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Getting The Most Out Of An Indiana Bankruptcy

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

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

Discharging Student Loans in an Illinois Bankruptcy

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

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

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

Maximizing the Homestead Exemption in Chicago

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

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

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

Forgiving Tax Debt in an Indiana Bankruptcy

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

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

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

Contact Experienced Attorneys

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


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.