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Category: Chapter 13

Say No to Debt Consolidation – Consider Chapter 13 Bankruptcy

Posted by emsc on April 3rd, 2014 in Bankruptcy, Chapter 13

Most people want to pay their debts. Many people think that filing bankruptcy is wrong. Some think that filing a bankruptcy case is dishonorable. And quite a few people think that bankruptcy is immoral. For these people, the hope of debt consolidation sounds like a good alternative. Read here why we think that chapter 13 is the best debt consolidation deal ever.
 

We agree with Dave Ramsey says:

Debt consolidation is nothing more than a “con” because you think you’ve done something about the debt problem. The debt is still there, as are the habits that caused it – you just moved it! You can’t borrow your way out of debt. You can’t get out of a hole by digging out the bottom. True debt help is not quick or easy.

Read what Dave Ramsey says about Debt Consolidation here

 

We agree with Illinois Attorney General Lisa Madigan who says this about Debt Settlement Firms:

These companies are unfairly luring financially strapped consumers with misleading claims that they can effectively eliminate consumers’ debt,” Madigan said. “The reality is that, after enrolling in a debt settlement program, consumers too often find themselves in even worse financial straits. It’s time to clean up this industry so that people struggling to pay off their debts aren’t being sold a false bill of goods.

Read what Illinois Attorney General Lisa Madigan says about Debt Consolidation here

Read what Wisconsin Attorney General J.B. Van Hollen is doing about Debt Settlement Firms in Chicago here

 

Here is what Lakelaw believes about Debt Consolidation:

  • Most debt consolidation plans or debt consolidation schemes are frauds
  • Most debt consolidation agencies and debt settlement companies will rip you off
  • Credit card companies will accept lump sum cash settlements from you if they are convinced that you can’t collect your debt. If you have some cash or can get some from a friend or relative, the experienced Kenosha bankruptcy lawyers at Lakelaw will help you with this on an hourly basis
  • If you are saving money to pay debts to credit card companies after you are in default under a “debt consolidation program”, interest will grow on your credit card debt at the default rate. In chapter 13 bankruptcy, you can pay your debts over a period up to 5 years without interest in almost every ccase.
  • When credit card companies get judgments against you, they will freeze your bank accounts and take 15% of your wages in Illinois and 25% of your wages in Wisconsin. In chapter 13 bankruptcy, wage garnishment stops. Bank accounts are unfrozen. You make one affordable payment each month to your chapter 13 trustee and have no further worries.
  • If you have some ready cash available, and just a few debts, our experienced Lake County bankruptcy attorneys can help you negotiate a settlement with your credit card companies. We’ve done this successfully in many cases. We do this on an hourly basis, not on a commission like debt settlement firms.

 

Frequently Asked Questions About Debt Consolidation

Isn’t it better to consolidate my debts than to file bankruptcy?
If you can afford to pay your debts off over time without filing bankruptcy, yes, it’s better. But if you think you can pay your debts off through a debt consolidation service, think again. You’ll be paying them a hefty fee. Creditors won’t necessarily stop calling you. You’ll actually be in default with creditors you are not paying. Your interest rates will go up a lot. Your credit limits will go down a lot. You’ll have a hard time paying your debts down.

Isn’t it true that I can pay my credit card debts off for pennies on a dollar?
You are liable for 100% of your credit card debt plus interest unless the credit card company forgives the debt or you get a bankruptcy discharge. If the credit card company forgives some of your debt, it can issue you a tax form called a Form 1099C. The debt which was cancelled is like found money to you – income – and you might have to pay income tax on it. You won’t have to do that in bankruptcy.

Can I settle my credit card debts without bankruptcy?
Credit card companies insist on knowing that they can’t do any better from you. When your back is to the wall, credit card companies may ask for a lump sum payment from you. However, the amount they will ask for is frequently more than you can pay.

