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Obstacles To Bankruptcy: Security Clearances

Posted on: November 2, 2017 by in Bankruptcy
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Some distressed debtors who work at one of the many military bases in Illinois or Indiana, or at one of the many private companies that support these installations, hesitate to file bankruptcy because they are afraid that a voluntary petition will mean the revocation of their security clearance.

But it is illegal to take any adverse action against any individual based solely on a bankruptcy filing. Moreover, the DoD cannot unilaterally take such action. Instead, the security clearance holder must receive actual notice of the proceedings and have an opportunity to present a defense. Finally, according to DoD Directive 5220.6, a Chapter 7 or Chapter 13 petition may actually be the only way to save a security clearance that’s already in jeopardy.

Likely Considerations

As an area of concern, financial considerations are rather far down the list. They are well below items like foreign influence and even sexual misconduct. In other words, individuals who have in-laws who work at foreign consulates or those with disturbing relationship histories are far more likely to suffer adverse action than those with debt problems. The specific concerns are:

  • History of Unmet Obligations: Even if the debtors have multiple unpaid accounts on their credit reports, which is not always the case, such credit history is usually related to one financial storm, such as a job loss, that had a snowball effect.
  • Illegal or Deceptive Practices: Persons with issues such as “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust” hardly ever file bankruptcy, mostly because such obligations are often not dischargeable.
  • Financial Problems Tied to Security Concerns: Similarly, almost no one files bankruptcy due to “gambling, drug abuse, alcoholism, or other issues of security concern.”

So, most of the listed concerns do not apply to consumer bankruptcy, a fact that carries considerable weight in any adverse action proceedings, such as an attempt to downgrade or revoke a security clearance.

Possible Defenses

The opposite is true of the listed mitigating circumstances, because nearly all of them apply to those who seek consumer bankruptcy protection.

  • Isolated Incident: The same one time storm/snowball effect argument discussed above applies here as well.
  • Uncontrollable Circumstances: Just as people cannot control the weather, people also have either no control, or very limited control, over “loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation.” All these things prompt many bankruptcy filings, and they are all explicitly listed in E2.A6.1.3.3.
  • Good Faith Resolution Effort: A Chapter 13 petition certainly qualifies as a good faith effort to “repay overdue creditors,” and a Chapter 7 petition is often the only alternative available to “otherwise resolve debts.”

Another mitigating circumstance — “The person has received or is receiving counseling for the problem and there are clear indications that the problem is being resolved or is under control” — also applies to all consumer bankruptcy petitions.

Count On Experienced Attorneys

Bankruptcy petitioners have little to fear in the way of security clearance revocation. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Three Quick Ways To Rebuild Credit After Bankruptcy

Posted on: October 23, 2017 by in Bankruptcy
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Some people do not file a necessary bankruptcy because they think it will “ruin their credit rating for seven years.” That’s partially true, because a completed Chapter 13 bankruptcy stays on a credit report for seven years. That’s also partially untrue, because the debtor’s credit rating is already very low due to current issues. Late payments, repossessions, and foreclosures also stay on most credit reports for seven years.

Nevertheless, for those who understandably do not want to wait seven years for their post-bankruptcy FICO scores to improve, here are a few tips to hasten the process.

Stay Current on Secured Debts

Late payments ruin a credit score faster than almost anything else, which means that on-time payments raise a credit score faster than almost anything else. That’s especially true of those periodic payments which are reported directly to the credit bureaus, including mortgage payments, vehicle payments, and insurance payments.

Come hell or high water, stay current on these payments after bankruptcy, not only to rebuild your credit score, but also avoid a repeat filing.

One good method is to make thirteen payments every twelve months. That usually means about another $50 or $75 a month, which most families will never miss. The cushion gives families the flexibility to make it through another rough patch. Moreover, the stellar payment history makes moneylenders more likely to defer a payment until the end of the loan rather than taking adverse action against the debtor.

