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Monthly Archives: June 2009
People often ask if they can file a bankruptcy case without their spouse joining in the petition. The answer is “Yes, you can file a bankruptcy without your spouse, and even without your spouse’s permission or knowledge.”
Of course there are a few catches.
The most important catch is the so-called “means test.” In 2005 when Congress amended the Bankruptcy Code, they decided that people who could afford to pay something to their creditors should be more or less forced to work for them for 5 years. To put it another way, if you make more than the median family income for a family your size, you are presumed to be abusing the bankruptcy system if you try to file a chapter 7 case and pay nothing to your creditors. Even if you have no assets for your creditors, if you are an above average earner, your earning capacity is deemed to be something to which your creditors are entitled.
Here’s the catch. Supposing you make maybe $35,000 a year. If you were single, you could easily file a bankruptcy case under chapter 7. You make less than the median income in most states. Suppose you were married to a postal worker who makes $60,000 a year and have no children. Even if your spouse doesn’t file, you are considered to have a household income of $95,000 a year, well above the median. Your spouse’s income is included for the means test even if you spouse is not filing along with you.
You are entitled to exclude from your non-filing spouse’s income whatever he or she demonstrably spends on himself or herself – this is called the “marital exclusion.” Your bankruptcy will not appear on your wife’s credit report. And your bankruptcy will not affect your non-filing husband’s credit.
The United States Trustee looks this type of case over carefully. You can see that it takes us longer and it is more complex to deal with a case where you file by yourself without your spouse. We almost always have to charge you more for such a case.
We can work this out with you in most cases. But it is time consuming and surprisingly complex.
Lakelaw can help you file a bankruptcy case even if your spouse is not included in the petition. Call us toll-free at 1-866-LAKELAW (525-3539) for help in metropolitan Chicago, Southeast Wisconsin, and in the Coulee- 7 Rivers Region around La Crosse.
Illinois Credit Card Claims subject to 5 year Statute of Limitation – not 10 years for written contract
Is the statute of limitation for credit card debt 10 years or 5 years in Illinois? For years, credit card companies and debt buyers from credit card companies have tried to collect debts up to 10 years old in Illinois. This is because the statute of limitation for a debt arising from a written contract is 10 years in Illinois.
However, the statute of limitation for a general account stated is only 5 years in Illinois.
Which one applies?
In a very important recent decision of the Illinois Appellate Court, Portfolio Acquisitions v. Feltman, No. 1-07-3004 (May 20, 2009) 3rd div. the court held that the five year statute of limitations for accounts stated, rather than 10 year limitations period for written agreements, applies in a complaint by debt collector against defendant for collection of credit card account balance.
Debt collectors frequently try to collect debts beyond the statute of limitation. They try to trick, lure or otherwise persuade people to pay even a little bit of the debt to revive the statute of limitation. They act friendly. They call you a client. This is a scam. It is a violation of the Fair Debt Collection Practices Act. Click here to learn more about the FDCPA. We often refer to this sort of debt as “zombie debt” becauise it seems to arise from the dead to haunt you.
Lakelaw can help defend you against credit card debt. If you get sued for “Zombie Debt”, we’ll sue the debt collector back and seek damages and attorneys’ fees.
The main reason to file a bankruptcy case is to discharge, eliminate and wipe out debt. And of course, as we have explained in previous posts, in bankruptcy, an honest debtor can get a fresh start through the discharge in bankruptcy.
However, in bankruptcy, some debts are not dischargeable. The reason for this can be found in Section 523(a) of the Bankruptcy Code.
Some debts are never discharged in bankruptcy. A creditor doesn’t have to do anything for these debts to remain valid after bankruptcy. Here are some examples of non-dischargeable debt:
- Certain types of taxes and particularly taxes where the debtor filed a fraudulent return tried to evade or defeat the tax and particularly income taxes less than 3 years old.
