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Chapter 7 Bankruptcy Chicago - Signing Document

Chapter 7 Bankruptcy Chicago - Signing Document 2

Chapter 7 Bankruptcy

What are the advantages to filing Chapter 7?


Chapter 7 is a great way to get a fresh start if you are struggling financially with unsecured debt such as credit card bills, medical bills, personal loans, utility bills, repossessed auto deficiencies, or mortgage deficiencies. Chapter 7 is not the cure to every financial problem; however, it is a great way to eliminate the majority of the types of debt that are out there.

A person who files Chapter 7 can most likely keep all of his or her property. There are certain state exemption laws that allow you to keep a certain dollar amount in real estate, a certain dollar amount in a vehicle, as well as a miscellaneous personal property exemption of up to $4000 in the state of Illinois. Most of my clients who file Chapter 7 eliminate a significant portion of debt while being allowed to maintain all of their personal property.

For example, any type of retirement benefit is 100 percent protected. All of someone's necessary clothing is 100 percent protected. Most people do not have significant equity in their home or vehicle. For that reason, they are able to keep those items provided they continue to make monthly payments on time.

There are certain debts that are not eliminated in a Chapter 7, which include child support, recent taxes, parking tickets, student loans, maintenance payments, or debts from any type of fraud. For the overwhelming majority of the people who I help, credit cards and medical bills are the main cause of their financial woes. Filing Chapter 7 Filing Chapter 7 easily eliminated the credit card debt, provided the person has not engaged in any kind of recent purchases or run up the charges on those cards in the last 90 days prior to filing. Medical bills are easily eliminated in Chapter 7 since those are unsecured debts for a service, and the service has already been provided, and nothing can be repossessed or returned.

Chapter 7 also enables someone to get back on their feet financially, to be able to get a mortgage two years after filing, to be able to get an auto loan immediately after filing, and to be able to save for the future without constantly having to pay creditors back on a monthly basis. For some people, Chapter 7 is the only thing that will stop a wage garnishment, a lawsuit, or other types of creditor harassment. Some people find that they are so far behind on their debt that the minimum monthly payment plus the interest is not enough to ever knock down the balance. For these people who rely on credit, and who are forced to make these high minimum payments, there isn't money available for necessities such as food, clothing, housing, and transportation.

The reason I enjoy handling Chapter 7 bankruptcy cases is that an overwhelming majority of debt is eliminated, and it really brings a fresh start in the person's life. By providing this type of fresh start, I have a happy client, a satisfied client, and one who is going to refer their family, friends, and coworkers to me.

In most areas of the law, there is a compromise. In other words, clients are giving up something in exchange for something and nobody is 100 percent happy because it's a give and take. With bankruptcy law, when you eliminate debt, it is a 100 percent advantage to the client. For that reason alone, my office is held in high regard with clients, not just during the procedure or during the case, but for the rest of their lives. People remember those who helped them out tremendously. If I can eliminate $50,000 or $75,000 or $100,000 worth of unsecured debt and give somebody a new financial start, I have provided a tremendous amount of help in his or her life. For that reason, they're going to remember me for the rest of their life and they're going to refer their family, their friends, their coworkers, and anybody else they know who raises the flag and says, “I'm struggling financially and I need help.” David Siegel is the one that they are going to recommend because David Siegel helped them.

What type of results can be achieved with Chapter 7 bankruptcy?


Chapter 7 bankruptcy is the most common form of bankruptcy, and over 75 percent of all bankruptcy cases are of the Chapter 7 variety. Chapter 7 is the fresh start type of bankruptcy or liquidation bankruptcy. However, most people do not have to liquidate anything, and they get to keep all of their property while filing a bankruptcy under Chapter 7. The best thing about Chapter 7 is that it eliminates miscellaneous debt, unsecured debt such as mortgage foreclosure deficiencies, medical bills, past-due utilities, credit cards, auto repossession deficiencies, personal loans, and debts for just about any other type of service. 

Most people who need a Chapter 7 have very little in the way of assets. For that reason, they are able to keep their house and/or vehicle, provided they continue to make payments on those items. They can also keep a checking account or a savings account throughout a bankruptcy case, provided there are no significant assets in those accounts. The person can also keep all of their necessary clothing. They can also keep whatever they have in a 401(k) or profit sharing plan, annuity, and life insurance, as long as the beneficiary of a whole life policy is either a spouse or a dependent. Therefore, Chapter 7 provides a great source of relief, eliminating all kinds of unsecured debt, while allowing the person to maintain, typically, whatever they have in their possession.

Another great thing about Chapter 7 is that a person can make a decision with regard to secured debt. Now, secured debt is debt that is secured by property. By that, I mean if the person does not make payments on the debt, the creditor has the right to either foreclose on the property or repossess the property. In some circumstances, Chapter 7 is a good option to get rid of a car that you are way upside down on. For example, if you are filing for bankruptcy and you have a vehicle that is worth $10,000, and you owe $25,000 on that vehicle, then you have the opportunity to surrender that vehicle back to the lien holder in exchange for a fresh start.

With regard to a home, if your home is way upside down due to the foreclosure crisis, you have the ability to get out of the debt, allowing the lender to foreclose on the property and you will not owe any deficiency. You will have to give up the property at some point and find another place to live, but you will basically change your equity position in terms of the property.

Therefore, Chapter 7 is a great way to get a fresh start, get back on your feet, eliminate unsecured debt, and stop creditor harassment. If you are someone who is receiving collection calls all day and all night, if you are in fear of lawsuits, if your wages are being garnished, if you can't sleep at night because you have overwhelming debt, then Chapter 7 is a good option to look into. I recommend you seek advice from a qualified, experienced bankruptcy attorney in your local area. That attorney will sit down with you, interview you, and explain to you whether you qualify, and if you do qualify, what it takes to get your case filed.

Many attorneys will file with less than full payment, provided you can make ready payments on a monthly basis or a weekly basis. Other law firms will demand the whole amount up front before your case can be filed. Make sure that you hire an attorney who knows how to handle bankruptcy cases and can answer all of your questions without any hesitation.

In order to qualify qualify for Chapter 7, you will have to submit your most recent paycheck stubs, your most recent federal tax return and you will have to take a credit counseling class. After your bankruptcy case is filed, but before the case is over, you will have to complete a two-hour financial management class. These are requirements, steps, and hoops that your bankruptcy attorney will be able to guide you through, help you with, and assist you in getting all this information together.

Therefore, Chapter 7 is a great way to get out of debt, get back on your feet, and get your financial life back in order.

What are the main causes for bankruptcy?


There are many reasons that someone would need to file for bankruptcy. In the United States, there are over one million bankruptcy cases filed in a calendar year. The main reason for filing is overspending on credit. It could be a mortgage, it could be an auto, and it could be a credit card. These are the items where people get in over their heads in spending. When it comes to real estate, people buy a house that they really cannot afford. You have mortgages that had adjustable rates, people were locked into a low rate to start, known as a teaser rate, and then the rate continued to increase to the point where the monthly mortgage payment was more than their budget could allow.

The same is true with vehicles. People are using vehicles that they can barely make the monthly payment for. If there's any kind of lapse in employment, illness or injury, they're going to fall behind on that payment and not be able to catch up.