Should I pay my credit card debts with money from my IRA or 401k plan?
We think this is a terrible idea. Not only are you losing money which you need for retirement, you may have to pay penalties on this for early withdrawal. Even worse, you will have to pay income tax on the money you take out. The banks could never touch your IRA or 401k – it’s exempt from creditors. Keep it that way!

What if I get my mom or dad to help me pay the debts?
That is very nice of mom or dad. And if there’s not that much involved, credit card companies might be willing to take less than 100% in order to settle. The banks won’t take less than 100% unless they know that there’s no way they will get paid more.

What happens to my credit record if I settle my debts for less than I owe?
There will be a notation on your credit report that the debts were legally satisfied for less than the full amount. This is considered somewhat derogatory and might make it harder for you to get credit in the future. However, this report is not as derogatory as bankruptcy or charge off?

What is Charge Off?
Charge off means that the credit card company has given up on collecting from you. It will probably sell your debt to another creditor who may try to collect the debt in the future. Just because the debt is charged off doesn’t mean you’re not still liable for it.

The credit card debt is now 6 years old – am I still liable?
You are still liable for a 6 year old credit card debt. It can still appear on your credit report. However, nobody can legally collect on it if you raise the defense that it is barred by the Statute of Limitations. After 7 years, the debt can no longer appear on your credit report.


What Happens If My Bankruptcy is Dismissed and I Have to Re-File?

Posted by Ryan Blay on March 28th, 2014 in Bankruptcy, Bankruptcy procedures, Chapter 13, Chapter 7

In baseball, a batter gets three strikes, then he’s out.  It doesn’t quite work that way with bankruptcy.  Take our clients Aaron and Wendy.  They filed a Chapter 13 bankruptcy and their bankruptcy was dismissed.  They weren’t able for different reasons to make their plan payments for the complete plan, and wanted to start over.

Aaron and Wendy could have filed a Chapter 13 bankruptcy again (and they did).  However, the bankruptcy code puts in rules when someone has two bankruptcies open in the same year.  These rules affect the “automatic stay”, the protection you get when filing for bankruptcy.  This is the protection that tells creditors to stop foreclosures, wage garnishments, car repossessions, and lawsuits.

The automatic stay is good for the full bankruptcy unless the court gives permission to a creditor to get around it.  So if you stop paying on your mortgage for four months, the mortgage company can ask the court to let them out of the protection so they can foreclose.

But when one case was dismissed (or discharged and finalized), then another case is filed, the automatic stay protection only lasts for 30 days.  To make it stay for the whole bankruptcy again, you have to ask the judge to continue or extend it and explain why.

To get what we wanted in court, we had to do what the courts ask when we need to ask for something – we filed a motion.  We filed the motion for Wendy and Aaron to continue their bankruptcy protection throughout their new bankruptcy.  In our explanation, we included their statements about why their last case didn’t work but this case would be more successful.  Sometimes that is enough for the court to agree and for creditors to stay quiet and not object or fight it.

Sometimes the judge wants to hear an explanation in person.  That’s what happened here.  The judge listened and agreed that this case was filed in good faith and not simply another way to stall and avoid creditors.  So she agreed and now our clients are protected again.

If you’ve had one case (or more) dismissed and want to re-file, you’ll want a lawyer to explain how to keep that automatic stay and protect yourself from creditors.  Call 847-249-9100 or 262-694-7300 in Wisconsin, or e-mail us to see what we can do to make sure you keep the automatic stay in a new bankruptcy filing.


Credit Unions and Cross-Collateralization in Bankruptcy

Posted by Carrie Zuniga on March 27th, 2014 in Bankruptcy, Chapter 13, Chapter 7, ,

Clients want to file a chapter 7 bankruptcy to clear up credit card debt and get a fresh start. Credit union customers are shocked to learn that their credit cards with a local credit union are tied together with their car loans at the same credit union.

