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Monthly Archives: January 2009

Personal Injury Claims must be disclosed in bankruptcy filings

Posted by David Leibowitz on January 29th, 2009 in Bankruptcy, Chapter 7, Exemptions, , , ,

If you file a bankruptcy case, you must list all of your assets.  This includes lawsuits for personal injury claims.  It also includes personal injury claims even if you have not yet filed a lawsuit.  

Failure to list all assets in a bankruptcy case could lead to loss of your discharge in bankruptcy or even criminal prosecution.

You can exempt a portion of your claim – up to $15,000 in Illinois and up to $25,000 in Wisconsin.  

Many people who have been involved in automobile accidents or medical malpractice claims find themselves facing bankruptcy during the long delays prior to trial or settlement.  Unfortunately, their personal injury attorneys frequently have no experience with bankruptcy.  And it would be unethical for them to help their clients out financially while waiting for trial or settlement.  Even worse are the companies who try to get the victim to sell a portion of his personal injury claim for a big discount in order to pay living expenses.

So victims of automobile accidents or other major tort claims may have to file a bankruptcy case before they get their settlement.  

Tell your bankruptcy lawyer about these claims.  We at Lakelaw will ask you.  

If you file a bankruptcy case, you won’t “lose” your rights.  If you have a smaller claim, it will be exempt from creditors.  If you have a larger claim, you will keep the first $15,000 in Illinois or  the first $25,000 in Wisconsin.  The next dollars will go to pay your creditors until they are paid in full.  And if you were unfortunate to have suffered a significant claim, you will get to keep the balance.  Sometimes, a personal injury claim settlement can be structured so that a significant part is allocated to your wife or family.  If these people are not filing a bankruptcy case, this may be a legitimate way to protect your claim from creditors.

We will work with your personal injury lawyer to maximize the amount of money you keep from your personal injury settlement even though you are filing a bankruptcy case.

Should I use my IRA to pay off debts?

Posted by David Leibowitz on January 28th, 2009 in Bankruptcy, ,

Clients often ask if they should avoid bankruptcy by paying off their debts using their IRA or 401k plans.  There are many reasons why I suggest they not do so.  Here are the top 10 reasons to keep your IRA or 401k and save it for retirement.

  1. Your IRA or 401k plan is exempt.  Creditors cannot collect anything from it.  You get to keep it until you need it for retirement.
  2. If you take money out of your IRA or 401k plan, you have to pay income taxes on it right now.  If you can’t afford to pay your debts, you probably can’t afford to pay extra income tax either.  That means you’d have to take out even more money from your IRA or 401k plan to stay even
  3. If you take money out of your IRA or 401k plan, you have to pay a 10% penalty in many cases.
  4. If you take money out of your IRA or 401k plan today, you are losing a lot because the market has declined drastically.
  5. If you take money out of your IRA or 401k plan today, you no longer are gaining the opportunity of increasing value over time, through appreciation or reinvestment of dividends.
  6. Who knows what’s going to happen to Social Security anyway?
  7. Do you really want to work until you are 85?
  8. Do you really want to depend on your children to support you?
  9. Do you really want to depend on strangers to support you?
  10. It’s called a “Retirement Account” – not a “rainy day fund.”

I could go on but you get the idea.  The answer is no.  Don’t do it.

Don't ignore a Wisconsin Mortgage Foreclosure Complaint

Posted by David Leibowitz on January 11th, 2009 in Chapter 13, Foreclosure - Saving Your Home, Wisconsin, , ,

If you live in Wisconsin, listen up!  You cannot ignore a mortgage foreclosure complaint.  If you get served with a summons, you will have 20 days to do something about it.  You need to file an answer or a motion on before those 20 days are up.  You probably need a lawyer like Lakelaw to help you.  If you don’t answer within 20 days, Wisconsin Courts rarely will give you a break.  You will face a judgment of foreclosure right away.  You will lose your house in a matter of months.

These days, there are many defenses available to foreclosure.  Not only that, Lakelaw can help you file a chapter 13 case to protect your house.  And if Congress enacts legislation to amend Chapter 13, you’ll be able to reduce your mortgage to the current value of your house, stretch out the loan for up to 40 years, and possibly reduce the interest rate of your loan to an affordable rate.

