Gary L. Shilts, Attorney at Law in Aurora, Montgomery, Kane and Kendall Counties
Illinois Bankruptcy: Chapter 7 and 13
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About Gary
Illinois Bankruptcy Attorney

Gary Shilts is an experienced bankruptcy attorney, providing services for clients in Kane and Kendall Counties in Illinois. Gary offers a free one hour consultation to discuss whether bankruptcy is the right option for you. Call today to schedule a consultation - 630-859-8522.

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Bankruptcy Services
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Conveniently located in the Boulder Hill subdivision in Montgomery, IL. Just minutes from Aurora. Proudly serving clients in Kendall county and Kane county from our Boulder Hill offices. Call to schedule your free bankruptcy consultation 630-859-8522.

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Frequently asked Bankruptcy Questions

What is this about?
I am going to attempt to talk about bankruptcy as it applies to working people in Northern Illinois. I am a lawyer but only licensed to practice in Illinois and, therefore, the information on these pages is only useful to people who actually live in Illinois, and, perhaps, marginally useful at that.

I will first say that what I write is not necessarily the truth or the way bankruptcy law should be practiced. It is only my understanding (including prejudices and misconceptions) of that truth and the way I happen practice it. Also note, bankruptcy law, like all other areas of the law, is highly fact based and subject to change at the whim of a judge, the legislature or the caprice of a local trustee. All of these whims are subject to the influence of alcohol, the drug of choice for most practitioners of the law.

In my case, it should be remembered, I went to college in the 60s so an occasional flashback is a real possibility. (I feel quite safe in revealing this as the statute of limitations has run on all of my crimes that I remember.) However, no warranty of accuracy, truth or logic is implied nor should be inferred. (See Who am I? at the end of this diatribe.)

Again, I must say, if you make any grand financial decisions based on the musings here, you deserve whatever evil may befall you. I will not be responsible for such foolishness.

This is first draft of a continuing work on Bankruptcy for ordinary folks. I will be amending and updating it frequently. While it deals with a serious topic, I have inserted some amusing anecdotes and observations not to offend but to enlighten.

Of course, in general this is an advertising website. The hope is that, having read this you will then assume I know everything there is to know about the subject and be willing to pay me whatever I ask to represent you in that endeavor.

I must again state that this is not intended as a detailed legal treaties on this area of the law. I only want to describe the Bankruptcy process in a way that most people could understand. Certainly, anyone confronted by the specter of Bankruptcy should seek legal counsel. These matters are highly fact dependant. If your aunt Flo did a Bankruptcy and such and such happened to her, that does not mean the same thing will happen in your case. Aunt Flos situation was different.

Bankruptcy - Frequently asked questions
How much does Bankruptcy cost?

For a Chapter 7, I usually tell people the basic fee I charge is $1,500 plus the filing fee of $335 and a Chapter 13 charge is $4,000 and a $310 filing fee. The fact is, in very simple cases I have charged a lot less than that, as low as $450 plus costs and for complex cases I have charged a lot more. Some people advertise their lowest possible price. I dont like to do that because it starts to feel like a bait and switch tactic. I would rather start with the higher price and then explain that the price will actually be lower. I know some who advertise at an extremely low price will either only do the simplest Bankruptcies or will dramatically increase fees on any but the simplest.

The nice thing about Bankruptcy practice is that if I have all the facts, that is, if the client tells me the truth when he first comes in, I have a very good idea of what is going to happen, how much work I will have to do and therefore, how much I should charge. Bankruptcy is the kind of practice where people usually tell the truth when they first come in. This is unlike my other main area of practice, divorce. In divorce, few people even know what the truth is and, if they did know the truth, they sure arent going to tell it to me on their first visit. The difference is that divorce is 5% law and 95% emotion. Bankruptcy is just the opposite. Its only about the money.

In a Chapter 7 case, all the fees and costs have to be paid before the case is filed. The reason is simple. Once you file, any unsecured creditor to whom you owe money cant collect it from you. That includes your Bankruptcy lawyer. We want the money up front.

