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Bankruptcy Filing Rates Continue Increasing

Posted on: March 21, 2017 by in Bankruptcy
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Illinois is the fifth most bankrupt state in the country, according to the American Bankruptcy Institute.

For the first time since 2010, the bankruptcy filing rate edged up in two consecutive months, as a 5 percent January 2017 increase followed a similar increase in December 2016. However, the per capita filing rate actually decreased, from 2.48 per 1,000 people to 2.13. Nevertheless, ABI Executive Director Samuel Gerdano said the higher overall filing rate marked the beginning of a trend fueled by higher interest rates that make it harder for people to borrow money. If current economic trends continue, “more debt-burdened consumers and businesses may seek the financial shelter of bankruptcy,” he predicted.

Alabama, Tennessee, Georgia, and Arkansas were the only states with higher per capita filing rates than Illinois’ 3.41.

Why People File Bankruptcy

Rising interest rates and a persistent wage gap are essentially the one-two punch combination that drives many families into bankruptcy. For almost the first time since the end of the Great Recession, just as many households are recovering, both interest rates and inflation are on the rise; meanwhile, wage growth is nowhere near as significant as it was in the go-go 1990s and early 2000s.

When interest rates were low, the wage-price gap was not that big of a deal, because families could use credit to take care of any sudden cash emergencies. But with loans now either harder to get or entirely unavailable, borrowing money is either not as good as an option as it was before or not on an option at all.

With limited access to credit and little savings (the average family does not have the cash to cover a $400 emergency expense), there are no resources to cope with sudden expenses related to:

  • – Job Loss: With many households existing hand-to-mouth, even a month or two of no income creates a snowball effect, as the late payments (especially on unsecured debts) quickly pile up.
  • – Medical Bills: Estimates vary, but there is little doubt that many people have medical bills that they can barely afford to pay.
  • – Divorce: Thousands of dollars in lawyers’ fees, along with family support payments and/or the loss of income, is a tremendous financial shock.

These events, and others like them, can happen to anyone at any time with little or no warning, and usually involve no fault on the part of the debtor.

Bankruptcy is a viable alternative in these situations. The automatic stay prohibits moneylenders from pursuing any adverse action against debtors, from annoying phone calls to foreclosure. Chapter 7 eliminates most unsecured debts in only a few months, while Chapter 13 gives families up to five years to catch up on past-due secured debts. Either way, when the case is discharged, the debtors have fresh financial starts.

Reach Out to Experienced Lawyers

Student loans are dischargeable in bankruptcy in limited circumstances. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


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 Lawyers

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


Feds Scrutinize Student Loan Repayments

Posted on: March 6, 2017 by in Bankruptcy, student debt
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Shortly before President Donald Trump was sworn into office, the Consumer Financial Protection bureau filed suit against one of the country’s largest student loan servicers.

According to court documents, Navient was guilty of two sins. First, it failed to properly credit additional payments on existing loans, although part of the blame may fall on borrowers. Under federal law, any excess funds on top of the minimum monthly payments are applied to principal and interest unless the borrower specifies otherwise, so many people who thought they were making additional principal reduction payments were basically just making regular payments in advance. Most payments go through lockboxes, an automated process that saves time but may result in confusion over funds applications. Secondly, and more importantly for bankruptcy purposes, the CFPB alleged that Navient steered distressed borrowers into forbearance agreements as opposed to alternative repayment plans.

In the wake of the lawsuit, a few borrowers have mulled a payment strike.

Discharging Student Loans in Bankruptcy

Many distressed student loan borrowers attempt to discharge their loans in bankruptcy. Before lawmakers amended the Bankruptcy Code in 1978, student loans were dischargeable in both Chapter 7 and Chapter 13 bankruptcies just like any other unsecured debt. But in the 1978 amendments, Congress inserted a provision that limited student loan discharge to cases involving “undue hardship,” a phrase that lawmakers intentionally left undefined to limit the political fallout this change caused.

Nine years later, the Second Circuit defined the phrase in Brunner v. New York State Higher Education Services Corporation. The court used a three-part analysis to determine if a debtor had an “undue hardship” under the new Section 523(a).