Credit unions frequently use “cross-collateralization.” This means that your car or house not only secures your car note or house mortgage but also your credit card debts at the credit union. Normally, when you borrow a large sum of money from a bank, you give a lien on the item known as collateral. So if you borrow money to purchase a vehicle, the lender keeps the title top the car until you pay off the loan. If you default on the car loan, then the bank could enforce its lien by taking it back.

A loan with a credit union to purchase a vehicle works differently with a cross-collateralization clause. This provision has the effect of making your vehicle the collateral for all present and future loans with the credit union. So if you have a vehicle loan with your credit union and a credit card, the credit union can take back your car even if you just stop paying on the credit card.

In bankruptcy, the credit union has two secured loans; the vehicle loan and the credit card. That means, if you want to keep the vehicle in a Chapter 7 bankruptcy, you have to reaffirm the vehicle loan AND the credit card. If you don’t reaffirm the credit card, then the credit union could repossess the vehicle. You could still get rid of personal liability on both the credit card and vehicle loan, but would no longer have a car to drive.

One alternative to this dilemma is to redeem the vehicle. The Bankruptcy Code lets debtors in Chapter 7 pay the secured creditor the fair market value of the vehicle in one lump sum – the present value of the car. This is a good option when the vehicle is worth much less than the total amount of debt securing the vehicle. If the vehicle is newer this is likely not a good option. Most debtors in bankruptcy will not have enough cash to make a lump sum payment. Sometimes we can actually refinance the debt using a tool called “redemption financing”.

If the vehicle loan was signed more than 910 days before the bankruptcy was filed, you can file a Chapter 13 and propose to pay the fair market value of the vehicle over the term of the plan, either 3 or 5 years, at a little over the current prime interest rate. The remaining balance on the vehicle loan and credit card would be paid a small percent of the balance as an unsecured creditor in the plan.

As with most things in bankruptcy, it is helpful to have an attorney guide you through the process and determine the best course of action for dealing with the credit union. To avoid this situation in the future, I always advise my clients not to have more than one loan, whether secured or unsecured, with a credit union.


Chapter 13 Bankruptcy can save your house from an Illinois Tax Deed or an Illinois Tax Sale

Posted by David Leibowitz on March 4th, 2014 in Bankruptcy, Bankruptcy and Taxes, Chapter 13, Illinois, , , ,

So many of our bankruptcy clients fear losing their house to mortgage foreclosure.  We have done a good job of teaching our clients that chapter 13 bankruptcy can save your home from mortgage foreclosure. You can catch up with payments you haven’t made to your mortgage company.

In Illinois, you can lose your house even if you’ve made every one of your mortgage payments? How can this be? If you don’t pay every cent of the taxes you are obligated to pay on your house, a tax purchaser can literally pay those taxes for you. Then you must pay back the tax purchaser through the county clerk with very hefty interest charges. If you don’t do this, the tax purchase may pay taxes on your house for you for several years after that. You may not even know that this is happening. At the end, the tax purchaser has the right to be paid in full with very high interest for the taxes paid on your behalf for all those years. You might not have enough money to pay these taxes back all at once. So the tax buyer then has the right to get a deed to your house – literally stealing it from you even if you have a great deal of equity. This frequently happens to older people or people not fully conversant in English. They simply don’t understand the complicated legal papers they receive about tax sales.

This is where Lakelaw comes to your rescue. You can file chapter 13 bankruptcy to save your house. You can pay back all those taxes, maybe with substantially reduced interest, over a period of up to five years. All you have to do is to file the chapter 13 case before the property “goes to deed.”

Bankruptcy Judge Janet Baer wrote a very important decision about this issue in the United States Bankruptcy Court for the Northern District of Illinois here in Chicago. These cases called Romious and Watts established the very important principal that a tax sale was more like a lien until the actual deed in favor of the tax purchaser was recorded. Because the tax sale position is so secure, the tax buyer has nothing to lose as long as the owner is making payments under the chapter 13 plan. You can find the Romius-Watts decision here:

So if you are facing a tax deed, don’t despair.  Call David Leibowitz at Lakelaw, 847 249 9100 and get the help you need immediately.