Refinancing may be an option as well. Many bankruptcy attorneys can connect former debtors with banks who specialize in post-bankruptcy restructurings.

Get a Credit Card

There are plenty of credit cards available to people who recently emerged from Chapter 13 bankruptcy, mostly because moneylenders know that these debtors cannot file another voluntary petition for a number of years. Ideally, the card should be one with a low initial credit limit that is easy to raise after a few months of timely payments.

A secured card may be an option as well. Try to choose a card that does not include a “secured” designation on a credit report, because such a label diminishes the payments’ effect on a score.

It’s usually best to charge several hundred dollars a month and pay off almost the entire balance every month. In this way, the unpaid balance stays low, there is considerable activity on the card, and the bank earns a little money off the interest.

Keep Making the Debt Consolidation Payment

In most cases, a Chapter 13 debt consolidation payment is about $400 or $600 a month. Instead of giving that money to the trustee, keep it in a savings account. Your family is already accustomed to living without this money, so there is no shock. The money adds up quickly, and in just a few months, a family will have an emergency fund of several thousand dollars, which is probably enough to weather almost any financial storm.

Rely on Savvy Attorneys

Bankruptcy can be the gateway to a higher credit score. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. After-hours appointments are available.


Bankruptcy And Student Loans: A Primer

Posted on: October 16, 2017 by in Bankruptcy, student debt
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Although student loans are unsecured debts, like credit cards, Small Business Administration loans, and medical bills, they are not automatically dischargeable like these other obligations. In fact, several years ago, Congress even closed the private student loan loophole, which is bad news for former ITT Tech students and other similarly situated borrowers.

There is an old saying among attorneys that “bad facts make bad law,” and that’s certainly the case in this regard, when closely examining the landmark decision Brunner v. New York State Higher Education Services.

The Brunner Rule

About ten years before the Second Circuit in New York decided this case, federal lawmakers rewrote the Bankruptcy Code, and there was considerable controversy about the student loan provision. Previously, such debts were automatically dischargeable. But there was some concern that student protesters in the 1960s borrowed their way through school and then adamantly refused to repay their loans.

Whether that was true or not, Congress included a provision that student loans could be discharged only upon showing of “undue hardship,” but lawmakers left it up to the courts to define that phrase.

Along came Marie Brunner, who graduated with a master’s degree in social work and had no apparent problems finding employment. Almost immediately thereafter, she asked a bankruptcy judge to discharge her debt, despite the fact that she had made no payments and had never asked for any other lesser kind of relief, such as a temporary forbearance.

In response, the appeals court endorsed what soon became known as the Brunner rule. It stated that student loans could be discharged in bankruptcy only if the debtor:

  • – Had made a good faith effort to repay the loan,
  • – Suffered from a long term disability, and
  • – Could not maintain a minimal standard of living if forced to repay the debt.

At first blush, the Brunner rule seems impossible to meet, since the elements of the test seem inconsistent, viz, if one cannot maintain a minimal standard of living, how can one make a good faith repayment effort? As a result only about .01 percent of consumer bankruptcy petitions even ask for a student loan discharge.

Meeting the Brunner Rule

Yet according to this same survey, about 40 percent of debtors who ask for student loan relief receive at least a partial discharge.

One factor in the debtor’s favor is that student loan debt is much, much higher now than it was forty years ago. Many people, especially those with graduate degrees, owe $40,000 or more, and it is a lot harder to pay off that amount of debt as opposed to $15,000 or $20,000.

As for the “minimal standard of living” prong, it’s generally understood that this level is akin to the poverty line, but there is a big difference between “generally understood” and black-letter law. If the debtor has to put off major purchases because of the student loan, some judges may be sympathetic and allow at least a partial discharge.

There’s another old saying in the law that “you don’t get anything unless you ask,” and in these cases, it may be worth asking for student loan discharge.

