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Category: Exemptions

Can I Stop a Citation to Discover Assets By Filing For Bankruptcy?

Posted by Ryan Blay on May 19th, 2014 in Bankruptcy, Exemptions, Illinois, Legal, Wisconsin

Courts in all states have procedures set to allow creditors to get judgments against the debtors who owe them money.  Then there are steps to allow those creditors to find out what the debtors owe and let the creditors take anything that is not exempted (or protected).

In Wisconsin, creditors mail an Order for Financial Disclosure form to the debtors and insist on getting the form filled out and returned in about two weeks.  If they don’t receive it, they can order the debtor to appear at a hearing in front of a court commissioner.  If the debtor skips the meeting, they can be held in contempt and even jailed for not showing and answering!

In Illinois, the process is called a Citation to Discover Assets.  It involves the same steps – paperwork and sometimes a hearing where a debtor has to testify about what they owe and what they believe is protected.

This process allows creditors to take what they can and it’s hard to stop or delay.  But filing for bankruptcy can put an end to the process.  We’ve helped multiple couples and individuals recently in Illinois and Wisconsin by filing bankruptcies to propose eliminating or repaying the debt that caused the citation or financial disclosures.  By not going to these hearings, our clients can focus on their businesses or jobs and proceeding through bankruptcy to get a discharge instead of taking time off to show up and submit paperwork they’d have to give to us to prepare their bankruptcies.

Bankruptcy allows creditors to be paid or eliminated in an orderly fashion.  Citation hearings and post-judgment paperwork are meant to help judgment creditors cut to the front of the line and take money and property faster than what most people can comfortably pay. Let us talk about using bankruptcy as a way to stop these creditors and put yourself back in control of your debts.  Call Lakelaw at 847-249-9100 or 262-694-7300 in Wisconsin to set up a free consultation for a better financial future.

Use Illinois Exemptions to Protect Against Judgments and Citations to Discover Assets in Illinois

Posted by David Leibowitz on February 17th, 2014 in Exemptions, , ,

Gavel2Our client needs to file for bankruptcy but can’t file her case until August.  Why?  She wants to discharge income taxes and must wait until they have been due long enough. In the meantime, creditors were suing her and getting judgments.

Once a creditor in Illinois gets a judgment against you, it can take steps to collect the judgment.  Most frequently creditors will try to collect their judgment by using a citation to discover assets.  The creditor can direct the citation to discover assets to the debtor or to anybody else who the creditor thinks might have assets belonging to the debtor – like a bank or an employer for example.

Most people facing judgments in Illinois don’t know that they can protect themselves with the same exemptions which they might use in bankruptcy. Sure, we can file a bankruptcy case to protect against a judgment. But not everyone can file a bankruptcy and it could be a problem for someone to file a bankruptcy right away.  Maybe it’s been less than 8 years since a prior bankruptcy.  And maybe we need to wait to let an important deadline pass.  There’s a 3 year waiting period from the last day to file a tax return for discharge of certain taxes.  There’s a 4 year waiting period from certain transfers which could be avoided as fraudulent transfers.  There’s a 1 year waiting period from payments of debts to friends family or relatives.

In the meantime, we can claim exemptions for a judgment debtor to prevent a creditor from taking assets.  What did we protect for our client this week?

  • We protected $2400 equity in her car using the automobile exemption
  • We protected another $4000 equity in her car using the wild-card exemption
  • We protected 85% of her wages using the wage exemption
  • We protected 100% of the cash surrender value of her life insurance because it was for the benefit of her children
  • We protected 100% of the money in her children’s bank accounts for which she was custodian because this was proceeds of social security, a public benefit.
  • We protected 100% of the money in her IRA because this is fully exempt under Illinois law.

These are just a few of the important assets which creditors can’t touch if they have a judgment against you. Click here for additional information about exemptions in Illinois and Wisconsin. 

While our client will certainly have some challenges from now until the time that it is optimal for her to file her bankruptcy case, we at Lakelaw will continue to protect her outside of bankruptcy until we can get complete relief for her in bankruptcy.

If you are facing judgments but can’t file bankruptcy today, call David Leibowitz at Lakelaw today at 847 249 9100.  We can intervene today to help you solve your immediate problems while we develop a lasting and permanent solution to your financial distress.


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.


Are EdVest accounts exempt in bankruptcy in Wisconsin?

Posted by Ryan Blay on March 27th, 2013 in Bankruptcy Information, Exemptions, Wisconsin

EdVest accounts are 529 College Savings Plans offered in Wisconsin.  These accounts, like any other account, are considered assets in a bankruptcy.  There are two ways to protect the value in these accounts:
1.  Use the wild card exemption offered by the Federal statutes (up to around $11,000)
2.  Use the state law exemption in Section 815.18(3)(p) of the Wisconsin Statues

These might seem to solve the problem, but they don’t.  This is because a decision out of the Western District of Wisconsin called In re Bronk held that a debtor in bankruptcy cannot exempt the value in an EdVest account using the Wisconsin 815.18 exemption.  The District Court in the Western District agreed, and that case is up on appeal right now to the 7th Circuit Court of Appeals in Chicago.