I’m filing bankruptcy – do I have to consider my spouse’s income? “It’s complicated.”

Posted by David Leibowitz on February 20th, 2014 in Bankruptcy, Chapter 13, Chapter 7, , , , ,

If you are filing for bankruptcy, either under chapter 7 or chapter 13, your income matters.  Why?  People who make more than the median income – the income more than 1/2 of the people make – are presumed to be abusing the system if they file a bankruptcy under chapter 7.  For an individual, that’s around $40,000 and for a family of 4 that’s around $80,000. It’s better for most people to file chapter 7 than chapter 13 because in chapter 7, you are done with your bankruptcy in 4 months.  In chapter 13, you pay more fees and you make monthly payments to a chapter 13 trustee toward payment of your debts for 5 years.  This can be a good deal if you are trying to save property or catch up with mortgage arrears. It’s not such a good deal if you have a very little non-exempt property which you might lose in a chapter 7.

When you make more than the median income, we have to figure out if you overcome the presumption of abuse. We do that by analyzing your income and expenses under the government’s Means Test as adopted by the Bankruptcy Code.

Many of our clients are married.  Frequently, one person in a marriage has debt and needs to file for bankruptcy but the other does not. Then what happens?

It’s not all that simple.

We have to figure out your projected disposable income.  To figure this out, we need to know not only what you make and what your expenses are, we also need to know what your spouse makes and what your spouse’s expenses are. That’s because anything your spouse makes beyond your spouse’s own separate expenses are deemed to be available to you as disposable income to allow you to pay some of your debts.  This additional disposable income might make a difference in determining (a) whether you are eligible to file a case under chapter 7 or (b) how much you’ll have to pay as a monthly payment if you have to file a case under chapter 13.

It might seem unfair that your spouse’s income must be considered if you are filing a bankruptcy case and your spouse is not.  But Congress has spoken  and we must help you obey the rules.

The good news is that if you file a bankruptcy case and your spouse does not, your bankruptcy case has no adverse impact on your spouse’s personal credit.

It’s complicated when one spouse files for bankruptcy and the other does not.  Lakelaw’s board certified bankruptcy attorneys have great experience with complex cases like yours.  Count on us to help you when you have tricky bankruptcy questions.   Call Lakelaw in Chicago or Waukegan at 847 249 9100 or in Milwaukee or Kenosha at 262 694 7300.


Can Lakelaw file a joint bankruptcy petition for us if we are a same-sex couple?

Posted by emsc on February 12th, 2014 in Bankruptcy Information, Chapter 13

At Lakelaw, we have filed a joint bankruptcy petition for a same-sex couple.  We had a couple we’ll call Daniel and Anthony.  The couple married in a state that permits same-sex marriage, since their home state, Wisconsin, does not.  Still, we filed the bankruptcy for them as a couple instead of filing separate bankruptcy petitions and consolidating (linking them together).  Thus far, the case has been a success and has met no objection from the Chapter 13 Trustee or United States Trustee.

With news this weekend that the Attorney General of the US will recognize same-sex marriage and expand the benefits for lawful same-sex marriages nationwide (link to  http://www.cnn.com/2014/02/08/politics/holder-same-sex-marriage-rights/), this process will soon be even easier for thousands of same-sex couples in marriages from around the nation.  .

Illinois is one of the 16 states that already recognizes same-sex marriage.  So a joint bankruptcy petition for a lawfully married couple regardless of their sexual orientation should not be a problem, as long as the couple meets the other requirements of the chapter of bankruptcy they seek.  It’s a good idea to speak with an attorney before filing to discuss those requirements from the bankruptcy code.

We predict more states, even those like Wisconsin that do not recognize gay marriage, will see many more joint bankruptcy petitions from gay and lesbian married couples.  The new threshold question won’t be “are you in a marriage defined as a man and a woman?” but “is your marriage ‘lawful’?”  As more and more states permit same-sex marriage, the answer that question will more and more be yes.