Connect With Experienced Attorneys

Student loan discharge is difficult, but not impossible, in consumer bankruptcy cases. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We aggressively represent student loan borrowers.


Four Dischargeable Debts In Bankruptcy

Posted on: October 9, 2017 by in Bankruptcy, chapter 13, chapter 7
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The end result of a bankruptcy petition, in almost all cases, is a fresh financial start for the honest yet unfortunate debtor. To get this fresh start, the bankruptcy judge will discharge (legally forgive) many different kinds of debts.

Sometimes, debtors want to pay what they owe, or at least most of it, but they lack the means to do so. Such repayment is an option in both Chapter 7 and Chapter 13 cases, because even if the debt is legally discharged, the moneylender will almost always still accept payments.

Credit Cards

The math is very simple. Since 2003, wages have increased by 28 percent and prices on many items have increased between 35 and 55 percent. Something has to fill in the gap, and in most cases, that something is borrowing money on credit cards. In fact, the average credit card-holding household has account balances over $16,000 in revolving debt alone.

There is no doubt that poor financial planning and overspending account for some of this debt, but unexpected emergencies, such as medical bills and unemployment, account for a lot more.

Since there is no security agreement, credit card debt is dischargeable in both Chapter 7 and Chapter 13 cases. In addition, because of the automatic stay, moneylenders cannot pursue any adverse actions, such as lawsuits, while the case is pending.

Medical Bills

As most people might expect, medical bills have increased more than most other types of expenses over the past fifteen years, and even if the debtor has good medical insurance, the membership fees, copays, and deductibles are often financially debilitating.

Legally, medical bills fall into the same category as credit cards and so they are completely dischargeable.

Signature Loans

Small Business Administration and other bank loans, as well as payday and other nonbank loans, are also unsecured, even if the lender required bank account information or if the debtor agreed to a certain withdrawal on a certain day.

Student loans, whether or not a governmental unit guaranteed them, are only dischargeable if the debtor establishes undue hardship, and admittedly, that is not an easy showing to make in court.


Somewhat similarly, income taxes, as opposed to payroll and other kinds of taxes, are dischargeable only under limited circumstance, but the showing is a little easier to make because it is based on time as opposed to other circumstances. The rules for both the IRS and state taxing authorities are:

  • Tax must be at least three years old,
  • Returns have been on file for the past two years, and
  • The authority has not assessed the debt in the last 240 days, which usually means that the taxpayer has not received a notice or bill in that time period.

The IRS, as well as states, are very particular on dates, and it is not unusual to see opposition based on one or two days off the deadlines.

If the taxing authority placed a lien on the taxpayer’s assets, such liens remain, because the bankruptcy judge has limited powers.

Contact Experienced Attorneys

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


Exempting Houses And Cars In Illinois Bankruptcies

Posted on: October 2, 2017 by in Bankruptcy, chapter 13, chapter 7
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Whether the voluntary petition is filed under Chapter 7 or Chapter 13, most all common consumer assets are exempt in Illinois, meaning that debtors rarely, if ever, must forcibly surrender their property to the bankruptcy trustee (person who oversees the case for the judge).

Bankruptcy protects assets to help fulfill the law’s mission of a fresh financial start for “honest yet unfortunate” debtors. If Illinois filers lost their houses, cars, and other important assets, they would go back behind the starting line, an outcome that’s clearly not contemplated by the Bankruptcy Code.

All that being said, if the asset is secured by a mortgage or other loan, the debtor must keep making payments as originally agreed, at least in most cases.


Up to $15,000 in equity for a single filer ($30,000) for joint filers) is exempt under 750 ILCS 65-22.

Per the Bankruptcy Code, the debtor must declare the house’s as-is cash value, which may be substantially lower than the fair market value, because cash-paying home investors usually pay a maximum 60 cents on the dollar.