  • – Consistent Payment History: Before they receive discharges, debtors must show that they made good-faith efforts to repay their loans, which usually means a regular, if somewhat sporadic, payment history.
  • – Effect on Dependents: The debtor must convince the court that repaying the student loan is so onerous that the debtor’s family would be unable to sustain a minimal standard of living (i.e. above the poverty line).
  • – Permanent: The hardship cannot be a business reversal or period of unemployment, but rather a disability that’s either permanent or expected to last through most of the repayment period.

The Brunner Rule also requires that the disability not be a self-inflicted injury; for examples, lawyers who are disbarred because of their own wrongdoing are not eligible for hardship discharges. Many commentators, and some dissenting judges as well, criticized the Brunner Rule throughout the 1990s and early 2000s, because it effectively eliminates discharge for anything other than a physical or emotional disability that occurs after the debtor finished school.

Reconsidering the Brunner Rule

The country is divided into eleven appeals circuits. Many circuits, including the neighboring Eighth Circuit based in St. Louis, have thrown out the harsh Brunner Rule and replaced it with a totality-of-the-circumstances analysis. However, the Seventh Circuit, which includes both Indiana and Illinois, reaffirmed the Brunner Rule in Tetzlaff v. Educational Credit Management Corporation. This case involved a law school graduate with over $260,000 in student loans who could not pass the bar due to chronic alcoholism and depression and may not even be eligible to sit for the test because of a prior criminal record. Despite his dire circumstances, the court mechanically applied the Brunner Rule, which clearly did not allow discharge under these facts.

In January 2016, despite the split in the circuits, the Supreme Court refused to review Tetzlaff, so it is still the law in this geographic area.

Reach Out to Experienced Lawyers

Student loans are dischargeable in bankruptcy in limited circumstances. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Mortgage Modifications In The Post-HAMP Era

Posted on: March 1, 2017 by in Bankruptcy, Loan Modification, Real Estate
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The government’s Home Affordable Modification Plan went away at the end of 2016, but there are still mortgage modification options available to the vast majority of distressed homeowners.

Fannie Mae and Freddie Mac both participate in the Flex Modification plan. The process is much the same. Homeowners must have a documented hardship, like a serious illness or job loss, that caused them to temporarily fall behind on their house payments. There are a slew of home modification companies who can basically wait on hold with the mortgage lender and help the homeowner compile the required documents, but these companies cannot expedite the process and cannot represent borrowers in court if the lenders try to foreclose on the loans.

According to some estimates, Freddie Mac and Fannie Mae own or have a controlling interest in as many as 90 percent of the residential mortgages in the United States.

Mortgage Modification Without Bankruptcy

In a nutshell, obtaining a loan modification outside bankruptcy is a frustrating process, to put it nicely. Typically, the lender requires the borrower to resubmit financial documents every 90 days in order to maintain eligibility, and the final decision is usually made strictly according to the numbers.

Many lenders deny eligibility because of a failure to comply with these strict technical requirements. If one document is one day late or faxed to the wrong location, or if one trial payment is one day late, the lender usually denies the application regardless of any good faith on the borrower’s behalf. Furthermore, if the DTI (debt-to-income ratio) is even slightly off, the lender normally denies the application no matter what the borrower is willing to do to make the arrangement work financially.

Mortgage Help in Bankruptcy

If an interest rate modification is the answer, and it often is if the debtor underwent a temporary hardship that is now over, bankruptcy judges usually refer the matter to mediation. Before a mediation, the lender has a duty to negotiate in good faith, which means that instead of a knee-jerk denial, the lender must articulate a legitimate reason for the decision. Many times, such a reason simply does not exist, and the bank would rather change the loan terms than litigate the question.

Many times, an interest rate modification is not the answer, because if the delinquent amount is more than a few thousand dollars, the monthly payments may actually increase. Instead, Chapter 13 repayment is normally a better option. Debtors have up to five years to catch up on mortgage payments, and during the protected repayment period, the automatic stay prevents moneylenders from undertaking any foreclosure proceedings or other adverse action unless the bankruptcy judge grants a special exception.

Bankruptcy lawyers are also skilled negotiators, and they are strong voices during talks with the bank, so distressed homeowners often receive relief through bankruptcy that they may not have even known was available.

Contact Experienced Lawyers

Bankruptcy helps people with past-due mortgages get fresh financial starts. For a free consultation with an experienced bankruptcy lawyer 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 Lawyers

There is no reason to panic over postpetition objections. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Should Financially Distressed Illinois Cities File Bankruptcy?