Credit cards are the biggest culprit in why someone needs to file for bankruptcy. Credit is just extended to people because the credit card companies know that the overwhelming majority of people are going to pay high interest, late fees, over limit fees, annual fees and any other fee that they can think of to help keep the credit card industry profitable. For everyone who files a bankruptcy and eliminates the credit card debt, many more people are paying on their credit cards and paying the high interest. People see credit with credit cards and then they want more. They get offers for credit from other lenders and they take advantage of those offers. Therefore, credit cards are the number one cause of filing for bankruptcy.

Medical bills are the second leading cause of filing for bankruptcy. It doesn't take much for a minor illness or one short hospital stay to put somebody, even with insurance, behind the eight ball, and they will not able to pay their bill. It could be a car accident. It could be an injury on the job. It could be an athletic injury during someone's leisure time. Whatever it might be, the unpaid medical cost can lead one to file for bankruptcy.

When you have credit card debt and medical debt and you can't pay it, a creditor is likely going to sue you and try to obtain a judgment. By obtaining a judgment, the creditor can now garnish your wages, attach your bank account, depending upon the type of debt, suspend your driver's license. Therefore, you have to be careful that once you owe money, that money that you owe can turn into a judgment, which is collectible.

The main problem, though, and the main cause for Chapter 7 is just the overall overzealous spending by consumers. We live in an “I want it now and I'll pay for it later” society. The idea of paying for something on credit is costing somebody a tremendous amount of money as opposed to if he or she had the ability to just pay for it in cash. This easy credit, the desire to have it now and pay for it later has led to the huge amount of bankruptcy filings in the United States. I don't see the trend going anywhere but up.

What property can I keep in bankruptcy?


In filing a Chapter 7 bankruptcy, you are able to keep almost all of your property in most cases. There are certain state exemptions that allow you to protect a certain value in property above and beyond what a trustee or a creditor can touch. In the state of Illinois, the Homestead Exemption, which applies to the real estate where you live, is $15,000 per person. So a husband and wife with a joint case can protect up to $30,000 worth of equity in primary real estate.

In doing the math, let's say the property is worth $200,000 and the first mortgage is $170,000. That would leave $30,000 worth of equity in the property. You can still file a Chapter 7 bankruptcy and protect, in a joint case, $30,000 of equity. Thus, the trustee would not be able to touch that property and you, as a debtor, would be able to keep that property, provided you continue to make your outstanding mortgage payment on time.

With regard to vehicles, the state of Illinois allows you to protect $2400 worth of equity in one vehicle. If you are filing a joint case, you can protect $2400 in one vehicle for each debtor, or you can combine it if you only have one vehicle and each debtor can put $2400 towards that vehicle. In terms of personal property, the state of Illinois allows a $4000 miscellaneous wildcard exemption. The $4000 can be sprinkled over any type of personal property, however, not on any real estate.

Anything you have in a retirement account that is in ERISA qualified is protected. That means if you have money in an IRA, 401(k), profit sharing, annuity, or any other retirement account, it is 100 percent protected from creditors and from the long arm of the trustee. I have had bankruptcy cases where someone would be eliminating anywhere from $50,000 to $1 million worth of debt and is able to protect over $1 million worth of retirement benefits. So if you are someone who is struggling financially but you have a lot of money in retirement and you were worried about whether or not that is going to be taken or touched by the trustee, the answer is no, it is protected. It is yours. All of your necessary clothing is protected, and all of your minor goods with the $4000 wildcard exemption.

One thing you should remember when you are filing Chapter 7, is that the trustee assigned to your case is going to look and see if there is any nonexempt property. Nonexempt property is property that you cannot protect under state law. Let's say your house has a little bit of nonexempt property. In my earlier example, if the house is worth say $250,000 and you owe $200,000 to pay it off, and with the $30,000 joint husband and wife Homestead Exemption, there is an additional $20,000 unprotected. A trustee in bankruptcy has to look at what it's going to take to sell that property after they pay the homeowners exemption, what is going to be left for the benefit of creditors. To sell a $250,000 house in today's market, you're going to have approximately 5 percent to 6 percent in real estate commissions, you're going to have costs of closing, and attorneys' fees. It might turn out that even though there's $50,000 total equity, once you subtract the Homestead Exemption and the cost of sale, there's going to be nothing left for creditors.

You want to consult with your attorney and get an idea of whether or not your property is going to be protected. In most cases, under Chapter 7, debtors keep all of their personal property.

What are the options with regard to secured property?


Secured property is any property that is secured by some sort of financing, or lien, whereby if you do not make payments on that item, the lender or the creditor can either repossess the collateral or foreclose upon the collateral. The great thing about Chapter 7 is that you, as the debtor, have an option as to what you want to do with regard to secured property.

With real estate, you basically have two main options and that is to either reaffirm the debt or surrender the debt. In the state of Illinois, we are allowed a third option, which is to continue to make payments without either reaffirming or surrendering. This ride through, as it was once called, puts the debtor in a great position. The debtor can keep their real estate, provided they continue to make their payments, without signing back up on the hook for that debt. This means that if something happens, say five years down the road, the parties lose their jobs, they can't make their payments on the house, and they decide to walk away from it for whatever reason, the mortgage company at that point can only foreclose against the property. They can't look to the debtor for any money because that debt was discharged in their Chapter 7.

Therefore, the advantage is really with the debtor in that if they want to keep the real estate, they continue to make voluntary, regular, timely payments. If they want to surrender the property, they can stop making payments and the mortgage company will have to complete a foreclosure process before the debtor can be evicted. In the state of Illinois, the foreclosure process is very lengthy. In fact, it could take up to a year to a year and a half to properly evict somebody in a foreclosure process.

With regard to a vehicle, which is another secured debt, the options are a little different. The debtor can either reaffirm the debt, which is to go back on the hook and sign an official agreement promising to be bound by that vehicle. If they were to do that, and something were to happen down the road, then the auto finance company can not only repossess the vehicle and sell it at auction, but also pursue the debtor for any deficiency because they put their name back on the dotted line.

The other option that the debtor can do with regard to a vehicle is to surrender the vehicle in full satisfaction of the debt. Some debtors find they are so upside down with their vehicle that it doesn't make sense to reaffirm the debt. If you have a vehicle that is worth $10,000, and your financing is $20,000, then Chapter 7 is your opportunity to get out of that debt, surrender the vehicle, and get yourself into another vehicle that has a better debt to equity ratio.

The other option, which is kind of special with vehicles, is redeeming the vehicle. Under Section 722 of the United States Bankruptcy Code, you have the ability to redeem the vehicle for its fair market value. Now, of course, how are you going to come up with the full fair market value in one lump payment to satisfy your lender? The answer is you're not going to be able to do it alone. However, there are other finance companies who specialize in 722 Redemption Funding and they jump in the shoes of your old lender, pay off the old lender for the fair market value of the vehicle, and then become your new lender for less than what you owed to the prior lender.

If you are a debtor who is completely upside down on a vehicle and you want to keep it, I would certainly explore the 722 Redemption Funding option. Your attorney will advise you as to whether or not it's a good idea to reaffirm, surrender, or redeem. Ultimately, you as the client and the debtor, have the decision on whether or not you're going to keep a piece of property, agree to be bound by it, redeem it, or surrender it. Consult with your attorney because his or her experience will be able to give you great wisdom on whether or not it's a good idea to make the decision that you're considering with regard to your secured property.