The fee, whatever it is, will be fully disclosed before any contract is signed and will cover almost everything in your Bankruptcy. This is not like a divorce where every telephone call costs $150. Most questions will be answered by my secretary. Only the most unusual of situations will require additional fees. Generally, if the client has told the truth during the initial interview, I can anticipate possible problems and we will have already discussed possible solutions and costs. The most common (but still rare) situations requiring additional fees are things called Adversary Complaints. This is generally where a creditor believes there has been some sort of fraud and they want their money back. Like, if you took out a $10,000 cash advance a week before filing the Bankruptcy and didnt mention it to me. Visa will notice and complain. Even these, however, are often settled quickly without an additional fee. (Yes you have to pay the money back!)

Chapter 13 fees are usually $4,000 plus filing fees of $274. Part of this fee is usually paid on filing and the balance is paid in the Plan (See Chapter 13 below.) The fee for the Chapter 13 is for all of the work during the entire 3 to 5 years of the Plan. (I would posit here an ethical question. For $4,000, I promise to be your lawyer for 5 years. .

In both a Chapter 7 and 13 there are other small costs. Everyone has to get a Certificate of Credit Counseling. This usually costs about $50 for an individual and $80 for a married couple. To get a discharge, everyone must also get a Certificate of Debtor Education at the same additional cost. These are the only other fee associated with filing a Bankruptcy. There is a fee for getting a credit report. The way I do it is that I pay for this, not you. Not everyone does it that way and it is perfectly legitimate to ask the client to pay this fee. The main reason I pay for it is because it is not legally required. I do it mainly for my own purposes. The credit report helps me in making the due diligence inquiry (see Keeping your lawyer out of jail) into the truthfulness of the Petition and it creates a handy list of creditors to start the process.

What is the difference between a Chapter 7 and a Chapter 13 Bankruptcy?


A Chapter 7 Bankruptcy is a regular Bankruptcy. Its what people usually think of when they think of Bankruptcy. The general idea is to keep as much property as possible and avoid as much debt as possible. At the conclusion of the Bankruptcy process the person is given a Discharge of his debts. (See What is a Discharge below.)

A Chapter 13 Bankruptcy is where the client pays a specific amount each month to the Bankruptcy Trustee who uses the money to pay some or all of the creditors. This money is paid pursuant to a Plan, approved by the court and unsecured creditors, ie those with no security like a house, car or specific property, can be paid as little as 10% of the amount due. The amount he is to pay must be all disposable income. After the completion of the Plan, the filer is given a Discharge. (See What is a Discharge? Below) Usually a Chapter 13 has a specialized purpose. Chapter 13 is usually done because either a Chapter 7 wont accomplish what the client wants or a client cannot for various reasons file a Chapter 7.

The most common reason to file a Chapter 13 is to catch up on delinquent house payments. One can take as long as 5 years to catch up on delinquent house payments. Another reason is that the client may make too much money or has too much property. (see Do I make too much money to file? And, Do I have too much property? ) The final typical reason is that one cannot file a Chapter 7 Bankruptcy because the client has filed a Chapter 7 Bankruptcy within the last eight years.

There are three major advantages to filing a Chapter 13, the super discharge, the ability to reduce secured debts on personal property to the value of the property and the co-debtor stay. There is a minor reason, the satisfaction of paying your creditors which I will get to later.

The super-discharge means that certain debts, especially those based on some types of financial fraud, that are not discharged in a Chapter 7 are discharged in a Chapter 13.

In a Chapter 13 if one owes, for example, $15,000 on a car worth $3,000, it is possible to pay only $3,000 (plus a reasonable rate of interest) to the car creditor and pay the balance of the loan ($12,000) as an unsecured claim paying as little as 10% of the total amount. This only applies to personal property not to real estate.

The co-debtor stay means that if you have a cosigner on a loan and you file a Chapter 13 agreeing to pay the entire loan, the loan company cannot bother the co-signer as long as the Chapter 13 payments are made.