- Debts which the debtor did not list in his bankruptcy papers in a case where the creditor might otherwise have recovered a dividend – commonly referred to as an asset case
- Debts for a domestic support obligation – arising from a divorce or other family law sort of situation
- Other debts, such as property settlements – arising from a divorce or other family law sort of situation
- Most fines, penalties or forefeitures payable to a governmental unit
- Student loans except in extraordinary cases
- Personal injury claims arising from use of alcohol or drugs
- Criminal restitution
- Condominium or homeowner association assessments due after the debtor files his bankruptcy case. For more information about post-petition liability to homeowners or condo associations, click here.
In addition to these problems, a debtor could be sued in a complaint to determine dischargeability of debt during the course of a bankruptcy case. Debts for these types of claims are discharged in bankruptcy unless the creditor timely files and thereafter wins a lawsuit during the course of the debtor’s bankruptcy case. The normal attorneys’ fee for the bankruptcy case will most certainly not cover the cost of defense. A creditor can file a lawsuit to force the debtor to pay these kind of debts:
- debts procured by fraud or false pretense
- debts procured by a false financial statement
- debt for luxury goods or services obtained within 90 days of a bankruptcy are presumed to habe been obtained by fraud or false pretense
- cash advances for more than $750 within 70 days of a bankruptcy case are presumed to have been obtained without the intent to repay.
- debts procured by breach of trust
- debts arising from a willful or malicious injury to another or their property. In this situation, the debtor must have had the actual intent to harm. Mere negligence or even recklessness is not enough to make a debt non-dischargeable.
You should discuss any of these situations with your bankruptcy attorney. Some of these debts might be dischargeable in chapter 11 or chapter 13. Other remedies might be possible to help you address the problems you face from otherwise non-dischargeable debt.
Lakelaw represents people in bankruptcy. Not only do we defend people against claims that their debts are not dischargeable, we also pursue claims asserting that debts might be nondischargeable.
For help with potentially nondischargeable debt, call Lakelaw now at 1 866 LAKELAW (1-866-525-5359).
The Senate voted decisively against allowing residential mortgages to be modified in Chapter 13 bankruptcy cases. It was a decisive vote. Only 41 Senators voted in favor – we know that 60 senators would have had to be in favor to get past a filibuster.
Why is it that a shopping center developer like General Growth can cram down their mortgages but ordinary American homeowners can’t? Why is it that bankruptcy is OK for Chrysler or GM to cram-down their reluctant hedge-fund bondholders but it’s not OK for an American homeowner who can’t even get a mortgage lender to talk to her?
Senator Durbin tells us exactly why – and we should be angry about this! We should be furious. People should be marching on Washington. Yet we seem not to care. We seem to think our neighbor should suffer, not realizing that in so doing, we are hurting ourselves.
The banks — hard to believe in a time when we’re facing a banking crisis -
many of the banks created – are still the most powerful lobby on Capitol Hill.
And they frankly own the place!
You would think that We, the People own the Senate. But we don’t. Unless We, the People, tell Senators that we won’t condone them acting as lackeys for the banks, the Senate will continue to take the banks’ money and stick it to you.
Why do banks care so much? The answer is in three little words – “Mark to Market.” This means that if lenders have to realistically value their assets – like their residential mortgages – to what they are really worth – they would have less assets than liabilities. In other words they would be broke – bankrupt – insolvent – closed – in receivership – taken over by the FDIC. Moreover, bank chairmen, directors, officers and their ilk would be unemployed, lose stock options, perks, private jets and their rich and famous lifestyle in general. This, dear readers, is what the Senate now stands for.
Henry Sommers, past president of the National Association of Consumer Bankruptcy Attorneys put it well when he said:
“In terms of what this was really about, my opinion is that the insolvent banks do not want to reveal the emperor’s lack of clothes, because if their assets were marked to market, their true value, the insolvency would be obvious. Fighting cramdown is part of that, as is the Obama mortgage plan, which does not require any principal reductions. The negotiations about the bill left me very doubtful that many people will even get the Obama plan modifications. When there are more foreclosures threatening banks’ balance sheets (and further dragging down the economy) they will want more bailouts.
