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Posts Tagged ‘ Chapter 13 Bankruptcy Chicago ’

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

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

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

Filing Chapter 7 Bankruptcy in Indiana

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

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

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

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

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

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

How Does Chapter 13 Bankruptcy Affect Me in Illinois?

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

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

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

Pursuing a Chapter 20 Bankruptcy in Indiana

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

Connect With Experienced Attorneys

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

Resource:

law.cornell.edu/supct/html/05-996.ZO.html

The Different Types Of Bankruptcy

Posted on: November 13, 2017 by in Bankruptcy, chapter 13, chapter 7
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The Bankruptcy Code provides for several different types of consumer bankruptcy, but nearly all these voluntary petitions fall under either Chapter 7 or Chapter 13.

Both these plans have some things in common. In each case, the debtor must undergo pre-filing debt counselling, as well as a post-filing financial management class. Both types trigger the automatic stay, in most cases. So, moneylenders may not take any adverse action against debtors while their cases are pending. That includes demands for payment, harassing phone calls, repossession, eviction, and foreclosure.

There are some significant differences as well, as each chapter is designed for a certain kind of debt problem.

Chapter 7

Sometimes called “liquidation” bankruptcy, although that term is not accurate, Chapter 7 is essentially a declaration that the debtor is completely unable to pay his/her outstanding unsecured debts in the way that the moneylender demands they be paid. Therefore, the debtor gives permission for the bankruptcy judge to seize and sell all nonexempt assets to satisfy that debt.

Most people do not have nonexempt assets, unless they own luxury items, like vacations homes and boats. Even then, the trustee (person who oversees the bankruptcy on behalf of the judge) might not seize the item, if its sale would not significantly benefit the creditors. For example, a vacation home might have a large mortgage that must be satisfied or a boat might need substantial work to get it in a saleable condition.

About six weeks after the petitioner files a petition and schedules, the trustee inspects the paperwork to ensure that it is all in order and also verifies the debtor’s income and identity.

Typically, about six months later, the judge discharges all unsecured debts. This category includes all medical bills, Small Business Administration loans, and credit cards, as well as most income taxes and some student loans. As a result, the debtor has the fresh financial start which the Bankruptcy Code guarantees.

Chapter 13

The so-called “wage earner plan” is often ideal for people who are behind on home mortgage payments, auto loans, and other secured debts. After reviewing the debtor’s paperwork, the trustee basically places the debtor on an allowance for either three or five years, largely depending on the household income level, to give the debtor a chance to catch up on past-due secured debt payments. The moneylenders may not successfully object to the debtor’s proposed repayment plan except in very rare circumstances, and they may not take any adverse action against debtors during the protected repayment period.

At the end of three or five years, any remaining unsecured debts are discharged, and the debtor has a fresh financial start while retaining all of his or her exempt assets.

Chapter 20

This one is not in the bankruptcy code, but it is a very common approach. Some Chapter 13 debtors soon realize that they cannot afford the monthly debt consolidation payment. In these cases, it is sometimes best to voluntarily dismiss the Chapter 13 and refile it as a Chapter 7, since the debtor has a right to convert the case at almost any time. In this way, the debtor needs not make any more payments, the automatic stay remains in place, and the debtor receives a fresh start much earlier than under a Chapter 13.

Connect With Experienced Attorneys

Different debtors have different bankruptcy choices. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

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.

Resource:

scholar.google.com/scholar_case?case=583609839906134327&hl=en&as_sdt=6&as_vis=1&oi=scholarr

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.

Resource:

reviewjournal.com/business/casinos-gaming/caesars-shareholders-take-new-steps-to-emerge-from-bankruptcy/

Honk Honk: Parking Tickets And Bankruptcy

Posted on: April 17, 2017 by in Bankruptcy, chapter 13, debt
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While the number of filings has declined overall, Chicago has the the highest number of non-business Chapter 13 bankruptcy filings in the country, and almost half of them list the Chicago Parking Bureau as one of the creditors.

The Windy City is notorious for its high parking ticket fines and aggressive collection procedures. In 2015, the city was owed $1.5 billion in unpaid fines from 4 million parking tickets; in contrast, New York City had $756 million from 10 million tickets. Chapter 13 trustee (person who oversees the bankruptcy for the judge) Glenn Stearns says that a single unpaid ticket can balloon to more than $4,000 in penalties that eventually result in drivers’ license suspension and vehicle impoundment.

In 2014, a bankruptcy fraudster circulated Chapter 13 petitions on the street for drivers to show the CPB. Consumers filed about 1,000 of these petitions which listed only two creditors: the CPB and the Department of Revenue. Most of these cases were quickly dismissed, and the FBI eventually arrested the fraudster.

Dischargeable Debts and Collateral Consequences

One of the reasons the parking ticket/Chapter 13 fraud was so widespread is that the CPB was one of the few entities that forgave both the underlying debt (in this case, the unpaid parking ticket) and the collateral consequences of that unpaid debt (the vehicle impound). Once the trustee closed that loophole, the scheme started to unravel.

Many unsecured debts fall into this category. Assume the debtor owes money to a college or university that is withholding the debtor’s transcript. Bankruptcy eliminates the debt, but the school still has the right to withhold the transcript pending payment or other resolution. Income tax debt is a better example. If the return was filed at least three years ago, the debt is at least two years old, and the taxing authority has not assessed the debt in the last 240 days, the bankruptcy judge will discharge the debt. However, the judge has no authority to cancel a lien.

Sometimes, the opposite is true. Under current law, student loans are difficult to discharge in Indiana and Illinois. However, if the bank is garnishing the debtor’s wages, bankruptcy ends this garnishment. The same thing applies to lawsuits and other collection attempts. That’s because the automatic stay applies to all debts, whether or not they are ultimately discharged.

Criminal Penalties

Generally, fines that punish the defendant are nondischargeable and fines that reimburse the government are dischargeable.

  • Punitive: Nearly all criminal fines, such as bad check fees and victim restitution, are punitive in nature and therefore nondischargeable in either a Chapter 7 or Chapter 13; some parking and traffic ticket fines may be dischargeable in a Chapter 13.
  • Reimbursement: Court costs and other such expenses are usually dischargeable.

Unpaid tolls are in a gray area, but the better argument is they are dischargeable because these fees reimburse the government for road maintenance expenses.

Partner With  Experienced Lawyers

Bankruptcy eliminates debts, but may not eliminate the secondary consequences of these debts. For a free consultation with an experienced bankruptcy lawyer in Chicago, contact the Bentz Holguin Law Firm, LLC. After hours appointments are available.

Resources:

law.cornell.edu/uscode/text/11/362

medill.northwestern.edu/chicago/expensive-chicago-parking-tickets-contribute-to-huge-bankruptcy-filings/

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.

Resources:

aw.cornell.edu/rules/frbp/rule_3015

epubs.utah.edu/index.php/ulr/article/viewArticle/1090

insurancejournal.com/news/midwest/2017/01/24/439837.htm

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.

Resources:

ibj.com/articles/61786-top-stories-retooled-republic-preps-to-exit-bankruptcy

bna.com/mediation-plays-increasing-n57982070088/