In some cases, these are extremely important reasons for filing a Chapter 13 rather than a Chapter 7.

The satisfaction one gets from paying ones creditors is a very real thing. Unfortunately, there isnt much of a reward for doing it. This is why I consider it a minor reason. First of all, creditors treat Chapter 7 and Chapter 13 filers the same way. Having paid your debts in a chapter 13 does not get you ahead with a credit score. It just means you spent a lot of money and really dont get anything for it except the satisfaction of having paid some or all of your creditors. This is very unfortunate as the intention of the 1979 Bankruptcy Code revision was to make Chapter 13 more attractive and more available to consumers. The way it has been applied in practice, however, is that very few Chapter 13 Plans succeed. Generally, a Chapter 7 filer can, three years after a Bankruptcy have good credit availability and money in the bank while a Chapter 13 filer will just be getting out of his Plan having spent every available cent paying his creditors.

I dont mean to get too philosophical in this. (Hey, its my story and you dont have to read it if you dont want to), If creditors and the legislature wanted Chapter 13 to work better and for more people to use it they should make a few changes. First, the idea that the Plan must provide for payment of all disposable income is silly. It dooms most Plans to failure. It does not allow for emergency funds, sick days or a leak in the hot water heater. Anyone who has seriously tried to make a budget knows that some surplus funds or wiggle room in the budget is essential. Creditors are quick to object to inflated miscellaneous expenses and protest that filers are not paying all disposable income into their plans. It is natural for creditors to do this. Their mind set it to get as much as possible for their clients. The super discharge primarily benefits people who have committed certain types of fraud. Thats a small group. If they wanted to make it more attractive, they should add student loans and criminal fines to the super-dischargeable list. (See Student loans)

What is a Discharge?
A Discharge is the main reason most people file a Bankruptcy in the first place. It is a federal court order that basically says your creditor cannot collect the debt from you any longer. It is crucial to remember that the Discharge only affects the cash amount of the debt. It does not, by itself, destroy a lien that may be attached to the debt. For example, if you own a house worth $200,000 with a $250,000 mortgage, the discharge says the bank cannot collect the money from you. However, it does not destroy the mortgage lien! In other words, while the bank cannot sue you for the cash, they can foreclose and take your house. If you want to keep the house, keep making the payment.

This is a very brief of synopsis of the concept of a Bankruptcy Discharge. Several very learned dissertations and appellate court decisions have analyzed this issue.

Do I make too much money to file?
The financial guidelines or means test for filing a Chapter 7 Bankruptcy change every month. They are based on median incomes and expenses for families of various sizes in the various states and counties. Right now (6-09) the median income ranges from about $47,000 for a single person to $85,000 for a family of four. This is misleading, however. One can deduct certain things from your gross income. Auto ownership expenses, income taxes, higher than average house payments are some of the more common things one can deduct. There are a lot of nooks and crannies in the means test. Ive had clients with incomes over $100,000 per year that passed the means test.

The means test is so complicated that the only way to really figure out if one qualifies for a Chapter 7 is to have a computer program that will compute it for you. An easier way is to talk some Bankruptcy lawyer into a free consultation where he can run the means test for you. Hell be happy to do it for you. At least I will but, I am a nice guy (and looking for business.)

If you flunk the means test - not to worry. First of all, consider yourself lucky that you are making too much money. Thats pretty cool all by itself! Second, it just means you have to do a Chapter 13. That may be a pain but a Chapter 13 will still help you reorganize and keep the wolf from the door.

Even if you pass the means test, you are still not out of the woods. The second test inquires whether you could pay some of your creditors considering the totality of the circumstances. The gets very complicated and the case law on it is still evolving. Obviously, creditors push the means test and the totality of circumstances test to the hilt.

Again, the worst thing that can happen is the court makes you file a Chapter 13. If the worst thing anyone can say about you is that you make too much money, youre a lucky person!