How to find a bankruptcy attorney for Chapter 7?


There are many bankruptcy attorneys out there in any major city and even small cities. Bankruptcy back in the day used to be a relatively easy process. You could have bought forms at the office supply in a simple case, filled them out by hand, made photocopies, paid a small fee, received a court date, and then eventually receive a discharge in bankruptcy. Everything changed with bankruptcy on October 17, 2005 when the Bankruptcy Reform Law came into being.

Bankruptcy today is a specialty under the law. Many attorneys who used to practice in bankruptcy law don't practice it anymore because they can't keep up with the changes to the existing law. What I recommend is that you do your research. I would start with the Internet. I would look up attorneys' websites to see a little bit about their background and what kind of information they are providing. For example, has the bankruptcy attorney written anything on the subject that you can read and digest? Has the attorney been practicing in this area for some time? Does the attorney specialize or concentrate in bankruptcy, or is bankruptcy just one of the 15 practice areas that he or she practices?

Once you have learned a lot from their website, I would recommend that you make at least two appointments, maybe more, with your top choices for a bankruptcy attorney. When you go to their office, you will be able to get a feel of whether or not they are truly an experienced bankruptcy attorney who makes bankruptcy part of their life's work. You will be able to gauge in their office whether they are set up to handle your case or whether they are sloppy. When you meet with the attorney, you will be able to find out what that attorney knows about bankruptcy, what that attorney can advise you about bankruptcy, and most importantly, whether you can trust that attorney. Ask the attorney for references of people you can call who he or she has helped in the past so that you can ask that person whether they had a good experience.

If you come to my office, and you sit in the waiting room for a few moments, you are going to see not only a copy of the book that I wrote, but you are also going to see a booklet that contains hundreds of thank you letters from prior clients that I have helped over the years. Nothing is more gratifying than receiving a thank you letter from someone who you have taken through the bankruptcy process.

If you do not feel comfortable with the attorney that you are meeting with, get up and walk out of the office. Plenty of attorneys are available to help you with bankruptcy. You don't have to be tied to someone who you don't feel comfortable with. I also recommend that you don't price shop. Finding the cheapest bankruptcy attorney is not necessarily the best idea. Hiring the most expensive bankruptcy attorney is not often the best idea. I have found that people who charge a reasonable fee, do excellent work, and can provide backup and documentation for what they do, are your best choice.

Start with the Internet, learn what you can, make an appointment, interview a couple of attorneys and I'm sure that the decision on who to hire will come screaming out at you.

What are the filing requirements for Chapter 7?


Chapter 7 bankruptcy is no longer a simple case. There are pre-filing requirements, there are post-filing requirements, and then there is the means test. Let's start with the pre-filing requirements.

Before a Chapter 7 bankruptcy case can be filed, the debtor must submit to and complete the required credit counseling session. This session can be done online, by telephone or in person. The pre-filing credit counseling can last anywhere from an hour to an hour and a half. The cost is typically $15-$25. You will receive a certificate once you complete the counseling. Before a case can be filed under the United States Bankruptcy Code, credit counseling must be obtained.

There is also a timeframe; the credit counseling must be obtained within 180 days of the filing. I have seen clients who have come to my office interested in bankruptcy and have rushed out to do the credit counseling only to wait more than six months before they actually filed their case. Those clients had to take the credit counseling the second time. The only thing worse than your first credit counseling session, is you having to submit to it again.

Congress believed, as they changed the law, that people would take pre-filing credit counseling and then decide to work out some form of debt repayment plan with the creditors in lieu of bankruptcy. However, what the Congress didn't realize was that attorneys were referring people to credit counseling so that they could be able to file. Therefore, credit counseling is a requirement that must be satisfied prior to filing.

A debtor must also provide their most recent federal tax return prior to filing a Chapter 7 bankruptcy. If the person has not filed a return, then we can do a statement saying they are no longer or did not have to file a return. If they filed an extension for that year and have not filed their official return, then the extension will suffice for that requirement.

Additionally, a debtor has to provide two months' worth of paycheck stubs or other forms of payment prior to filing. The reason for these requirements is that the trustee appointed to the Chapter 7 case must review the tax return information as well as the pay advices to ensure that the debtor qualifies for bankruptcy and that the information contained in the petition and schedules is truthful and accurate.

The other requirement is based on the means test. Each state has a different median income, which is determined by the household size. If you fall below the state median and you don't have available money per month, then you are going to qualify for Chapter 7. If, on the other hand, your income for your household size exceeds the state median, then you must submit to a means test which is a mathematical calculation to determine whether you have the ability to repay your creditors or whether you truly are entitled to a fresh start.

These are the pre-filing requirements: eligibility, passing the means test, providing tax returns, providing pay advices, and submitting to credit counseling. Once you have done that, you are technically able to file a Chapter 7 bankruptcy case. However, you might have to pay your attorney's fees in full, depending on who you hire. Once you meet with your attorney, that attorney will let you know what is required in terms of credit counseling, providing tax returns, providing pay advices, qualifying under Chapter 7 and most importantly, what dollar amount that attorney is going to require before a case can be officially filed with the United States Bankruptcy Clerk.

What is the Automatic Stay in Chapter 7 bankruptcy?


The Automatic Stay is what every debtor is seeking. The Automatic Stay is protection. The Automatic Stay is a notice that goes out to creditors advising them that they cannot take certain actions in the collection of a debt. Actions that are stayed include harassment, attempting to collect a debt, continuing to garnish wages, continuing to seize bank accounts or taking any other action in an effort to collect a debt.

The Automatic Stay does not provide absolute guarantees, because exceptions are made in certain instances. There are exceptions to the Automatic Stay, especially in the case of re-filings. There are also some actions, such as criminal actions, which are not subject to the creditors' stay. Filing a bankruptcy case will not prevent federal, state, or local authorities from pursuing criminal actions against a debtor.

Lawsuits regarding child support are not stayed because child support is a protected area, and the courts want to see that children are protected. Any kind of police power by the state is also not protected under the Automatic Stay. Therefore, if you owe money to a governmental agency, you do have protection. If, however, the state is pursuing you for criminal activity or other police power activity, then you are not protected.

The Automatic Stay is created immediately upon the bankruptcy case being filed. About 5 to 7 business days after a case is filed, the Clerk of the United States Bankruptcy Court will send a notice to all the creditors listed on the bankruptcy petition and schedules. In my office, if there is an urgent circumstance such as a bank citation, a wage garnishment, or any type of lawsuit, we will create the document in the office called the Automatic Stay immediately upon the case being filed. We will then fax the Automatic Stay to the creditor so the creditor knows that they can't take any further actions. If you have questions concerning the Automatic Stay and violations of said Automatic Stay, please consult with your bankruptcy attorney immediately.

If a creditor continues to violate the Automatic Stay, your attorney has the ability to bring that creditor back into court under potential sanctions. This involves a court action and motion, and an appearance before the judge. In my experience, if the violation of the Automatic Stay is egregious, then the court will award some sort of sanctions based upon the type of conduct that was committed. Often the debtor must show actual damages. Once such case would be where a vehicle was repossessed in violation of the Automatic Stay, and the debtor was not able to get to work. Loss of income from the job during that period where they were deprived of their vehicle could be a basis for damages and an action for sanctions against the creditor for violation of the Automatic Stay.