The changes don’t just impact bankruptcy.  The changes mean that spouses in same sex marriage get federal survivorship benefits and don’t have to testify against one another in a criminal trial.  But one of the biggest impacts will be the ability to go hand-in-hand toward financial relief by filing bankruptcy together.


Mistakes to Avoid When Filing Bankruptcy in Chicago

Posted by David Leibowitz on December 9th, 2013 in Bankruptcy, Chapter 13, Chapter 7

It is a good idea to consult with an experienced Chicago bankruptcy attorney before acting.  Bankruptcy is a big decision and can provide the financial freedom you desperately need.  However, it should not be entered into lightly.   Bankruptcy does require planning before you file your case

  1. Don’t use your credit cards once you make the decision to file bankruptcy.  Under the Bankruptcy Code, incurring debt in the 90 days before filing for bankruptcy for the purchase of luxury goods or services is presumed non-dischargeable.  Even if you use your credit card for non-luxury goods or services, you will face an uphill battle in proving to the credit card company that your purchases were not used for luxury purposes.  Discontinuing credit card use also has a practical purpose; it prepares you for a life without the credit you have come to rely upon.
  2. Don’t repay family members.  Family members may be willing to loan you money in your time of need and naturally, you feel a moral obligation to pay them back.  But under the Bankruptcy Code, you can’t treat family members better than other creditors.  Because you are more likely to payback a family member than a credit card company, the look-back period is one year before you file for bankruptcy.  If you do repay a family member, the trustee could sue your family member to get the money back.
  3. Don’t transfer property out of your name.  Bankruptcy is scary to think about, particularly when you hear that a trustee could sell your property to pay your creditors in Chapter 7.  However, you will only make things worse if you transfer property to someone else before filing for bankruptcy.  When you file for bankruptcy, you must disclose all transfers of property within 2 years before filing.  If a trustee thinks that you transferred the property fraudulently, they could avoid the transfer.
  4. Don’t touch your retirement account.  Many times when people are struggling with debt, they cash out an IRA or take a 401(k) loan to pay their creditors.  However, retirement funds are fully exempt from the collection of creditors in Illinois.  This means that if you are sued by a creditor, they cannot seize your retirement account.  A trustee in bankruptcy can’t take even a penny of your retirement account.

These are just a few of the mistakes that you should avoid before filing for bankruptcy.  If you are considering bankruptcy, you should consult with a Waukegan bankruptcy attorney if you are thinking about filing for bankruptcy in Lake County, Illinois.


Help, a creditor took money from my bank account after I filed for bankruptcy!

Posted by Ryan Blay on September 23rd, 2013 in Bankruptcy, Chapter 13, Chapter 7, Consumer Law, Wisconsin

Sam and Sally were victims of payday loans in Wisconsin.  The payday lenders were sucking large sums of money from their bank accounts every month. Lakelaw filed bankruptcy for Sam and Sally to stop the payday lenders. The automatic stay for bankruptcy in Wisconsin serves as a legal stop sign.  If a creditor tries to collect a debt even after we file a chapter 7 case in Wisconsin or even a chapter 13 case in Wisconsin, Lakelaw can sue that creditor for damages and attorneys fees to make them stop.

Bankruptcy stops payday lenders from collecting.  Bankruptcy stops payday lenders from taking money from peoples’ bank accounts.  But Sam and Sally’s payday lenders ignored the law.  They took money from Sam and Sally’s bank account after Lakelaw filed their bankruptcy.  Sam and Sally got hit with bank fees and overdraft charges.

Lakelaw informs creditors after a bankruptcy filing our client has filed a bankruptcy case, whether under chapter 7 or chapter 13.  This way, the creditor can’t complain they didn’t know about the case.  If they keep collecting anyway, it’s a willful violation of the automatic stay.  We also tell our clients to stop any automated withdrawals from their bank account.  We frequently tell our clients to close their bank accounts and open new ones so the creditors can’t get their hands on their money.