Do I have too much property What can I keep?
Exemptions are property you get to keep when you file a Bankruptcy. Exemptions are determined by a combination of state and federal law. In Illinois (and if you dont live in Illinois you shouldnt even be reading this) the state exemptions are pretty generous. A single person is entitled to keep $15,000 equity in a home they live in, $2,400 in an automobile and $4,000 worth of any other stuff they have. For married couples those figures are doubled. Some things, like pensions, 401(k)s, and workers compensation claims are totally exempt. There are a lot of miscellaneous exemptions.

Be careful!! Dont go transferring the vacation home to your daughter or the 57 Impala to your son. Bad, bad idea! Any moves like that will look suspicious and be carefully scrutinized. It will, believe me, cause far more problems that it will solve,

I'm upside-down on my house what should I do?
First of all, consider that it really doesnt matter what your house is worth until you want to sell it. If you dont want to sell it right now, who cares what it is worth? Its your home. The questions really are, do you like it and can you afford it? If you like it and can afford it, just keep paying the mortgage and enjoying your home.

The truth is now as it has always been. Real estate will in the long run go up in value. It is the only thing they are not making more of. If you plan to sell the house in 20 years, just mow the grass and stop worrying. In 20 years the house will be worth a lot more than it is now. Thats when it will matter.

There was a dramatic run up in housing prices in the last 10 years. There was a real estate bubble. More houses, especially expensive houses were built that there are people that could afford them. Generous (actually read stupid) mortgage terms were made available and everyone wanted to have a 3500 square foot McMansion. In suburban Chicago, mega houses were sprouting like mushrooms. I often wondered how many people there were in the country that could afford $4,000 per month houses payments. Practically nothing was being built in the $100,000 to $150,000 range that most people with decent jobs could afford. We found out. When people started discovering they couldnt refinance their mortgage deficiencies any longer, the bubble burst. Now one can buy a $700,000 house for $400,000, a $400,000 house for $250,000 and the $150,000 house is still worth about $150,000. The big losses have been on the upper end. The only good news is that its a great time to buy.

If you must sell the house now, you may have a problem. It may be best to walk away from it. Before doing that, however, read How does Home Foreclosure Work In Illinois? below.

How does Home Foreclosure Work In Illinois?
To people confronted with foreclosure, the future looks bleak and hopeless. Therefore, I would like to briefly describe the foreclosure process so that the reader might better understand what the monster really looks like. This is not a detailed legal treaties but a broad overview. People looking for specific answers to specific questions should consult a lawyer.

Plan A is to always pay your mortgage on time. For some very good reasons, many people fall behind on the mortgage payments. But, remember this, no body cares what the reason is. The banks want and are entitled to the payment. The Judges, no matter how sympathetic they might be, must enforce the law and the contract. Thats their job. Therefore, if you start to fall behind on the house payments, Plan A is to catch up any way you can. Borrow the money from a relative, sell the motorcycle, take a part time job and put every other able bodied human being in the house to work. If there is anyone in the house over 18 who is not either working or going to school, kick them out. Its time to get rid of the dead weight.

Generally speaking, a mortgage company will begin the foreclosure lawsuit when you are three months late. When the case is filed, two important things will happen. First, the earliest the mortgage company can take title to the home (and kick you out) is seven months from the date the case is filed. Second, to catch up on the payments, you must pay not only the overdue payments but also the mortgage companys attorneys fees and costs usually about $3,500. (Not fair? Remember, nobody cares.)

When you get the foreclosure papers, dont just move out. Remember, you still have seven months. Thats time to plot, plan, strategize, catch up on the payments or whatever. Also, dont sell your house to someone for $100. Remember, you still have seven months. What is seven months rent worth? Do the math.

You still have several options which include catching up on the payments, refinancing the house, selling the house, Chapter 13 Bankruptcy and, of course, Plan C, the do nothing option. Lets take the options one by one.

At any time within those seven months you can reinstate the loan by paying the mortgage company all of the back payments, late fees and their attorneys fees and costs. Maybe its time to swallow your pride and call grandma. Maybe its time to actually sell the motorcycle. (Its OK to buy a few lottery tickets. However, stay away from the casinos. You have enough problems.)