Once the bankruptcy case has concluded, there is a discharge injunction, which basically takes the place of the Automatic Stay. If a creditor attempts to collect a debt that was discharged in violation of the discharge injunction, your attorney can bring a motion to reopen the case without a fee in that case, and try to seek a remedy or a sanction against that particular creditor.

What are the bankruptcy schedules and petition?


The bankruptcy schedule and petition lists all of a debtor's assets, liabilities, income, and expenses. Schedule A deals with real estate property. Schedule B lists all of the debtor's personal property, including bank accounts and household goods. Schedule C provides for the state of Illinois exemptions that allows a debtor to keep property free and clear from the long arm of the Trustee. Schedule D involves secured debts such as mortgage companies and auto lenders. Schedule E deals with tax debt and domestic support obligations. Schedule F involves the debtor's unsecured debt such as credit cards and medical bills. Schedule G lists all executory contracts and leases. Schedule H deals with co-debtors who may have also signed to be liable on the debt. Schedule I is your income. You have to list income from all sources, including wages, Social Security, unemployment, government assistance, pension, profit sharing, and any other income are included in Schedule I. Schedule J is where you list all of your monthly expenses. If you have an expense that is not monthly, you want to divide it by the number of months so that you can come up with a monthly amount for what you pay in expenses.

After the alphabetical schedule, we have a Statement of Financial Affairs. Under the Statement of Financial Affairs section, you have to list all of your income for the last three years from a job as well as income from other sources. You have to list whether or not you were involved in a lawsuit. You have to list whether you had any property repossessed or returned in the last two years. You have to list any closed bank accounts in the last two years. You have to list your prior address in the last three years and whether or not you were engaged in business.

Under the Statement of Financial Affairs, a trustee is going to be able to see whether you had property at one point and no longer have property. The trustee is going to be able to see whether you transferred property out of your name, and to whom. The trustee is also going to be able to understand whether you made a large payment over $600 to one creditor prior to filing your bankruptcy.

These petitions and schedules are prepared, signed, and then filed with the Clerk of the Bankruptcy Court. It is from these schedules that the court is going to send out the official Notice of Filing. The Notice of Filing is commonly known as a B9A form and it gets mailed to all the creditors that are listed on your schedules. Once the creditors receive the B9A form, they can no longer contact you, they can no longer try to collect on a debt, and they have to abide by the Automatic Stay, which protects you from creditors trying to collect the debt after the case has been filed.

Those are the petitions and schedules and that's what they result in: notice going out to all creditors about your bankruptcy case.

What is the 341 Meeting of Creditors in bankruptcy?


Under bankruptcy law, whether it's a Chapter 7 bankruptcy case, or a Chapter 13 bankruptcy case, there is a 341 Meeting of Creditors. 341 comes from Bankruptcy Code Section 341 which states that a debtor must appear in front of a trustee and be examined under oath, and notice goes out to creditors that they can appear and ask questions from the debtor as well. Under Chapter 7, the 341 Meeting of Creditors is a relatively simple matter. The debtor must show up on time, bring a photo ID, and proof of the Social Security number. The trustee under Chapter 7 has already received in advance a copy of the petition and schedules, a copy of the most recent federal tax return, and two months' worth of paycheck advices. Therefore, the trustee already has a good idea what the case pertains to, before you ever meet the trustee.

Once you meet the trustee, you're going to be sworn in under oath and you're going to be asked a series of yes/no questions. The questions are as simple as state your name, and state where you live; to as difficult and as detailed as what you use the credit cards for. Have you given away or sold anything for less than its fair market value? Have you owned any property ever in your lifetime? What was the main reason that caused you to file bankruptcy? You will be asked these and other questions of that nature.

The trustee usually has several cases on call and can't dedicate very much time to one individual case. For this reason, under Chapter 7, the 341 Meeting goes relatively smoothly. Often, the trustee is not even going to want any amendments and is going to make a finding of no assets on the spot, and then recommend that you receive a discharge under Chapter 7 bankruptcy law. In other cases, the trustee might want verification of certain debt, of certain assets, or other information that pertain to whether there's an asset that can be administered.

Remember, the trustee's job in a Chapter 7 bankruptcy case is to administer any nonexempt assets on behalf of the creditors and get them a pro rata share. In 99 percent of all Chapter 7 bankruptcy cases, there are no assets to be administered. This is because the state of Illinois allows for large exemptions in property. A debtor can protect up to $15,000 worth of equity in real estate. A debtor can protect up to $2400 worth of equity in one motor vehicle. Further, a debtor has a $4000 miscellaneous wildcard exemption that can be sprinkled over any type of personal property. In addition to that, the debtor can protect 100 percent of a retirement 401(k) or other profit-sharing account as long as its ERISA qualified.

Therefore, the trustee in a Chapter 7 case is not really going to find much in terms of the administration unless the debtor knowingly is giving up property in exchange for a fresh start. We see this sometimes with timeshares or vehicles that cannot be protected where the debtor just says I am so much in debt I'm willing to give up this little piece of asset that is nonexempt in order to get my fresh start. In those cases, the trustee will sell the item at a fair market value, put out a notice in front of the court that goes to all the creditors as to what is being acquired and how it's going to be distributed. Of course, the trustee is usually going to hire his or her own law firm as the attorney, and get paid an additional fee for that service. However, the debtor gets a fresh start. They just have to give up any nonexempt property in exchange for that fresh start.

If I have a client who has an asset that's potentially exposed, I'm going to have that client sign a Potential Asset Acknowledgment form. This form basically states that the client is aware there's an asset that may be taken by the trustee in exchange for the fresh start.

What property is protected in a Chapter 7?


Believe it or not, most Chapter 7 bankruptcy cases are handled without giving up any personal property whatsoever. The reason for this is the state of Illinois has certain exemption amounts whereby you can protect personal property free and clear from creditors, and free and clear from the Chapter 7 trustee's long arm. The exemptions include $15,000 worth of equity in real estate property, $4000 worth of equity in any personal property, $2400 worth of equity in one motor vehicle, life insurance provided that the beneficiary is a spouse or a dependent, 100 percent of  ERISA qualified retirement benefits including 401(k), profit sharing, and annuities. All of one's necessary clothing is protected. There is a certain exemption for tools of trade. In addition, there is a certain exemption for animals.

Now, since most people filing for Chapter 7 bankruptcy do not have significant equity in any of their property, they are clearly allowed to keep what they have, provided they continue to make timely payments on secured items such as houses and vehicles. Also, keep in mind that the numbers that I quoted are for an individual case. However, the exemption amounts double with a husband and wife filing a joint case. This would allow up to $30,000 worth of equity in real estate to be protected before a trustee can touch it.

In reality, the trustee is going to want to see a lot more than $30,000 worth of equity before he or she tries to sell that asset. When you have an asset such as a house, you're going to have a 5 percent or 6 percent broker's commission, you're going to have attorney's fees, and closing costs when you try and administer an asset. For this reason, there has to be significant equity above and beyond $30,000 before a trustee is even going to consider taking that asset and selling it for the benefit of creditors. The trustee wants to make sure that there's going to be something left for the creditors. If taking your property is simply an exercise in paying you your exemption and having nothing left for creditors, then it is never going to pass the scrutiny of the bankruptcy judge.

