Does Bankruptcy Mean School’s Out?

Although a threatened teacher strike never occurred, Governor Bruce Rauner is pressuring the Chicago School District to declare bankruptcy and start over.

Many parents were concerned, not only because of the issues, but also because they feared major disruptions. During the last teachers’ strike in 2012, most of the district’s 652 campuses closed, and the ones that remained open closed their doors at noon. But this time, had there been a strike, all campuses would have remained open and staffed by non-union employees that facilitated online learning and supervised activities like art, music, and physical education. Additionally, eligible students would have continued to receive free breakfasts and lunches.

In the event of bankruptcy, schools will continue to operate normally, all teachers will still get paid, and classes will be in session.

Financial Events in a Bankruptcy

Some people think that bankruptcy is a life-ending event and that their financial routines will change radically. But the opposite is often true, and in many cases, day-to-day living is largely the same pre- and post-filing.

The biggest difference is the automatic stay. In most cases, moneylenders cannot take any adverse action against bankruptcy debtors. That includes major events, like credit card lawsuits and house foreclosure proceedings, as well as more everyday matters, like collections letters and harassing phone calls. The automatic stay also typically applies to wage garnishment, even if the underlying debt, like a student loan, is non-dischargeable.

There are a few caveats, because the automatic stay sometimes has some unintended consequences. Most automatic drafts stop, so debtors should be proactively contact the moneylender to ascertain its policy and also watch their bank statements to see if the payment is deducted. On a related note, some moneylenders no longer send monthly statements. This correspondence usually contains a line about a past-due balance, and this information could be interpreted as a debt collection attempt that violates the automatic stay. In either case, the bills are still due, and if the debtor wants to retain the property, the debtor must keep making payments.

Many debtors have a preferred credit card or two. If that is the case, contact the moneylender before filing and make arrangements to keep the account open, because most credit card issuers automatically cut off these accounts if the cardholders file bankruptcy. Talk to your lawyer before you call the moneylender.

Legal Events in Bankruptcy

Most bankruptcy debtors never see the inside of a courthouse. The paperwork is all filed online, and the one event that requires a personal appearance – the 341 meeting of creditors – is a one-on-one with the bankruptcy trustee (person who oversees the case on behalf of the judge).

If there is a motion for turnover or other adversarial action, about 97 percent of these matters are settled out of court. In a Chapter 7 motion for turnover, the lawyers often negotiate a settlement over the phone. In a Chapter 13, the trustee may object to the plan or file a motion to dismiss the bankruptcy if the debtor misses a trustee payment; these matters are usually quickly resolved with an amended plan that addresses the trustee’s concerns or with a timely-made payment.

Contact Diligent Lawyers

At the Bentz Holguin Law Firm, LLC, we work hard to get you the fresh start that you and your family deserve. Call us today for a confidential consultation with an experienced bankruptcy lawyer in Chicago.

Resources:

pantagraph.com/news/state-and-regional/illinois/teachers-union-chicago-school-district-reach-contract-deal/article_5768311e-7f94-58c1-8bcb-f16842633e64.html

bizjournals.com/phoenix/stories/2004/05/31/newscolumn5.html