If making the mortgage payment on time was hard, catching up three of them and the extra $3,500 may be impossible. Therefore, you might have to go to the other options. Perhaps refinancing is possible. However, with housing prices falling and most people having their home mortgaged to the rafters already, refinancing may be impossible. Even if you can refinance the property, you will be paying an even higher interest rate and an even higher loan to catch up those back payments.

If refinancing wont work, consider selling the house. If you have enough equity, selling the house could keep you away from a Bankruptcy and foreclosure. However, remember those seven months. If you are going to net $500 out of the sale and you still have six months to stay there, do the math.

If you just need more time to catch up, Chapter 13 may be the answer. Chapter 13 is a form of Bankruptcy that many people use to save their houses. Basically, this type of Chapter 13 creates a Plan where you make the regular house payment plus enough to catch up the past due payments. Other debts can be included also. There are numerous intricacies and catches to Chapter 13s but the general idea in a house saving Chapter 13 is simply to make the house payment each month plus enough to catch up on the overdue payments. Chapter 13 Plans can last as long as five years. Sometimes a Chapter 13 works well. Sometimes it gives people a breather until they can make a better plan. Sometimes it fails. People in this situation should carefully review this option as soon as they see the problem coming.

Finally Plan C. Doing nothing is always an option. Remember those seven months? Those months can be an extremely productive time in your life. And I dont mean just a time to discuss with your spouse which of you is more at fault for the mess. Remember, we cant change the past but we can do a lot to alter the future.

If the house is lost, theres no equity to sell or borrow against and a Chapter 13 would be futile, stay in the house for those seven months and save your money. If you move you will just have to pay rent somewhere else. Do the math. For various reasons first mortgage companies rarely come after people for a deficiency after a foreclosure sale. In other words, you usually wont owe the bank any money when the foreclosure is over. (Thats not true for second mortgage companies, however.) Also remember, real estate taxes are just a lien on the house. They are not like income taxes which you personally owe. They are more like taxes the house owes. In Plan C, dont pay them.

For Plan C to work, you must actually save your money. Figure out what rent is going to be when you do move out. Put at least that much away each month. Worried about your credit rating when you go look for an apartment? With $7,000 in your pocket, youll find an apartment, trust me. Money always talks. Plan C allows you to live to fight another day. It allows you to regroup and think about the lessons youve learned. Its not a failure as much as it is experience and education. We all pay dearly for our education, dont we?

Again I must say that this was not intended as a detailed legal treaties on this area of the law. I only wanted to describe the foreclosure process in a way that most people could understand. Certainly, anyone confronted by the specter of foreclosure should seek legal counsel. If you are a resident of northern Illinois and would like to discuss this matter further, please feel free to call:

Do I have to tell them about ALL of my property?
Yes! Bankruptcy is not like other things in life. There are no little white lies, just big criminal perjuries! If you get divorced and dont tell the ex about the ten dollar bill you have in your shoe, you may consider that to be good sport. In Bankruptcy, its considered a federal crime. The questions contained in the Bankruptcy petition are complicated but the thrust of it is that they want to know about everything you have and even everything that you have transferred to others in the recent past. (Like if you sold your gold bars to your brother last year for $10, they want to know about it.) Trying to evade these questions with some artifice or clever answer will only get you and your lawyer in trouble (see Keeping your lawyer out of jail). Dont do it. Just answer the questions fully. If in doubt give too much information, not too little.