However, a recent case out of Milwaukee’s Eastern District of Wisconsin Bankruptcy Court disagrees with Bronk.  In the case of In re Eckerman, Chief Judge Pamela Pepper held that a proper reading of the statute allows for the state protection for a debtor’s contributions to the EdVest Account.

This matter will probably be pursued on appeal in both cases before a final decision is issued.  To be safe, stay tuned and be warned if you plan on using EdVest accounts to protect cash in the event of a bankruptcy filing.

Why It Is Critical to Read Your Mortgage Documents

Posted by Ryan Blay on July 16th, 2012 in Bankruptcy, Chapter 13, Exemptions, Real Estate, Wisconsin

When a mortgage is given on a property and the lender files the normal paperwork with the county Recorder of Deeds or Register of Deeds, the lender does this to give notice to all parties that they hold an interest in the property.  It is a requirement to protect the company from otherwise innocent purchasers who wouldn’t otherwise know how many mortgages are in place.

The lenders occasionally make mistakes.  Sometimes the mistakes are considered harmless, especially when a simple search discovers a typo.  However, there are times that these mistakes can prove fatal for the holder of a mortgage.

In a recent Chapter 13 Bankruptcy case out of Wisconsin, this scary situation happened to the holder of a mortgage.  The lender recorded the mortgage documents, but incorrectly listed the legal description of the property.  In bankruptcy law, the trustee can avoid an improperly perfected lien under Section 544.  In plain English, the trustee appointed to hold assets for the estate can move to treat that valuable secured mortgage like an unsecured debt and pay it off through the bankruptcy process, leaving the home free and clear.

For these debtors, what it means is that they can file a lawsuit inside their bankruptcy called an adversary, have a judge declare that the lien of the mortgage lender wasn’t perfected and is therefore just an unsecured loan like a credit card or personal loan.  The debtors will have to pay much more through their bankruptcy, but they wouldn’t have to make a mortgage payment anymore (not on their second mortgage either, since that too wasn’t properly recorded).  By the time they exit bankruptcy, their home would then be free and clear minus yearly property taxes.

Sometimes, mistakes are innocent and can be corrected.  Other times, when the facts are right, mistakes are fatal.  If you think your mortgage lender made a mistake that can be attacked through bankruptcy, please contact us to discuss.  We will review proof of claim documents and other documents to see if these mistakes can be used to your advantage.

If I File For Bankruptcy Relief, Can Creditors Take My Property?

Posted by Ryan Blay on May 17th, 2012 in Bankruptcy, Chapter 7, Exemptions, Illinois, Wisconsin

The short answer:  technically yes, but creditors almost never do.  Most of our clients leave bankruptcy with everything they owned before filing.

The process for taking someone’s property in bankruptcy works like this:  When you file for bankruptcy protection under Chapter 7,  a Trustee is appointed to your case. The Trustee’s job is to see if he or she can sell your property in order to pay your creditors. That’s called a “liquidation”.  But, there are two major issues that prevent Trustees from taking property and selling it to pay creditors (and earn a commission) : secured property and exemptions.

Secured property is property that has a loan or lien.  If you don’t pay a debt secured by property, the creditor can take the property back through repossession, foreclosure, or other means.  The most common examples of secured property are homes and cars. A Trustee would have to pay off the secured creditor before the Trustee could pay other creditors. It is a waste of the Trustee’s time if only the secured creditor gets paid, so unless you have equity in your secured property, the Trustee isn’t going to want it. The other reason Trustees don’t take your property is exemptions.

Exemptions are state or federal protections that prevent someone filing for bankruptcy from being left with nothing. When a person in bankruptcy applies an available exemption, it means the creditor cannot take that property or a certain amount of the property. An example is the Illinois state exemption for a car. In Illinois, a debtor gets $2,400 for a car. So, if the Trustee sells a car the first $2,400 goes to the person who filed bankruptcy. A Trustee wouldn’t go to all of the trouble of filing the appropriate paperwork with the court, taking the car and selling the car unless the car was worth much more than $2,400 which would go to the person in bankruptcy.

As you can see, while it is possible for a Trustee to take property from someone in bankruptcy, the odds of it happening are low.  If you are concerned about keeping your possessions but need to file bankruptcy, please contact us to discuss how we can protect your assets and still get you the financial relief you need.