Although the value difference makes no difference in the amount of equity, as that figure remains the same regardless of the home’s value, the distinction makes a tremendous difference in terms of the loan-to-value ratio. Assume a single filer has a $200,000 home with $20,000 in equity and a $180,000 loan balance. Given those facts, the trustee could theoretically force the debtor to sell the house for the $5,000 in unexempt equity, although the judge would have to approve such a plan.

But the as-is cash value of that house may be as low as $100,000, meaning that the debtor is upside-down on the residence and there will be no sale.

There are some other loan-to-value issues related to exempt homesteads as well, including:

  • – Lien Strip: If the property’s value is too low to secure a second mortgage or other junior lien, the bankruptcy court may declare it to be unsecured, thus freeing the debtor from the obligations to make payments on that debt.
  • – Cram Down: In some cases, the outstanding loan balance can be reduced to match the property’s fair market or as-is value.

These options, and specifically a cram down, may be available for other assets as well, such as motor vehicle loans.


$2,400 in equity for a single filer ($4,800) for joint filers is exempt under 735 ILCS 5/12-1001(c). Typically, newer cars have almost no equity because the outstanding loan balance is so high, and older vehicles have almost no equity because they have almost no value.Once again, the debtor must declare the as-is cash value, which can be readily obtained from a site like

In addition to the cram down mentioned above, redemption may be an option as well, especially in longer lasting Chapter 13 cases. If the debtor pays the full fair market value of the collateral, the moneylender may be unable to collect the remaining balance on the loan, no matter how high it is.

Count On Experienced Attorneys

Nearly all bankruptcy debtors get to keep their houses, cars, and other key assets. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


What’s The Difference Between Chapter 7 And Chapter 13?

Posted on: September 25, 2017 by in Bankruptcy, chapter 13, chapter 7
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A number of times over the last hundred years, and perhaps most recently in 1998, the Supreme Court has reaffirmed that the purpose of the Bankruptcy Code is to give the “honest but unfortunate debtor” a fresh start. There is only one kind of honest, but there are several kinds of misfortune, which is why there are basically two types of bankruptcy.

The most successful bankruptcy debtors either are victims of unforeseeable, and usually once in a lifetime, financial storms, or they understand the mistakes they made and are committed to doing better. Many times, there is a little bit of both, as the debtor may have had an unhealthy financial habit or two that created a vulnerability to job loss, divorce, medical bills, or another unexpected event.

Chapter 7

If the debtor has mostly unsecured debts, which are credit cards and other debts that the debtor has promised to repay, an ill-named liquidation bankruptcy may be the best option. This nickname is inaccurate because, in most cases, Chapter 7 debtors do not lose any of their assets. By law, Indiana and Illinois debtors can keep their:

  • – Retirement Accounts: If the IRA, 401k, or other nest egg was earned and not inherited, the debtor can keep the entire amount, regardless of the account balance.
  • – House: Both Illinois and Indiana use value-based exemptions that protect a certain amount of home equity in a primary residence. Bear in mind that if the house is worth $200,000 and the debtor still owes $190,000, the exemption only needs to protect the $10,000 in equity.
  • – Cars: The same rule applies for motor vehicles, and generally, new cars have almost no equity and used cars have almost no value.
  • – Personal Property: Other personal property, including cash in many cases, is also exempt.

To determine value, the debtor must declare the as-is cash value (“garage sale”) value. This amount is usually much lower than the fair market value.

About six weeks after the debtor files a petition and schedules, the trustee (person who oversees the bankruptcy on behalf of the judge) reviews the paperwork to ensure that everything is in order, and about six months later, all unsecured debts are discharged.

Chapter 13

Other debtors have issues with secured debts, such as home mortgages and vehicle loans. In these cases, the debtor probably does not want the debt to disappear, because that would mean losing the secured asset. So, the wage earner plan is probably a better option. Chapter 13 debtors have up to five years to catch up on secured debts, and during the entire period, they are under the protection of the bankruptcy court. So, in most cases, moneylenders cannot take any adverse action during this time, and that includes anything from harassing phone calls to repossession.