So be alert!  If you get served with a summons or a mortgage foreclosure complaint, don’t be scared.  Don’t ignore it.  Don’t delay.  Call Lakelaw at 262.694.7300 and ask for help right away.

Citibank supports Senate Bill 61 to allow Loan Modifications to Home Mortgages

Posted by David Leibowitz on January 9th, 2009 in Chapter 13, Foreclosure - Saving Your Home, Uncategorized, , ,

Senate Bill 61, introduced by Dick Durbin (D. IL), is entitled Helping Families Save their Homes.  This bill, if enacted, would allow borrowers to use chapter 13 to modify their mortgages, even if they couldn’t cut a deal with their lender outside of bankruptcy.  Mortgages could be marked down to the present value of the house.  The rest of the loan would be paid under a chapter 13 plan over a period of five years – and not necessarily at 100% either.  Interest rates could be cut.  Prepayment penalties would be out.  Consumer protection claims would be preserved.  No more flim-flam junk charges on mortgages would be allowed either.

Sounds good?  Well not to most mortgage lenders.  They are geared up to fight this tooth and nail.  The American Bankers Association still opposes using Chapter 13 to modify home loans.

BUT –  In a stunning turn of events, Citibank now supports this legislation.  How did this happen?  Here’s the deal.  The new law would apply only to mortgages in existence at the time the legislation was passed.  And the borrower would have to first show that he or she tried to get a loan modification before going into chapter 13 bankruptcy.  There are other points too – but these are the main ones.

Remember, making laws in Congress is a lot like making sausage – the end product may taste good but the manufacturing process isn’t pretty.  Stand by – we’ll keep you informed.

Congress responding to foreclosure – Loan Modifications in Chapter 13

Posted by David Leibowitz on January 6th, 2009 in Bankruptcy, Chapter 13, Foreclosure - Saving Your Home, , , ,

Too many homeowners are facing foreclosure in Illinois and Wisconsin.  Chapter 7 bankruptcy won’t help you save your home if you can’t keep up your mortgage payments.  Even Chapter 13 wage earner plans are not so great, especially if your house is worth much less than what you owe.  But help is on the way.  Congress is planning to amend chapter 13 of the Bankruptcy Code.  And President-Elect Obama supports this legislation.  This change will allow a homeowner to lower the amount due on your home mortgage to no more than the current value of your home.  Any excess would be treated as an unsecured claim.  

What does this mean?  Suppose you have a house worth $200,000 today with a $150,000 first mortgage and a $100,000 second mortgage.  As things stand now, in a Chapter 13 bankruptcy case, you’d have to pay the entire $150,000 first mortgage and the entire $100,000 second mortgage plus any arrearages to keep your house.  You couldn’t do anything about the interest rates either.

Under the proposed law, you could reduce the second mortgage to $50,000.  You might be able to reduce the interest rates on both mortgages.  And the remaining $50,000 unsecured balance could be paid off under your chapter 13 plan over a period of up to 5 years.  You probably would not have to pay the whole $50,000, but perhaps only a small percentage.

This is a very important change in the law.  It would treat you just like any other property owner.  So PLEASE, contact your Congressman and Senators TODAY.  Tell them you want Chapter 13 amended to protect you and thousands of American homeowners just like you.

New Notices to Homeowners in Illinois Foreclosure Cases

Posted by David Leibowitz on January 4th, 2009 in Consumer Law, Foreclosure - Saving Your Home, Legal, Real Estate, ,

A new Illinois statute, effective January 1, 2009, requires that lenders give homeowners special notices in forclosure cases, both in English and Spanish.  Click here to read the Illinois Mortgage Foreclosure Law.  These notices must inform the defendant that:

  • As lawful occupants, they have the right to live in the home until a judge enters an order of possession
  • The homeowner continues to own the home until the court rules otherwise
  • Homeowners can get professional guidance from a lawyer or certified housing counsellor but should PROCEED WITH CAUTION when dealing with others who say that they are offering help
  • The mortgage company doesn’t really want to foreclose on the house if there is any way to avoid it

In addition, the name of the mortgage lender must be set out in large type.  The lender must provide a pay-off statement at no cost.  If the lender wilfully fails to deliver an accurate statement within 10 days, the lender is liable for actual damages or statutory damages not less than $500.

This statute gives borrowers important rights.  We at Lakelaw are ready, willing and able to help Illinois homeowners protect their rights and save their homes.


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