Unfortunately, Summers and Geithner can’t escape the bank culture whence they came. They cannot contemplate shutting down the insolvent banks and are therefore over a barrel. If you have not done so yet, you should definitely listen to the This American Life’s show on the topic.”
If you’re mad as hell and won’t take it anymore, then gear up to support whoever will oppose any incumbent Senator who failed to stand up for you when they next run for election. This is still a democracy, right?
If you are trying to get a mortgage modification or mortgage finance plan under the Obama Home Affordable Plan and can’t, please tell us about your experience. We may be able to publicize your plight in the press or in Congress.
For bankruptcy help in Chicagoland, call Lakelaw now at 847 249 9100 or toll free at 1-866-LAKELAW (1 866 525-5359)
Banks may care about what you say on the financial statement in your loan application. When you apply for a loan, the bank asked you about your assets and liabilities. If you told the bank you have less than you actually own, this may not be a problem. Some financial statements create problems. Here are some common problems in financial statements:
- You claim to be the owner of something you really don’t own
- You claim to own something outright when you really own it with your spouse
- You claim to own something in joint tenancy when you really own it as tenants in common
- You overstate the value of your personal property
- You overstate how much you have been earning.
If the bank or another lender justifiably relies on something you put in a financial statement, you could be in trouble if you knew your statements were material and not true when you made them. A bank might seek to bar dischargeability of your debt even if you do file a bankruptcy case. Sometimes a bank might try to bar your discharge altogether. A bank may threaten to prosecute you for bank fraud.
Banks today are under severe stresss. If you plan to file a bankruptcy case, you should consider how a bank might react to your filing. Tell your bankruptcy lawyer everything you told your bank when you took out your loan. It will help your lawyer advise you and help you to be ready for any claim a bank or other creditor might make against you during the course of your bankruptcy case.
For more information, check Bankruptcy Code section 523(a).
For more information about discharge in bankruptcy, click here
Call Lakelaw now at 1 866 LAKELAW (1 866 525-5359).
Clients often ask “Will my bankruptcy be go through?” It’s a reasonable question. The answer to this question could mean a lot of things. Some people are wonder if they can file a case under chapter 7 or if they have to file a case under chapter 13. We’ve written a lot about this before.
Often, people are really asking whether they will get a discharge in bankruptcy. The general idea of bankruptcy is that an honest person gets a fresh start. You can lose the chance to get a discharge in bankruptcy if you do something which the Bankruptcy Code considers bad. You can also lose your discharge in bankruptcy if you don’t pay attention to details.
A discharge is the most important benefit of filing a bankruptcy case. A discharge wipes out most, if not all, of a debtor’s debts. It also provides an injunction against creditors seeking to collect on those debts in the future.
Here are some of the things people do which result in loss of their discharge in bankruptcy:
- transfer, remove, destroy, mutilate, destroy or conceal property within a year prior to the bankruptcy or during the course of the bankruptcy case with intent to hinder, delay, or defraud
- conceal, destroy, mutilatie, falsify or fail to keep books and records concerning business or financial affairs without justification
- lie on papers, make a false claim, give a bribe, or withhold property, books or records from the trustee
- fail to explain loss of assets
- fail to obey an order of court in a bankruptcy case
- do any of the above things within a year prior to the bankruptcy case or in the bankruptcy case of a close family member or other insider
- obtain a chapter 7 discharge within the past 8 years or a chapter 13 discharge within the past 4 years.
- fail to take a financial management course within the prescribed period
Not only that, but a person’s discharge can be revoked under some circumstances if:
- it is obtained by fraud; or
- debtor obtains property which should be administered in bankruptcy but fails to disclose it; or
- debtor fails to cooperate in a government ordered audit of his case
If you file a bankruptcy case, you must be honest and act properly. If you don’t, you could lose your discharge. Worse, you could be fined and even imprisoned in a criminal prosecution.
So remember, an honest debtor gets a fresh start. A dishonest debtor loses his discharge and faces criminal prosecution.
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