Posted on: February 22, 2017 by in Bankruptcy, debt
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The nonprofit Manhattan Institute says that an “intervention bankruptcy” is a good option for cities experiencing pressing financial problems, as long as politicians are kept out of the loop.

Such a course of action is highly preferable to continuing operations on the brink of insolvency, because eventually they get to a point “where they cannot pay their creditors and [they are] liable to creditor lawsuits,” remarked MI Senior Fellow Dan DiSalvo. However, cities are under intense pressure from voters and interest groups to avoid the bankruptcy route, he added. The so-called Detroit model, which puts a state-appointed manager in charge of the city’s finances, is preferable to the so-called California model, under which elected officials retain control.

Under a 1990 law, financially distressed Illinois cities have access to special emergency funding options, and if they file bankruptcy, the elected leaders must relinquish control to a state-appointed manager.

Bankruptcy Symptoms

In the past, many observers criticized politicians in Washington for their “borrow-and-spend” approach to government finances, as according to some, leaders ran up large budget deficits with little thought as to the funding for their ambitious programs. Many cities are in a similar boat, because they promised large pensions to attract and retain workers to jobs that, relatively speaking, paid much less than private-sector alternatives. Later, when those bills become due, a few cities struggle to stay afloat.

Most personal bankruptcies occur because of job losses,divorces, illnesses, and other events largely beyond the debtors’ control. As a result, it is sometimes hard to know when to seek bankruptcy assistance.

  • – Unsecured Debt Servicing: As a rule of thumb, if a family accumulates more than $10,000 in consumer debt (credit cards and medical bills), it is all but impossible to repay it, especially if the family’s other loan balances are about average.
  • – Secured Debt: Again as a rule of thumb, most moneylenders begin initial adverse action (letters and phone calls) once an account becomes 30 days delinquent; more aggressive adverse action (repossession and foreclosure) follows shortly thereafter.

In most cases, an automatic stay takes effect as soon as debtors file bankruptcy, so for the duration of the case, moneylenders cannot take any adverse action against debtors without special permission from the bankruptcy court.

The automatic stay applies to dischargeable as well as nondischargeable debts. For example, if a moneylender is garnishing a debtor’s wages to satisfy a student loan obligation, the moneylender cannot continue such garnishment while the bankruptcy is pending, even though the underlying obligation will most likely survive.

Typically, Chapter 7 bankruptcy extinguishes unsecured debts in a matter of months; Chapter 13 gives debtors up to five years to repay past-due amounts on secured debts.

Contact Aggressive Lawyers

Bankruptcy provides both short and long-term debt relief. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle cases in both Illinois and Indiana.


Five Exempt Assets In An Illinois Bankruptcy

Posted on: February 14, 2017 by in Bankruptcy
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Even in so-called “liquidation” bankruptcies, debtors get to keep nearly all their assets, because they are immune from creditor seizure under the generous exemption laws in both Illinois and Indiana. That being said, bankruptcy only erases underlying debts, and it does not extinguish either voluntary or involuntary liens. So, if property is secured, debtors must continue making payments and follow all other terms and conditions in the security agreement.

Some assets are entirely exempt regardless of value, but in most cases, proper asset valuation is a key to ensuring that these items remain free from seizure.

Retirement Accounts

In many situations, a 401(k), IRA, or other tax-deferred account is the largest financial asset. In 2014’s Clark v. Rameker, the Supreme Court once again affirmed that these assets are 100 percent exempt in bankruptcy, no matter how much money they contain. The overarching these in bankruptcy cases is that honest but unlucky debtors deserve fresh financial starts, and such starts are impossible without long-term financial security. Furthermore, if a court took away a retirement account, which is usually the product of many months of savings and financial sacrifice, such a move would definitely send the wrong message.


Both Indiana ($17,600) and Illinois ($15,000) exempt home equity up to certain dollar amounts; these amounts may be higher if the spouses file a joint bankruptcy. If the owners have made faithful payments for several years, the equity amounts are probably near the cap. Under the Bankruptcy Code, debtors must declare the as-is cash sale value of particular assets, and this rule has some nuances with regard to real property.