Keep in mind, when the trustee administers an asset, he has to bring a motion to acquire or sell the property for the benefit of the creditors. The trustee then has to estimate or detail what the creditors are going to receive under that administration. If the amount of the administration to the creditors is going to be nominal and the attorney's fee to the trustee is going to be large, then the bankruptcy judge might refuse to accept or approve that transfer.

In certain circumstances, Chapter 7 property is given up in exchange for a fresh start. Recently, I did a case where someone had six timeshare properties, but a lot of unsecured debt. In that case, we negotiated a settlement whereby we bought out the trustee's interest so that my client could keep timeshares in exchange for a fair dollar amount going to the trustee. The trustee then uses this dollar amount to pay creditors a pro rata share. My client could have also surrendered the timeshares entirely to the trustee in exchange for their fresh start. In reality, trustees don't want to deal with assets that are difficult to sell such as timeshares. Trustees like vehicles that have a lot of equity, houses that have a lot of equity, or bank accounts that are above and beyond the exemption amount. To find out if your particular property is going to be protected free and clear, contact a local bankruptcy attorney who has the experience to handle your case.


Will my bankruptcy filing be a public record?


Technically, your bankruptcy filing will be a public record and it will be contained in a database either on the internet or with the Clerk of the US Bankruptcy Court. However, if you are worried that people are going to find out that you filed for bankruptcy, you can stop worrying. Most people are not going to become aware of your bankruptcy filing unless they were a creditor and received a notice in your bankruptcy case. If someone is not a creditor, such as a neighbor, friend, or a coworker, these people will typically never find out about your bankruptcy filing unless you tell them.

The reason for this is the information is contained on the internet but it has to be obtained typically through the Clerk of the Bankruptcy Court's website. Someone would have to log on, get what's known as a Pacer Account, and pay a fee to examine documentation online through the Federal Bankruptcy Court. If someone you know is so curious about you that he or she is going to go through those steps, then I would really worry about them being a friend of yours.

Typically, only people who are creditors in your bankruptcy case, or co-debtors in your bankruptcy case, are going to receive the official notice from the Clerk at the US Bankruptcy Court. There was a time back in the day where names were published in local newspapers and evidence of bankruptcy were found in some business trade journals. However, today, proof of your bankruptcy filing is very limited and people have to go to great lengths to find it.

If you are someone who is concerned about your name being associated with bankruptcy, then I ask you this question: look at the alternative for not filing. Look at the ability to get out of debt under Chapter 7, keep your property and get a fresh start versus the scrutiny or the feeling that you have that it's a public record and that somebody could look it up. Anybody who is a friend of yours, who cares about you or a family member who loves you, would hate to see that you are struggling financially and would be relieved to find out that you availed yourself of the federal law and got a fresh start. Anybody that you feel would denigrate you, look down upon you, or hold you in shame for filing a Chapter 7 bankruptcy under your federal right is not someone that you should hold in high regard. That person doesn't care about you, that person doesn't want you to succeed, that person is only examining the internet and searching for dirt on you.

So yes, bankruptcy filing is a public record. It can be found on the Clerk of the US Bankruptcy Court website if somebody takes the time and effort to search. They don't have to have your Social Security number to search for it. They simply have to have your name, and the time and dedication to navigate through the system and try to find it.

What I tell my clients is this: if someone is going to look up to find out if you have filed for bankruptcy, that person is not someone who cares about you. That is someone who is looking for dirt on you, that's not somebody you should be associated with, or be concerned about whether he or she knows that you filed for bankruptcy. Your sole determination on whether to file bankruptcy is whether you need the federal protection of the Bankruptcy Court to eliminate the majority of your unsecured debt. If your concern is whether it's going to be a public record, then maybe you don't have enough debt or you're not concerned enough about your debt to avail yourself of your federal rights.

Please consult with a bankruptcy attorney regarding filing a bankruptcy if you are struggling financially, if you are hurting financially, if you are worried about creditor harassment, wage garnishment, bank citations, repossession, or foreclosure. A bankruptcy attorney worth his salt will give you the best advice and let you know whether it's worth it to file, and what the consequences of filing are.

Can I get credit again after filing Chapter 7?


Credit is the thing that most clients are concerned about more than anything else. Before I even file a bankruptcy for someone, before they even hire me during the initial consultation, people want to know if they can get credit again. My answer to them is yes, you can get credit again. However, before we talk about credit, why don't we talk about getting you out of debt under federal bankruptcy laws? Why don't we talk about how the procedure works, how you can find relief, and most importantly, how you can get back on your feet financially by making smart decisions, and then we'll get into whether or not you can get credit.

Clients are impressed by the fact that I truly care about their financial well-being and I don't want to see them fall back into financial hardship again. Even though you can file bankruptcy once every eight years, it's truly not something you want to do more than once if you can avoid it. Whatever got you into trouble in the first place, whether it was overspending on credit cards, lack of insurance for medical reasons, or any other issue that you can resolve for the future; by all means; take care of that issue so that you don't have to fall back into debt again.

Clients are happy to learn that they can qualify for a mortgage two years after filing for bankruptcy relief. They can even qualify for a car loan immediately after filing. However, it is always best to go on a cash basis for the first six months after a bankruptcy filing. This way, you can learn just how much you are spending. When you don't rely on credit, you have a tendency to spend less. You can also acquire a secured credit card after filing. This is where you put $250.00 or $500.00 in a bank account and use the convenience of a plastic card to make your purchases. Eventually, the secured card can turn into an unsecured card. In any event, the lender will start reporting favorably to the credit bureaus. This can go a long way in getting decent credit as the time passes after the bankruptcy filing.

Will filing bankruptcy wipe out all of my debts?


Most debts are eliminated under Chapter 7 bankruptcy. These include credit cards, personal loans, utility bills, repossessed auto deficiencies, and foreclosure deficiencies, as well as debts for any other type of service. There are, however, debts that are not eliminated in the Chapter 7 bankruptcy. If you have student loans, if you have recent tax debt, if you have child-support debt or maintenance debt or debts incurred via fraud, then those debts are going to stick around after your fresh start bankruptcy case is completed.

For most people, their debt is the dischargeable type such as credit cards and medical bills and personal loans. For those who have a student loan or a recent tax debt, in addition to a lot of unsecured debt, then it still makes sense to file a Chapter 7 bankruptcy and eliminate all that you can. Once you have done that, you can deal with the remaining debt because you don't have the burden of all the debts that you had eliminated. Many of my clients have a student loan, but they also have a lot of credit card debt and medical bills. In those cases, I simply advise my client that the student loan is going to stick around because it cannot be discharged under your particular case, and the remainder of your debt is going to be eliminated. Once the client hears that, they can make accommodations to pay something towards the student loan because they are no longer paying Visa, MasterCard, American Express, Discover Card, and their outstanding medical bills. By getting some relief for a majority of debt, they are able to deal with the part that can't be eliminated.