This post was authored by Lakelaw associate Nicholas D. Strom


You can file your bankruptcy in Wisconsin even if you just moved here

Posted by David Leibowitz on December 10th, 2009 in Chapter 7, Exemptions, Wisconsin

You can file your bankruptcy case in Wisconsin even if you are relatively new to the State.  Suppose you move to Wisconsin after having spent the last several years elsewhere.  First, welcome to a state with wonderful people and a lot of reasons to stay.   But you might be moving to Wisconsin and be concerned about filing a bankruptcy.  This is where an experienced bankruptcy attorney can assist you.

You have some flexibility, just like the big corporations which file their cases in New York and Delaware.  Once you’ve lived in Wisconsin a little more than 3 months, you can file your case here.  Or you could file your case in Wisconsin right away if most of your property is now located in Wisconsin.

If you just moved to Wisconsin, you can’t use  Wisconsin’s exemption law to figure out what property you can keep.  Chances are, you’re going to use your old state’s rules.  The key factor is where you lived in the 180 day period before the last two years started.  If, like me, you moved recently from Illinois, spending the bulk of that 180 period in the Land of Lincoln, you’d be using the Illinois rules.  Sometimes, however, you may have to use the federal exemptions.  Make sure your lawyer asks you the right questions so that you can get the right answers.

For financial relief in Kenosha, Racine, Walworth or Milwaukee, call Lakelaw today at 262.694.7300 and ask for Attorney Ryan Blay or David Leibowitz

This post was written by Ryan Blay, Supervising Attorney in Lakelaw’s Kenosha office.

Keep more property when filing bankruptcy in Wisconsin

Posted by David Leibowitz on December 2nd, 2009 in Exemptions, Wisconsin

You can keep exempt property in a chapter 7 bankruptcy case.  Thanks to a new Wisconsin law going into effect on December 16th, you’ll be able to keep more of your property if you have to file for bankruptcy.

Under 2009 Wisconsin Act 90:

  • The homestead exemption is raised to $75,000 and each individual in a marriage may use this $75,000 exemption.  Prior to this change, the exemption was limited to $40,000. 
  • Equipment, inventory, farm products, and professional books used in the business of a debtor or a debtor’s dependant is doubled from $7,500 to $15,000.
  • Household goods and furnishings are now protected up to $12,000, up from $5,000.  This includes wearing apparel, keepsakes, jewelry, appliances, books, musical instruments, firearms, sporting goods, animals, and other tangible personal property.
  • Protection in the equity of a motor vehicle rises from $1,200 to $4,000 in value.  Moreover, any unused portion of the Household goods exemption can be applied to the car protection.  
  • Bank accounts can now be protected up to $5,000 instead of $1,000.  These are only for personal use and not business. 
  • Exemptions for personal injury claims double from $25,000 to $50,000. 

In Wisconsin, you can select either state or federal exemptions.  Sometimes, federal exemptions are better for you.  So always consult an attorney before selecting the exemptions for your bankruptcy petition and schedules.  What you protect from your possessions and estate can mean the difference between peace of mind and a trustee demanding that you turn over the things you need for a normal life after bankruptcy.

For financial relief in Kenosha, Racine, Walworth or Milwaukee, call Lakelaw today at 262.694.7300 and ask for Attorney Ryan Blay or David Leibowitz

This post was written by Ryan Blay, Supervising Attorney in Lakelaw’s Kenosha office.

Servicemembers from Chicago, Lake County and Wisconsin: Rely on Lakelaw

Posted by David Leibowitz on April 4th, 2009 in Exemptions, Uncategorized,

The Servicemembers Civil Relief Act protects our soldiers, sailors and airmen.  Lakelaw supports our troops.  We offer our servicemen and servicewomen bankruptcy and other legal services at substantial discounts.  We always have and always will.

Recently, Lakelaw heard from an Army medic in Afghanistan who was threatened with foreclosure.  I told him not to worry so much.  The Servicemembers Civil Relief Act gives a lot of protection to our active duty servicemen and servicewomen.

Here are some of the most important features:

  1. Nobody can get a judgment againt you by default – just because you didn’t answer a complaint.  Instead, the court has to appoint an attorney to act on your behalf
  2. The court has to stop proceedings against you for at least 90 days while your attorney determines if you have any defenses to the claim
  3. Interest on any debts against you is limited to 6% while you are on active duty.  Any difference between 6% and the contract interest can never be collected.
  4. You can’t be evicted from your residence (rented for less than $2400/month, adjusted for inflation) while you are on active duty for at least 90 days after the eviction order.  

Service connected life insurance is increased while you are on active duty.  There are other provisions which are all more fully explained in this link:  Servicemembers Civil Relief Act

If you are on active duty and came anywhere from the Chicago metropolitan area or Southeast Wisconsin – call on Lakelaw.  We support our troops.  We’ve got your back.

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.


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