Most honest creditors stop collection right after we file the bankruptcy case.  But Lakelaw will sue and collect from those who insist on doing the wrong thing,

Creditors with no notice of filings might not be willingly ignoring the bankruptcy stay when they act, but if they get notice and still refuse to correct their behavior, a court can rule they were liable for their actions after getting the notice.

Lakelaw helps our clients recover money taken from them after filing, even if it means extra time on the phones and fax lines.  It’s part of completely representing our clients from start to finish and providing them with true debt relief.

Lakelaw also protects people after bankruptcy taking advantage of consumer protection laws such the Fair Debt Collection Practices Act, the Telephone Collection Practices Act and by enforcing the discharge injunction.  After a bankruptcy is complete,  creditors can’t collect on claims which arose before the bankruptcy. Lakelaw insists that such creditors stop.  And if they don’t we sue them and collect for our clients.

We also help our clients restore credit after bankruptcy by reviewing their credit reports and correcting errors.

When facing financial crisis, whether in Wisconsin or Illinois, let Lakelaw fight for you.  Remember, Lakelaw is your financial life-saver ™.  We help people with bankruptcy and foreclosure in Illinois and Wisconsin.

 


My Chicago bankruptcy lawyer has been disbarred!! What do I do?

Posted by David Leibowitz on August 29th, 2013 in Bankruptcy Ethics, Chapter 13, Chapter 7, ,

You want to file your bankruptcy case right now.  Maybe you even found www.filenow.com.  If you did, your lawyer has a problem.  Your lawyer’s problem now is your problem. If your bankruptcy attorney has been disbarred, you may feel lost and abandoned. Perhaps you’ve paid a large fee.  But a disbarred lawyer can’t file your Chicago bankruptcy case.

It’s not right to charge you more for legal services than you agreed to pay.  A bankruptcy attorney must give you a contract which describes what he or she will do for you. And then he or she must perform these services.  There should be no extra charges for your bankruptcy case unless you agreed to them in writing. And a bankruptcy lawyer in Chicago should handle all normal aspects of your chapter 7 bankruptcy from start to finish for the agreed upon flat fee.

For most chapter 13 cases in the Northern District of Illinois, you’ll sign a form contract called the “Court Approved Retention Agreement.”  This is the only agreement allowed if your lawyer wants to receive a $4,000 flat fee for your chapter 13 case.  There can’t be any side deals or side agreements if your lawyer wants a $4,000 flat fee.

What can you do if your Chicago bankruptcy lawyer has been disbarred or convicted of a crime? You can find an ethical, competent, highly acclaimed Chicago bankruptcy attorney at Lakelaw. For example, David Leibowitz is board certified by the American Board of Certification as a consumer bankruptcy attorney and a business bankruptcy attorney even though this is not required to practice law in Illinois.  He has been retained as an expert witness in legal malpractice cases concerning consumer bankruptcy.  He chaired of the American Bankruptcy Institute’s Consumer Bankruptcy Committee for two years.  Now he is coordinating editor of the Consumer Corner column of the American Bankruptcy Institute Law Journal. He has been selected to write on bankruptcy ethics by Bloomberg Law for its soon-to-be-published bankruptcy treatise.

If you have been victimized by a disbarred Chicago bankruptcy attorney, or an Chicago bankruptcy lawyer convicted of a crime, Lakelaw will take over your case at a reduced fee. And we’ll try to recover unearned fees for you too.

And as always, David Leibowitz will represent you with care, kindness, courtesy, respect, professionalism and dedication, just as he has for thousands of clients for almost 40 years.


Common Bankruptcy Misconceptions

Posted by Ryan Blay on April 17th, 2013 in Bankruptcy, Bankruptcy Information, Bankruptcy procedures, Chapter 13, Chapter 7, Debt Settlement, Exemptions, Illinois, Wisconsin

As an attorney who’s been practicing in consumer bankruptcy for five years now (in Illinois and Wisconsin), it’s heartbreaking and frustrating to see the huge amount of lies and misinformation about bankruptcy.