During the trustee meeting, the debtor and trustee come up with an income-based repayment plan, which is nearly always a better alternative to the debt-based “repayment plans” that moneylenders offer.

Debtors can voluntarily convert their plans from Chapter 13 to Chapter 7, and vice versa, at almost any time. So, many debtors file a Chapter 13, and if they find they cannot afford the debt consolidation payments, they convert to Chapter 7, wrap things up quickly, and take full advantage of their fresh starts.

Go With Experienced Attorneys

Different distressed debtors have different legal options in bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Our attorneys are licensed in both Illinois and Indiana.


A.D.K. Arms Files Bankruptcy

Posted on: September 19, 2017 by in Bankruptcy
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Aggressive debt collection tactics may have forced the firearms manufacturer into bankruptcy. Do ordinary people file bankruptcy for the same reason?

A.D.K. and its affiliate company, Advanced Precision Manufacturing, Inc., sought Chapter 11 bankruptcy protection almost simultaneously, apparently because Midwest Community Bank was attempting to collect on a $3.9 million loan and the company either could not, or would not, satisfy that obligation. Indeed, A.D.K. also filed a civil suit against the bank, alleging unfair debt collection practices.

Many companies use Chapter 11 to reorganize under the protection of a federal court.

Bankruptcy and Debt Collection

Over the past several years, many large banks have acquired many smaller banks, and these institutions may have little or no connection to the communities that they serve. As a result, some banks are even more aggressive than they were before when it comes to collecting debts, and they do not hesitate to take adverse action like repossession, foreclosure, lawsuits, and harassment.

Moreover, in June 2017’s Henson v. Santander, a unanimous Court relaxed the rules even further, so moneylenders, and specifically debt buyers, may push the envelope even more in the coming months and years. Typically, moneylenders launch adverse action after two or three missed payments, and once the debt collection machine kicks into high gear, it is almost impossible to slow it down simply by making payments.

Fortunately, bankruptcy’s automatic stay offers a solution. In most cases, moneylenders cannot take any adverse action against debtors, even if that action is already pending, while the case is open, unless the bankruptcy judge grants special permission. Even if a foreclosure sale is scheduled for the afternoon, the automatic stay will usually stop it if the voluntary petition is filed in the morning.

Why People File Bankruptcy

Just like business downturn usually triggers the inability to pay business debts, financial storms that the debtor cannot possibly control usually lead to the inability to pay personal debts and therefore a Chapter 7 or Chapter 13 petition. Some of these events include:

  • – Medical Bills: Even if the debtor has good health insurance, the deductibles and copays associated with a serious illness are usually thousands of dollars, and neither hospitals nor banks are very patient when it comes to payment.
  • – Unemployment: Almost 70 percent of American families have less than $1,000 in savings, so even a temporary layoff usually has devastating consequences.
  • – Divorce: The unexpected legal fees, coupled with support payments and/or the expense involved in maintaining two households, triggers many bankruptcy filings.

Even if families can weather one of these storms, these events often come in pairs or in quick succession, and that is enough to swamp most any boat.

They say lightning never strikes twice in the same place, but there is no guarantee when it comes to financial storms. So, people can usually file bankruptcy again, after a short waiting period expires.

Go With Tenacious Attorneys

Most of the people who file bankruptcy are victims of adverse financial circumstances that they cannot control. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Bankruptcy And Consumer Credit Reports

Posted on: September 11, 2017 by in Bankruptcy
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TransUnion and Equifax Information Services violated the Fair Credit Reporting Act by posting erroneous information on a post-bankruptcy credit report, according to court documents filed in an Illinois federal court.