Now, this is true with recent tax debt, too. Some people do not file taxes on time. They incur penalties, interest fees, late fees, and often they file and then they owe the government money. Well, what happens is if you can't make the tax debt on time, you are going to incur additional interest on top of the tax that you owe. This interest and tax seems to pile up on itself, and it becomes almost insurmountable to try and get out of tax debt. By filing a Chapter 7 bankruptcy and eliminating your other debt, you are able to work out an installment plan with the IRS to pay that debt over time. In some circumstances, you can handle tax debt through a Chapter 13 bankruptcy case even after you have already filed a Chapter 7 and received a discharge. You first want to get out of the debt that you can get out of, and then deal with the debt separately that you can't get out of.

For many of my clients, they don't have any non-dischargeable debt. They don't have any student loans, or tax debt, or child support, or maintenance, or debts incurred via fraud. For 80 percent to 90 percent of my clients, Chapter 7 is the fresh start that eliminates all of their unsecured debt and gives them an opportunity to get out of secured debt such as houses and vehicles. Chapter 7 is where you have an election as to whether you want to keep the property and continue to pay for it when it is secured. You, as a client, have the ability to say, “I'm not going to keep this house, I can't afford this house it's too expensive for me.” “I'm going to surrender it back to the lender in exchange for full satisfaction of the debt.”

Clients also have the ability in a Chapter 7 to make an election with regard to their vehicles. They can decide that the car is too far upside down, they don't want to keep it, they don't want to reaffirm the debt, they don't want to redeem the debt, and they just want to give up the vehicle in exchange for a fresh start and get into something in the future at a lower payment. Therefore, although most debt is eliminated in a Chapter 7, some debts are going to stick around beyond the filing of a Chapter 7.

Does all of my creditors need to be listed on my bankruptcy?


When you file for bankruptcy relief, either a Chapter 7 or a Chapter 13, you must list all of the people who you owe money to. This would include your mortgage debt, even if you are keeping the house; your auto lender even if you are keeping the auto, any type of medical debt, credit card debt, personal loans, past-due utility bills, parking tickets or other fines to the government. You also have to list any tax debt that you have, whether that tax is going to be eliminated or not. Most importantly, you also must list friends or family members to whom you owe money to. The reason why you have to list all of the people that you owe money to is that the Bankruptcy Code is clear that all debt must be listed.

In a Chapter 7 bankruptcy case, you can decide to voluntarily pay a creditor if you would like, after your bankruptcy case is filed. For example, many people like to keep their house through a Chapter 7 bankruptcy. They can do this by simply making voluntary payments to that creditor from the time the case is filed to going forward. Many people also like to keep their financed vehicle. The vehicle then can be reaffirmed or redeemed and paid back in the ordinary course of monthly payments.

If you are filing a Chapter 13 bankruptcy, then all of your debt must be listed as well. Chapter 13 allows for the restructuring or reorganization of debt with a payment plan consisting of a three to five year period. Inside that Chapter 13 plan, you can designate who is going to be paid back, who is not going to be paid back, which property is going to be in, which property is going to be surrendered.

So whether it is Chapter 7 or Chapter 13, you have to list all of your creditors, but you do have the ability in each case to make a determination as to whether you're going to keep that particular creditor or not. In some cases, particularly in a Chapter 7, someone will want to keep a credit card that he or she has had for some time. It might be the first card they ever received, or one that has significant benefits to it, and the person simply does not want to lose that creditor. Unfortunately, all debt must be listed. Thus, if you have a credit card that you like and you are carrying a balance, the debt must be listed.

Even if you have a zero balance on a credit card, you are probably going to lose the card. Now, technically, if you have a zero balance, you don't have to list the card because it is not a debt. However, most credit card companies are going to send you a letter terminating your charging privileges, because they do become aware of your bankruptcy filing. After a bankruptcy, you can acquire a secured credit card, or even an unsecured credit card at times, to help rebuild some form of credit after bankruptcy.

You must list all the people you owe money to on your bankruptcy petition. If you fail to list a creditor, then the creditor can object to your discharge and hold that debt due and owing. Furthermore, you are signing the documents under all penalty of perjury and you want to be truthful and accurate when you are listing whom you owe money to and whom you do not.

How long does a bankruptcy case take?


A Chapter 7 bankruptcy case can take approximately 110 days from start to finish. This includes the filing of the petition, the appearance at the 341 Meeting of Creditors, and then the final discharge. The typical process for filing a Chapter 7 bankruptcy in terms of timing is this: the client comes to the office and has an initial consultation, fills out a bankruptcy questionnaire, learns their rights, the responsibilities, the costs, and the procedures. From that point, if the client hires the law firm, a bankruptcy petition is prepared and sent out for the person's signature. Once the person returns the signed document, there are several requirements that need to be satisfied before a case can be officially filed.

The first requirement is submitting to a credit counseling session. The credit counseling session before the case is filed can last anywhere from one hour to an hour and a half and it costs approximately $15-$25. The credit counseling session must be completed within 180 days of filing. If someone takes it too early and waits to file, they must take it again.

The second requirement before a case can be filed is the person must submit their most recent federal tax return under Chapter 7. Additionally, under Chapter 7, the person must submit two months' worth of paycheck stubs or other forms of pay advices, which can include unemployment, workers compensation, government assistance, or assistance from family.

The last requirement before a case can be filed really depends upon the law firm. Most lawyers under bankruptcy law want to be paid in full prior to a case being filed. However, in certain circumstances, my law firm will file your bankruptcy case prior to being paid in full. A perfect example of this would be if a client is being garnished or is being sued and if we don't file the case quickly, the debtor is going to lose money or property. Under certain circumstances, if the debtor can show that they can make payments or if they are willing to go on an electronic fund transfer agreement whereby the money is taken directly out of a checking account every two weeks, then I might decide to file the case early.

Once the case is filed, a notice from the United States Bankruptcy Court clerk is sent to all creditors, the trustee, the debtor and the debtor's attorney advising them of the upcoming 341 Meeting of Creditors. The 341 Meeting of Creditors is held approximately 40 to 50 days after the case is filed. At that meeting, the client will appear before a Chapter 7 trustee to be examined under oath. The trustee will ask yes/no questions, very simple questions, based on the information contained in the petition and schedules. Provided the debtor answers those questions truthfully and honestly, there should be no problem with the case.

The next part of the case is a waiting period. After the 341 Meeting of Creditors, but before the case is discharged, there is approximately a 60-day waiting period. This waiting period allows creditors to object to the debt and file what's known as an Adversarial Complaint. An Adversarial Complaint is a separate lawsuit inside the Bankruptcy Court whereby one creditor is looking to hold either a portion or all of the debt non-dischargeable. In the overwhelming majority of Chapter 7 bankruptcy cases, there is no Adversarial Complaint filed. What happens is once the sixty days runs and there's no adversary, the deadline to object has passed, the clerk of the United States Bankruptcy Court will trigger the issuance of a discharge.

A discharge is a one-page document that basically states that the case has gone through to conclusion, none of the creditors whose debts were discharged in the bankruptcy can seek to collect on those debts, and the debtor is given a fresh start. Some debts are not eliminated in a bankruptcy. Consult with an experienced bankruptcy attorney to learn your rights and obligations under the United States Bankruptcy Code.

What happens to my credit report after filing for Chapter 7 bankruptcy?


