Miles to auction off a number of collectibles, such as a LeBron James signed jersey and an autographed Mark McGwire bat, to repay moneylenders. Mr. Miles’ money troubles are far from unique, as 60 percent of former NBA players file bankruptcy within five years of retirement.

Mr. Miles appeared in several basketball-related docudramas, as well as a 2002 National Lampoon film.

Exempt Assets in Bankruptcy

Some people refer to Chapter 7 as “liquidation,” but that term is very misleading, because it implies that Chapter 7 debtors must sell most or all of their assets to pay their debts. In most cases, the opposite is true, because Chapter 7 debtors very rarely part with anything during bankruptcy.

Mr. Miles’ case is an exception, but not because he was a basketball player and the trustee is somehow “out to get him.” Sports memorabilia is quite unlike rental houses, old vehicles, and some other commonly non-exempt assets. Memorabilia needs no fixing up and there are nearly always lots of buyers with cash in hand, so these assets are easy to dispose of. In contrast, some other property may need substantial repairs, and even then, the trustee may have to hold it for several months, and discount the price several times, before finding a buyer. Given these facts, the return is so low that seizing and selling the asset may not be in the creditors’ best interests, and that is the only consideration that counts in these cases.

Second, although Illinois has a large “wildcard” exemption which can apply to any asset, there is a dollar limit, and sometimes assets must be prioritized. Mr. Miles declared substantial amounts of cash in his Chapter 7 petition, so he made the wise decision to hang onto cash and part with some items that may have been sitting in his garage.

Even considering the memorabilia, Mr. Miles got to keep far more assets than he lost. Some of the exempt assets under Illinois law include:

  • Homestead: Single filers can exempt up to $15,000 in home equity, and unless they have been in their homes for many years, most people are far under this limit.
  • Retirement Accounts: Earned 401(k)s, IRAs, pension plans, and other retirement accounts are 100percent exempt regardless of value.
  • Cash: 85 percent of current wages are exempt, up to 45 times the federal minimum wage per week.
  • Wildcard: Debtors can exempt up to $4,000of otherwise non-exempt property simply by checking boxes on their schedules.

Bankruptcy’s automatic stay prohibits moneylenders from taking adverse action, so if any assets are liquidating, the debtor is in control.

Reach Out to Experienced Attorneys

To hang onto as many of your assets as possible while still getting your fresh start, contact an experienced bankruptcy attorney in Chicago from the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


The Financial Comeback Trail

Posted on: December 20, 2016 by in Bankruptcy, chapter 13, chapter 7, debt
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Abraham Lincoln, one of Illinois’ favorite sons, declared bankruptcy in 1833.

In his early 20s, Lincoln worked various jobs in Springfield, and that work included employment at a local general store. When the establishment closed, the young and enterprising Lincoln decided to open his own store in New Salem with a business partner. The two men purchased other stores’ inventories on credit to fill their shelves, a risky strategy that backfired when sales dipped at the New Salem establishment. Lincoln later recalled that the store “winked out,” and after his partner died, Lincoln was liable for about $1,000 in debts, an astronomical sum at the time.

Since he filed before the modern Bankruptcy Code, Lincoln took seventeen years to repay the debt in full; he also lost his horse and surveying gear, which were his only assets.

What If It Were Today?

Today, debtors can choose between Chapter 7 and Chapter 13, and either one would have most likely protected Lincoln’s assets and shortened the debt repayment period. Furthermore, during repayment, the hypothetical Lincoln would probably not receive any threatening letters or phone calls, because of the automatic stay.

In both liquidation and repayment bankruptcies, most assets are exempt up to certain levels, including:

  • – Houses,
  • – Vehicles,
  • – Retirement accounts,
  • – Personal property, and
  • – Cash on hand.

Qualified Chapter 7 debtors normally receive debt discharge (debt forgiveness) orders in only a few months.

Depending on their income, Chapter 13 debtors have either three or five years to repay their debts, and after that debt repayment period, any remaining unsecured debts, like credit card and medical bills, are discharged. Before the repayment period begins, debtors propose a monthly debt consolidation payment that goes to satisfy all secured debts, like home mortgage arrears or past-due car payments; during the repayment period, moneylenders can only take adverse action with special permission from the bankruptcy judge.

Recovery from Bankruptcy

Although it is not much worse than foreclosure or repossession, bankruptcy is normally the worst possible blow to a credit report; Chapter 13s usually fall off after seven years and Chapter 7s normally take ten years. In other words, bankruptcy gives consumers fresh starts and places them back at the starting line, and there are a few ways to move forward thereafter.

First, take a hard look at why the filing was necessary. Typically, there was a serious financial storm, such as a sudden illness or layoff, and saving a little bit each month goes a long way towards weathering these storms. If poor spending habits contributed, and they sometimes do, these issues must be dealt with. Second, get a credit card after bankruptcy. Charge something every month, and pay off most of the balance before the due date. This habit creates a good payment history that raises your credit score. Third, pay secured debts on time. These payments are normally reported to the credit bureau, so this is another way to build up a solid payment history.

If they take full advantage of their fresh starts, most bankruptcy debtors may not even remember that they filed after their petitions fall off their credit reports.

Go with Zealous Attorneys

At the Bentz Holguin Law Firm LLC in Chicago, we are committed to consumers in Illinois and Indiana. Contact us today for a free consultation.


Can I File Bankruptcy Again?