Mary Ahlers, of East St. Louis, says that the credit reporting companies recorded some debts as delinquent, as opposed to discharged, even after she received a debt forgiveness order that applied to the listed accounts. She blames the companies for not performing a diligent investigation, and then for not deleting or modifying the account data in light of the available information about the accounts. Her lawsuit demands compensation for unspecified out-of-pocket expenses and emotional distress.

Her lawsuit also seeks a court order that forces the companies to amend her credit reports.

How Does Bankruptcy Affect Credit Scores?

The answer to this question surprises many people, because in many cases, a bankruptcy looks better than long-term debt delinquency or adverse actions, like foreclosure or repossession. These negative reports are signals to many moneylenders that the debtor simply gave up and made no effort whatsoever to rectify the situation, and typically, that is probably a fair assessment.

However, if a consumer files bankruptcy, some moneylenders may conclude that something is better than nothing, and at least the debtor made some effort to cure the money problems. This is the same reason that a Chapter 13 (seven years) falls off most credit reports faster than a Chapter 7 (ten years).

As for the information on the credit report, it is often incumbent on the consumer to ensure that the data is accurate and that all discharged debts are listed as such, because as discussed in a previous post, the Supreme Court recently sided with a debt buyer against a consumer. So, it is fair to speculate that courts will show little interest in enforcing the FCRA and other consumer-friendly laws.

Managing Post-Bankruptcy Credit

Remaining current on any remaining secured debts, such as auto loans or home mortgages, is one of the best and fastest way to rebuild credit.

A new credit card may be a good idea as well, as long as it has a low credit line. If possible, obtain a secured card that does not contain a “secured” note on your credit report. Opinions vary as to whether it is best to pay off the entire balance each month to show diligent payment  or carry over a few dollars and allow the bank to make money.

A proactive attitude may be the best way to rebuild credit. Be upfront with future potential moneylenders about your past credit problems, and while they do not need or want to know details, they do need to hear a brief explanation for your filing, such as medical bills or whatever.

Debtors who keep true to these principles, and others that their attorneys suggest, are in the fast lane to credit restoration, while debtors that overlook or ignore them often end up back in bankruptcy court.

Reach Out to Experienced Attorneys

Effective credit recovery is part of a bankruptcy strategy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.


Bankruptcy Filings Dip Slightly

Posted on: September 6, 2017 by in Bankruptcy, chapter 13, chapter 7
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According to the latest government statistics, distressed debtors have less money, owe less money, and are filing fewer voluntary bankruptcy petitions than they were a year ago.

Nationally, consumer filings dropped 6 percent in the latest filing tally. The average debtor had a $2,668 monthly income to pay $2,590 in monthly expenses. In 2015, both these figures were about 7 percent higher.

In Indiana, bankruptcy filings fell by 9 percent.

Types of Consumer Bankruptcy

Chapter 7 bankruptcy is normally a good option for families who owe more than $10,000 in unsecured debt, because that is realistically more money than most people can afford to repay. The list of dischargeable obligations includes:

  • Medical Bills: Even with health insurance, medical bills often overwhelm a family, which is why these expenses are one of the leading causes of bankruptcy.
  • Credit Cards: Like payday loans, credit cards are secured only by a future promise to pay, which is why credit card debt is one of the most frequently-discharged obligations.
  • Back Taxes: Income taxes are dischargeable if the taxpayer did not commit fraud or tax evasion, the tax is at least three years old, the returns have been on file at least two years, and the debt has not been assessed in the last 240 days.
  • Small Business Administration Loans: Most businesses fail within their first few years, and if your business is no longer in operation but the SBA loan is still outstanding, bankruptcy should be a consideration.

Bankruptcy eliminates the debt but not the collateral consequences of debt. So for example, if a taxing authority has filed liens on outstanding taxes, those liens remain even if the underlying debt is discharged.

Procedurally, after the debtor takes a debt counselling class, an attorney files a petition and schedules. About six weeks later, the debtor meets with the trustee (person who oversees the bankruptcy on behalf of the judge) to review the paperwork, and about six months after that, the judge typically signs the discharge order.