A lot of people are under the impression that once they file for bankruptcy, all the negative items that are listed on the credit report will magically disappear, and the credit report will be perfectly clean. Unfortunately, credit reports are not going to be perfectly clean after the filing of a bankruptcy.

The best thing to do is start your bankruptcy case by pulling all three credit bureaus. This can be done at www.annualcreditreport.com. Each year, a person, for free, can pull their credit reports. At my office, I go ahead and pay for Equifax on behalf of my client because I want to be sure that everybody my client owes, or that I can find out my client owes, is on the petition. Many people are surprised when they realize that a lot of the debts that they have did not show up on their credit report. Remember that a credit report is just one source of information regarding debt. Many debts are not going to be reported to a credit bureau, and thus, the client must provide names, addresses, and approximate dollar amounts for those debts.

After the bankruptcy case is filed, creditors will get a notice from the clerk of the Bankruptcy Court advising that a case has been filed. Many of those creditors will update the credit bureau with information that that debt is included in the bankruptcy. However, you cannot rely on the creditor to report accurately to the credit bureau, and you cannot rely on the credit bureau to take the information reported to it and place it properly.

What I recommend to all my clients is, approximately one to two months after the bankruptcy case has gone through to discharge, that they pull a recent credit report. By pulling a recent credit report, they will be able to see what has been updated as being included in the bankruptcy and what is still showing as due and owing. If something is showing as due and owing, they need to take action to help rebuild their credit quickly. They can start an online dispute with Equifax, Trans Union, or Experian indicating that a particular debt which is still showing as due and owing was listed on your bankruptcy petition. They want to include a copy of their discharge when they are making their dispute. If you are someone who wants to pull your credit report on a more regular basis, you can subscribe to a service, or every four months you can pull one of the three major bureaus for free.

Clients are very disappointed to understand that the credit report does not become clean after filing a bankruptcy. If somebody owes a debt to a credit card company and they file a Chapter 7 bankruptcy, then the credit report, at best, will show that the account was included in a bankruptcy; at worst, the credit report will show that the account is still due and owing, and at that time, I recommend a dispute be made online.

If you are looking to get credit after your bankruptcy, you want to make sure that you start with a smart credit opportunity. Don't jump at the first opportunity that is sent to you because you will receive letters in the mail that are not good deals. Lenders know that you can't file bankruptcy under Chapter 7 for another eight years and they are hoping that you want credit so bad that you are willing to pay an annual fee, high interest rates, and all kinds of other fees. I recommend you consult with your bankruptcy attorney who can give you advice on how to get a secured card. A secured card is where you put money in an account and you have charging privileges up to that amount.

Please keep in mind that bankruptcy under Chapter 7 is something that can be done once every eight years. You want to make sure that you don't ever have to file again, so be very careful about obtaining credit after filing.

Should I file for Chapter 7 bankruptcy?


When someone makes the initial phone call and starts to tell me about the fact that they are interested in filing bankruptcy, I will usually have a brief conversation and then invite them in for a face-to-face consultation. There's only so much information that I can obtain over the telephone and only so much advice that I should give over the telephone without knowing more about the case.

When someone actually comes into the office, they're going to spend about fifteen minutes filling out a bankruptcy questionnaire. Once they have filled out the questionnaire, we will meet face-to-face; we will go over the questionnaire and talk about the particular details of the case. Some people have property that can't be protected in a bankruptcy. Other people have no property but they have debt that cannot be eliminated in a bankruptcy. Other people have very little property and a lot of unsecured debt and Chapter 7 bankruptcy makes perfect sense. For those people, I'm going to recommend a fresh start. For other people, they need to do a Chapter 13 where they repay all or a portion of their debt over time.

Every once in a while, I have someone in front of me at a consultation who really needs to file for bankruptcy and they will ask me do you think I should file? Now, as a bankruptcy attorney in the business of helping people, you would think that my initial reaction would be of course, everybody would need to file. In reality, I like to advise my clients that if you feel that you can bail yourself out of debt within a six to nine month period without causing extreme hardship on you or your family, that maybe you should consider not filing and pay off your debt. If, on the other hand, after a six to nine month effort to pay down your debt, you would cause an extreme hardship on you and your family, and you wouldn't be able to actually pay the debt down, then Chapter 7 is what you really need.

If credit cards have got you down, then it's very hard to get out from under the credit because of the high interest and late fees. Some forms of credit have a very low percentage; mortgages, auto loans, these types of items have relatively low interest historically and a person can often get on top of a mortgage or an auto payment if they can budget or come into additional money. If on the other hand, they are struggling with $50,000-$75,000 worth of credit card debt and they are being sued by one or two of their credit card issuers, then Chapter 7 is going to be the best bet.

The decision to file for bankruptcy is a personal one. As a bankruptcy professional, I can only give the advice that I see on a case-by-case basis. After practicing bankruptcy for over twenty-one years, I can honestly tell you that bankruptcy has provided tremendous relief for the majority of my clients. I have never had a client who, under a Chapter 7 bankruptcy to eliminate credit card debt, says to me I wish I didn't file. In fact, most of my clients state that they wish that they would have filed sooner, they struggled for too many years, they liquidated their 401(k), and they liquidated other property that they didn't have to liquidate, and they should have just filed for bankruptcy sooner.

If you are someone who is struggling financially and you don't have the ability to pay off the debt within six to nine months, then I would strongly consider meeting with a bankruptcy attorney to learn your rights and your obligations under the United States Bankruptcy Code. A good attorney is going to advise you properly as to whether it's a good idea to file or whether it's a good idea not to file.

What is the best way to get out of debt?


The answer to that question really depends upon what type of debt you have. If you are someone who is struggling with unsecured debt such as medical bills, credit card bills, personal loans, utility bills and debts for some type of service, then a Chapter 7 fresh start bankruptcy is going to be your best bet. Chapter 7 is available for individuals or couples provided they don't have significant equity in their property. Now, they can still file if they have equity in their property, but they are not going to be able to keep that property free and clear while getting a fresh start. Some people are willing to give up an interest in property known as a nonexempt interest to a trustee in exchange for a fresh start. Most of my clients keep all of their property and they are able to get a fresh start despite the fact that they might own a home or despite the fact that they might own a vehicle, because there's very little equity in those items.

If you are someone who is trying to save a home from foreclosure and repay mortgage arrearages over time, then Chapter 13 is going to be your best option. Chapter 13 allows you to repay the portion that you fell behind on over a period of three to five years, while being allowed to make your current monthly payment to your mortgage company on time once again. What often happens is someone will fall behind on his or her mortgage and the mortgage company will not accept anything except the full amount to get current. Under Chapter 13 bankruptcy law, the homeowner or the debtor in this case, has the ability to dictate how the mortgage company is going to get paid over the next three to five years. The mortgage arrearage portion has to be paid within sixty months. You cannot extend it beyond that. In addition, the mortgage company will have to accept the regular mortgage payment while the repayment plan is in progress. Therefore, it is depending upon whether you are trying to save a home in foreclosure, whether you're trying to save a vehicle that you have fallen behind on, or whether you are just trying to eliminate a bunch of miscellaneous unsecured debt that is going to dictate which Chapter of the Bankruptcy Code you file under.