Some of these mistakes come from gossip or bad experiences in bankruptcy (including lying, bad attorneys, or other frustrations). Others come from rumors spread by the financial services industry to try to keep people out of bankruptcy (even though lenders can write off the uncollectable debt and take a tax break for it).  Even worse are errors from hacks – er, attorneys/writers – who blatantly skew statistics and facts about bankruptcy filings for their own purposes.  We can assure you that while nothing is ever certain with the law, the overwhelming majority of bankruptcies are successful, peaceful, and bring financial relief to our clients.

Here are some common statements about bankruptcy and the truth.

Statement 1:  Why not just settle debt? It’ll be better for your credit report and you won’t have to pay a lawyer to settle debts for 40-50 cents on the dollar.

Answer:  If your sole major debt is a $4,000 credit card and you can afford to pay a lump sum of $2,000, a credit card company may take it and waive the rest.  To do so, you’ll have to show you have a serious hardship (not just because you don’t feel like paying) and submit financial records to prove it.  You’ll also have to come up with a lump sum or a few significant payments, not a long term payment plan.  Unless you’re insolvent, you’ll have to pay tax on the forgiven debt.  But in the situation above, that’s fine because bankruptcy’s costs for a lawyer and the filing fees would make a bankruptcy unnecessary.  Where bankruptcy absolutely becomes necessary is if you are in the same financial situation but have $50,000 worth of credit card debt and medical bills.
Even if you get every card or hospital to settle for 10 cents on the dollar (an unrealistic goal for most clients), and even if you can avoid the tax on the 1099 for the forgiven debt, that’s still at least 2-3 times what you’d pay for a bankruptcy to discharge the debt altogether.  With so much debt, settlement is not only unrealistic, but it costs significantly more than a bankruptcy filing.  For an attorney not to disclose that is tantamount to malpractice.

2.  You cannot discharge student loans in bankruptcy.
Answer:  This is another major misstatement, largely perpetrated by student loan lenders.  In order to discharge student loans, there is a very high standard (possibly relaxed by a recent decision in the 7th Circuit Court of Appeals for Illinois/Indiana/Wisconsin) where you have to demonstrate a good faith attempt to make payments and a serious reason why it’s impossible to pay anything back.  Essentially the situation is for people who are unable to earn a significant income, will likely never have the means to do so, leaving the possibility of repayment fruitless.  That’s a high standard for sure, but it’s by no means impossible.  (Think a 60 year old disabled person with only $700 per month in social security/disability coming in, with expenses of $1000 per month and $60,000 of outstanding student loans).  With or without an attorney, people have successfully discharged significant private and government-backed student loan debt.

3.  I want to file bankruptcy, but if I do, I’ll lose my (car, boat, beagles, RV, bank account, retirement accounts, etc.)

This aggravates me this most because it assumes that the point of bankruptcy is to take everything from the debtor.  The exact opposite is true:  an honest but unfortunate debtor gets a fresh start (in Chapter 7, or a repayment plan in Chapter 13) in exchange for listing, valuing and exempting assets.  Every state has a scheme of exemptions (with some, like Wisconsin, allowing federal exemptions, while others, like Illinois, do not).  The easiest way to find out what you can maintain:  Talk to a competent bankruptcy lawyer.  Call us at Lakelaw or e-mail us. Even if we don’t practice in your jurisdiction, we can refer you to a qualified consumer attorney in another area.  You’ll be surprised, but typically 90% of Chapter 7 cases or so are no-asset  7 cases where the filing debtor turns over nothing.

The moral of this story:  Speak with an attorney and learn the truth before believing what people write and say to scare people away from bankruptcy.  It may not be for everyone, but for most debtors, it’s a huge relief and worthwhile decision.

 


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