Chapter 7 debtors must pass the means test, which means their income must be lower than the average income for that geographic area.

In Chapter 13 cases, the debtor’s income usually needs to be slightly above average, since the debtor must make monthly debt consolidation payments. The debtor has up to five years to pay any arrearage on home mortgages, auto loans, and other secured debts.

The trustee also has a different role in Chapter 13 cases, because instead of simply reviewing paperwork, the trustee evaluates the debtor’s monthly income and expenses. The debtor ten remits any excess income as the debt consolidation payment.

Chapter 13 is a good option for people who are more than a month or two behind on secured debts.

Benefits of Bankruptcy

The automatic stay is one of the most significant benefits of bankruptcy. In most cases, moneylenders cannot take any adverse action against debtors as long as the case is pending. That includes lawsuits, repossessions, foreclosures, and collection phone calls.

Chapter 7 debtors receive a fresh financial start in only a few months, and Chapter 13 debtors have up to five years to pay off any arrearage. Furthermore, Chapter 13 debtors may also be eligible for cramdowns, which means that their secured loans are reduced to the current fair market value of the secured property.

Rely On Experienced Attorneys

Chapter 7 and Chapter 13 are the two main types of consumer bankruptcy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters in both Illinois and Indiana.


Casino Remains On Track To Exit Bankruptcy

Posted on: August 30, 2017 by in Bankruptcy, chapter 13
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In much the same way that consumers deal with debts in a Chapter 13 bankruptcy, Caesars Entertainment Corporation hopes that Chapter 11 will give it a fresh start.

The company announced that about 90 percent of shareholders approved a merger between Caesars Entertainment Corporation, the bankrupt entity, and Caesars Acquisition Company. The merger is part of the company’s reorganization plan, which the shareholders must approve before the company can emerge from bankruptcy. In the coming months, regulators from both Nevada and Missouri will further scrutinize the plan, which is part of an action pending in an Illinois federal court.

Caesars CEO Mark Frissora said the merger “is an important milestone” in the case.

Renegotiating Debt

In many Chapter 13s, home mortgage debt is the largest single liability. Largely depending on the jurisdiction and the facts of the case, debtors may have some options in terms of renegotiating this and other secured debt.

One option may be a cramdown. Assume the homeowner recently purchased a $200,000 home and still owes $200,000 on the note. Further assume that the house’s tax appraised value is now $180,000. If that is the case, the actual fair market value may be even lower than that. Under these facts, the homeowner may be able to renegotiate the $200,000 unpaid principal balance down to $180,000, or the fair market value of the property. In this scenario, the additional $20,000 is forgiven.

A lien strip may be a possibility as well. Assume the homeowner took out a second mortgage for $20,000. If there is not enough equity in the property to secure both debts, the junior lien arguably becomes unsecured and therefore subject to discharge.

Finally, there may be a legitimate dispute as to the amount owed, perhaps because the loan was predatory or the homeowner may be eligible for a loan modification. In these cases, the judge usually refers the dispute to mediation, where the lender has a duty to negotiate in good faith. In other words, the moneylender must come down on its demand and try very hard to meet the homeowner somewhere in the middle.

Paying Off Debt

The principle advantage of a Chapter 13 is not the possibility for debt renegotiation, but the certainty of debt repayment. Debtors have up the five years to catch up on any delinquencies on any secured debt, including home mortgages and auto loans. During this period, the automatic stay remains in effect, in most cases, so moneylenders cannot take adverse action against the debtors, including repossession or foreclosure.

The repayment schedule is income-based, so debtors pay what they can afford as opposed to what the moneylender demands. Again in most cases, the moneylender cannot successfully oppose the repayment plan as long as the arrearage is satisfied within the protected repayment period.

Go With Experienced Attorneys

Chapter 13 debtors may have several debt reduction and debt repayment options. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in Illinois and Indiana.