Now, no matter which Chapter of the Bankruptcy Code you file under, you are going to have to provide detailed information to your attorney regarding your income, your assets, your expenses and all the information concerning your financial affairs. Be prepared to provide three years' worth of tax information, submit to credit counseling, and provide two months' worth of paycheck stubs. Once you meet with your attorney and advise what you are trying to accomplish, your attorney will let you know whether it's possible under Chapter 7 or whether you really need to file a Chapter 13. Each case is different and each case needs to be analyzed with a fresh set of eyes. If you are someone who has non-dischargeable debt such as recent tax debt, child support, student loans, parking tickets, then Chapter 7 is going to be a mistake for you, because none of that debt is going to be affected. Therefore, depending on who you owe, how much you owe, and what you have in terms of assets and liabilities, what you have in terms of income per month, that will dictate whether you are a candidate for a fresh start under Chapter 7 or whether it's best to reorganize under Chapter 13 bankruptcy law.

Your attorney, if he or she is experienced, will be able to handle either one of those Chapters with ease. Make sure you contact a bankruptcy attorney in your area, find out your rights, and find out if that attorney is the best qualified to help you get out of debt.

What about my credit after bankruptcy?


I am amazed by how many clients are concerned about their credit score and their credit report before they have even gotten out of debt. The very first thing that you need to do before you consider what your credit situation is going to be, going forward, is to eliminate your debt and get a fresh start. From that point, you can start thinking about how to rebuild credit, how to build up your score, what type of lender you should go to, what type of credit should you apply for to get your score up. People believe, for some reason, that their credit score is the ‘be all end all’. The truth is, you might have a great credit score, but you might be struggling with $50,000 or $75,000 worth of unsecured credit card debt. I would rather exchange the good score and eliminate the debt.

I have seen over my twenty-one years of practice how quickly clients obtain credit after a bankruptcy filing. This is true whether the person is filing a Chapter 7 fresh start or reorganizing under Chapter 13. Lenders, mortgages, auto lenders, other types of financing companies can pull from the public record a listing of people who have filed for bankruptcy. If you filed for Chapter 7 bankruptcy, these lenders understand that you cannot file again for eight years under Chapter 7. What these lenders hope is that you apply for the credit, you obtain the credit, you not only pay their annual fee and their high interest, but they are hoping you get back into the same problems that caused you to file bankruptcy in the first place. They want to make money off of you. They want you to be a client for their benefit, not for yours. So if you are someone who is concerned about whether you're going to get an offer for credit after bankruptcy, ease your fears because there's going to be plenty of offers that come from bankruptcy, after bankruptcy.

One of the things I see more than ever is auto lenders who are contacting clients before they have even gone to their bankruptcy court date offering an opportunity for them to obtain auto financing. For some clients, this offer is a great opportunity to get out of the auto debt that they have, and get into something more affordable. However, clients need to be careful. If you take auto financing immediately after a bankruptcy case is filed, you are typically going to pay a much higher interest rate than if you can wait six months or a year or even two years after a bankruptcy filing to obtain a new car. The same is true with mortgage lenders. You really have to wait two years after the case is filed to obtain a decent mortgage. Try and go on a cash basis during this interim period. Try to save some money for a down payment. Try to make sure that you don't incur any negative credit between the date you file for bankruptcy and the date you're going to apply for credit.

There is more to credit applications and financing than just whether you filed for bankruptcy or not. Do you have income? Do you have steady employment? Do you have good credit, or has there been no negative credit after your bankruptcy case was filed? In other words, can you show a lender that you have rectified your situation, you are on the right track, you have the ability to make your payments, and you have a significant down payment to make on a particular item? These are the factors that you need to consider, and you need to be concerned about going forward. Don't worry about what your actual credit score is going to be after the bankruptcy filing. You must get out of debt first under bankruptcy before you can even be concerned about credit after bankruptcy. Put one foot in front of the other. Follow the advice of your attorney. Follow the steps that are required and you will get credit after bankruptcy provided you do the right thing after filing. For more information about credit after bankruptcy, contact an experienced bankruptcy attorney in your local area to learn your rights.

Who should be my bankruptcy attorney?


You should seek out a bankruptcy attorney who has experience in the field. What I recommend is that you do research on the internet to find out what a particular attorney is offering in terms of information on his or her site. You can learn a lot about an attorney just by doing some basic research. If you look at their website, you will be able to see by the information that they have on their site whether or not they are really involved in that area of practice or whether bankruptcy is just a tangential area of practice for them. You should be able to see all kinds of information regarding Chapter 7, Chapter 13, frequently asked questions, perhaps some videos and maybe even some testimonials as well as links to other helpful sites.

Once you have determined that you like what you see on the website, then I recommend that you go and visit two or three bankruptcy attorneys in your area. Once you meet with the attorney, you will be able to ask a series of yes/no questions. You'll be able to gauge whether you feel comfortable with his or her presentation, whether you feel comfortable with the office staff, and basically, whether that office is set up to handle complex or simple bankruptcy cases. If the attorney is late, if the attorney is short with you, if the attorney can't answer your questions without stepping out of the room and doing research, then you know you have found the wrong law firm.

My office has over twenty-one years of experience handling bankruptcy cases, both Chapter 7 and Chapter 13 variety. I am a former member of the National Association of Consumer Bankruptcy Attorneys (NACBA) as well as the American Bankruptcy Institute (ABI). I have written thousands of articles on the topic of bankruptcy and I have presented to different groups over the years approximately six to ten times per year. I have over 1000 videos on the Internet concerning bankruptcy.

Since bankruptcy is something that you only want to file once, you want to make sure that you get it right the first time. The right attorney will be able to put you into the right Chapter. The right attorney will be able to protect your nonexempt or exempt assets or advise you on how to protect your assets including nonexempt assets. For example, if you are someone who has significant assets, then you don't want to file a Chapter 7 because you are going to lose those assets to the trustee. If, on the other hand, you are trying to save a home that's in foreclosure subject to a fast approaching sale day, then you want to file a Chapter 13 to protect the home and not a 7.

A lot of information can be found on the internet. However, you want to get it right from the attorney's mouth as to what Chapter is best and why. If you are someone who does not have a lot of income or if you certainly don't have a surplus of income per month, then Chapter 13 is not going to be a good idea. Chapter 13 is a reorganization plan whereby you pay all or a portion of your debt over the next three to five years. There are law firms out there that will put you in a Chapter 13 because that's how the law firm makes more money. Instead of giving you the fresh start that you need, some law firms put you into a reorganization plan which is just strapping you each month where you can't even survive yet the law firm benefits because they can charge a higher fee. This is why I suggest that you go to at least two or three bankruptcy attorneys in your local area to get a second opinion on whether or not the first recommendation of the attorney is the right recommendation or not. In some cases, you can possibly file a 7 or 13 and it's a close call.

In most cases however, it's a clear call as to whether or not a Chapter 7 fresh start or a Chapter 13 Bill reorganization is your best option under the Bankruptcy Code. In either Chapter, you're going to have to gather personal financial information about yourself and provide that to your attorney. Most attorneys are going to have a bankruptcy intake questionnaire, which you can fill out in advance and have it prepared for your attorney. The advice that your attorney gives is going to be based upon your assets, your liabilities, your income, and your expenses. The more accurate the information available to the attorney, the better the advice coming from that attorney.

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