Arguably, a home’s as-is cash value is the amount of money that a home investor would pay for a no-inspection property purchase, and that amount is usually between 50 and 60 percent of the home’s fair market value or tax appraised value (these two amounts are usually different). An accurate bankruptcy appraisal often reduces the apparent level of equity, thus exempting the entire amount.

Motor Vehicles

Similarly, both Indiana and Illinois have monetary value exemptions, rather than category exemptions, in this area. Most newer vehicles have very high loan values and almost no equity, and most older vehicles have almost no resale value. In either case, they are very unattractive targets for the trustee (person who oversees the bankruptcy on behalf of the judge) to take and sell, especially given the costs of seizing the vehicle, storing it, making any necessary repairs, and bearing the risk of finding a seller.

The trustee has a duty to evaluate nonexempt assets and determine if creditors would benefit from their seizure and sale as opposed to a duty to grab them, and there is a significant difference between the two.

Insurance Benefits

Much like retirement accounts, life insurance and other benefits are categorically exempt, because the debtor made financial sacrifices to build equity in these policies and the funds can provide long-term security essential for fresh starts.

Wild Card

In both Indiana and Illinois, debtors can apply the wildcard exemption to otherwise nonexempt property, including cash in a checking or savings account. The law is even more generous in Illinois, as at least one court has held that current wages are exempt under the Wage Deduction Act.

Count on Experienced Lawyers

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


Bankruptcy Filings Increase

Posted on: February 14, 2017 by in Bankruptcy
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After several consecutive years of steady decline, consumer bankruptcy filings increased 6 percent in 2016.

According to a report, Illinois had the second-highest number of new bankruptcy filings in the country for December 2016. Alabama and Tennessee had the highest per capita filing rates, continuing a trend of more bankruptcies in the South than almost any other region. Despite the recent increase, filing volume is still at about half its Great Recession peak.

Filing volume also peaked around 2005, the year that major bankruptcy reforms went into effect.

Mandatory Bankruptcy Procedures

Whether consumers file Chapter 7 or Chapter 13 bankruptcy, they must complete a debt counselling course prior to filing. Once they file, the automatic stay lasts for the duration of the case if the debtor has no prior at-fault dismissals. The stay lasts for 30 days if the debtor has one such dismissal in the last year and it is not automatic if the debtor has more than one such dismissal in the past year; in either case, judges routinely extend the automatic stay if the debtor demonstrates good faith. The automatic stay is a critical part of the Bankruptcy Code, because it prevents moneylenders from taking any adverse action against debtors, such as lawsuits or foreclosure proceedings, while the case is pending.

Also, in both bankruptcies, there is a meeting with the trustee (person who oversees the case on the judge’s behalf) about six weeks after filing. Debtors have a legal obligation to cooperate with the trustee, and that includes providing all requested documents. At a minimum, debtors must have a valid drivers’ license, Social Security card, and their most recent Federal and State returns. Depending on the jurisdiction, trustees normally request additional documents as well, such as insurance policy declaration pages, certain bank records, and title information.

Chapter 7 Procedure

Even though most debtors get to keep almost all their assets, Chapter 7 bankruptcies are often called “liquidation” bankruptcies. In many cases, debtors can keep their nonexempt assets as well, typically because they either have high unpaid secured loan balances or they do not have enough pure monetary value to legally justify their seizure and sale.

At the 341 meeting, the trustee essentially reviews the debtor’s paperwork, confirms the debtor’s identity, and asks a few simple questions. Most Chapter 7s end about four to six months later with the discharge of all the debtor’s unsecured debts, including credit cards, medical bills, payday loans, and so on.

Chapter 13 Procedure

If a consumer opts for the “wage earner” repayment plan, the trustee reviews income and expense figures before placing the consumer on an allowance. The allowance is based on the repayment plan, which is a joint effort between the trustee and the debtor; moneylenders can only object to the repayment plan under rare circumstances.

The protected repayment period lasts up to five years, giving the debtor as many as 60 months to catch up on past-due mortgage payments, vehicle loans, and other secured debts. At the end of the repayment period, these accounts show a zero past-due balance and any remaining unpaid debts are discharged.

Reach Out to Experienced Lawyers

Consumers have several options to deal with unpaid debts in bankruptcy. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours appointments are available.


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 Lawyers

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 lawyer 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 lawyers 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 Lawyers

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