Posted on: December 14, 2016 by in Bankruptcy, chapter 13, chapter 7
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They say that lightning never strikes twice in the same place; unfortunately, financial misfortune comes with no such guarantee. Job loss, serious illness, divorce, and other unexpected emergencies may occur once in a lifetime or once a year, and it is almost impossible to predict when the next storm will arrive. That unpredictability and lack of control causes many people to file bankruptcy after having discharged their debts in a previous case. In many cases, bankruptcy is a fresh start, so debtors must identify poor financial habits and correct them, if they expect to move forward. In still other cases, a combination of unforeseen circumstances and poor management has people back in bankruptcy court.

Technically, there is no limit to the number of times that a person can file bankruptcy, or at least there is no such limit in the Bankruptcy Code. However, there are limits on the number of discharges, and it is important to know what they are and how they work.

Repeat Filings

Mistakes happen, and sometimes, debtors file in the wrong district or they file the incorrect paperwork. Such errors are particularly common in bankruptcy cases, because so many debtors attempt “do-it-yourself” bankruptcies. Other bankruptcies are dismissed later on for other reasons, such as a failure to make on-time trustee payments. At the same time, there are a few unscrupulous filers who have no intention of completing the bankruptcy process, and they simply want to use the automatic stay to prevent a foreclosure or repossession.

To balance things out, most courts have adopted some form of the serial filer rule. The exact rule varies by jurisdiction, but in most cases, if one case has been dismissed for any reason, the automatic stay expires after thirty days. The court will extend the automatic stay if:

  • – The request is filed before the thirty days elapse, and
  • – The debtor filed the new case in good faith.

If two or more cases have been dismissed in the past year, no automatic stay goes into effect unless the debtor files a motion and convinces the judge that the new filing is not in bad faith. Furthermore, if the court dismissed the prior bankruptcy with prejudice to refile, the debtor must wait 180 days before filing again.

Repeat Discharge

The rules in this area are a little tricky.

  • – Prior Chapter 7/New Chapter 7: Debtors must wait eight years between Chapter 7 discharges.
  • – Prior Chapter 13/New Chapter 13: There is normally a two-year waiting period between discharges, but that can change if the court did not confirm the plan in the prior case.
  • – Chapter 13 then Chapter 7: Debtors must wait six years between discharges, unless the prior Chapter 13 took care of at least 70 percent of unsecured debts.
  • – Chapter 7 then Chapter 13: Typically, the waiting period between discharges is four years.

Sometimes, a “Chapter 20” bankruptcy is the best course of action in these cases. If debtors are paying off tax debts or other nondischargeable obligations, it may behoove them to file a Chapter 13 immediately after a Chapter 7 discharge, to extend the automatic stay.

Count On Experienced Attorneys

If necessary, the Bankruptcy Code allows debtors more than one fresh start. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We have offices in Illinois and Indiana.


Under Armour Tries To Recover From Sports Authority Bankruptcy

Posted on: November 30, 2016 by in Bankruptcy, chapter 13, chapter 7
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Share prices for the country’s second-largest sports apparel retailer have plummeted 20 percent in the last year as Under Armour struggles to find new customers to replace the bankrupt Sports Authority chain.

Carter Harrison analysts had already predicted that the company might have to endure “a tougher period” after the firm lost one of its best customers in North America. Although net sales increased over 15 percent last quarter, the growth was well below the target level and the stock price dropped again, to $31.77 per share. The company says that both sales volume and profit margins were lower than they were a year ago.

Since Sports Authority filed bankruptcy, Under Armour has increasingly relied on promotions to move unsold product.

Bankruptcy Recovery

Corporate bankruptcies often have ripple effects throughout an entire industry, but personal bankruptcies are different. Although most people have little or no control over the circumstances that prompted their bankruptcy filings, they have almost total control over their bankruptcy recoveries.

“It is the purpose of the Bankrupt Act. . .to relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.” Supreme Court Justice James Clark McReynolds penned those words over a hundred years ago, and they are still true today. Chapter 7 and Chapter 13 give debtors fresh starts, and what they do with them is almost entirely their own choice.

Although it is impossible to affix a proportion, a combination of poor financial planning and unanticipated misfortune bring about most bankruptcy filings, and the latter is nearly always much, much more of a factor than the former. Typically, a temporary job loss or serious illness disrupts income for a few months, and there is basically a snowball effect. So, recovery from bankruptcy is a two-tier approach.

Most high school and/or college economics classes at least introduce the concept of scarcity (limitless wants and limited resources), but for whatever reason, the concept does not seem to take root in many households. Basically, if expenses go up in one area, either income must go up or other expenses must go down to compensate.

One of the biggest priorities for former bankruptcy debtors is raising their credit scores. The old adage that paying bills on time is a large part of a FICO score is partially true and partially false. Some bills, like mortgage payments, credit card payments, car payments, and probably auto insurance payments, are reported to the credit bureaus monthly, and consistent on-time payments will improve most FICO scores. Other bills, like rent payments, utility payments, and probably internet/TV payments, are not reported to credit bureaus, so on-time payments will not affect FICO scores. However, most such accounts are referred to debt buyers after about ninety days of nonpayment, and “referred to collections” is almost as negative as “filed bankruptcy.” So, people who neglect their accounts are essentially back at square one.

Acquiring a credit card is a good idea as well, preferably one with a low credit limit. There is some debate as to whether it is best to pay off the balance in full every month or leave a small balance every month, but in any case, regular on-time payments are crucial.

Partner with Assertive Lawyers

Bankruptcy offers distressed consumers a fresh start. 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.