Practicing Bankruptcy law is like playing stud poker with all the cards face up. Everybody knows what everyone else has and what they can do about it. If there are any secrets, someone has probably committed perjury. Bad idea! Even though everyone can see what everyone else has and can do, we still try to bluff. Thats just the way we are. For example, lets say you recently purchased a big screen TV with your secured store credit card for $4,000. It seemed like a real good idea two years ago when you were getting 12 yours a week overtime but now the payments, along with the other credit cards (and the kids whining for food every day) have become impossible. Feeding the kids will require filing for Bankruptcy. Filing for Bankruptcy means you might loose the big screen TV. Tough choice and, of course, you make the logical decision. However, the wife convinces you the kids must be fed. After we file for Bankruptcy, you still owe $3,950 on the TV. (Its only been 2 years.) Your choices are, reaffirm the debt and keep paying it, give the TV back to the store or make a cash offer to buy the TV for its actual cash value. We offer the store $300 for the TV telling them we really dont want it that bad, its a pain to operate and too big for the living room. Everybody involved in this knows a few things. The store knows, for example, that you love the TV and it works fine. They also know you like the fact that its too big for the living room because it impresses your friends. They say no to the $300 and say they want $2,500. However, you know a few things too. You know they really dont want the used TV back. They cant resell it as new and they dont want to pay to have someone come out to pick it up. So, after much gnashing of teeth we settle on $1,500. Everyone is a bit unhappy, the sign of a good negotiation.

On the other hand, be realistic about the value of your property. The values they are looking for are the values the property could be sold for now. The value of your house, for example is the amount it could reasonably be sold for less normal costs of sale. You might have paid $2,000 for your living room couch (probably putting it on the Visa) but, since it came out of the showroom, the cat has thrown up a hair ball or two on it and you would be lucky to get $100 for it at a well advertised garage sale. I generally find that there is plenty of room in the $4,000 miscellaneous exemption for most peoples personal property.

Keeping your lawyer out of Jail.
The relationship between a lawyer and client is a tiny bit different in Bankruptcy than in other cases. When a lawyer files a Bankruptcy, he has to certify to the court that, on reasonable and diligent inquiry, he believes the statements contained in the petitions are true. That is a little different than in most cases. Of course, in no type of case can a lawyer help a client lie to the court. That would be abetting perjury. A lawyer cannot allow a client to say something the lawyer knows to be false. However, in most legal cases, a lawyer has no obligation to make any sort of inquiry as to whether what the client says is true or not. The lawyer can simply take the clients word for it .

If your lawyer finds out you are lying about a fact before you file a Bankruptcy, he does not have to rat you out. He can simply tell you he cant file the case. If he finds out after the case is filed that something is not true, he is in a more difficult position. He has the duty to inform the court about the mistake and provide full disclosure.

Dont get your lawyer in trouble. Remember, its always good to keep your lawyer out of jail. He will be a lot more useful to you on the street. If there is an uncomfortable fact in the Bankruptcy, its best to deal with it up front. Usually there is a simple way to deal with it. Sometimes just waiting a prescribed amount of time to file will solve the problem. Sometimes filing a different Chapter of the Bankruptcy code will solve the problem. If you have an asset that you dont think was asked about, you probably didnt understand one of the questions. Just spit it out. Better now that later. Its just like your mother told you. Always tell the truth and you wont get in trouble.

Student loans?
Sorry, generally speaking student loans are not dischargeable. There are exceptions but not many. Why, in the name of all that is righteous, are student loans not dischargeable? Someone may put a big screen TV on the Visa or borrow money to get a college education. The TV loan is dischargeable. The student loan isnt. Which debt has improved his life, the country or the economy more?

Why are these debts treated like criminal fines and penalties? Its easier to discharge taxes (see Taxes) than student loans. Well, of course, I have a theory. The old fogies in Congress (most of whom are younger than me but they are still old fogies) are still ticked off about the Vietnam War. (I went to college during the Vietnam War. Remember, I joined the military just before that war. Timing is everything, you know.) During that war, a lot of people were justifiably ticked off that students with their draft deferments and college grants were demonstrating against the war and their cousins who were fighting and dieing in it. At that time most government money for students came in the form of grants not loans and even the loans were easily forgiven. However, students in general were considered effete intellectual snobs (quote Spiro Agnew) and ungrateful louts. Within a few years, college grants became loans and the ability to forgive those loans has become harder and harder. The reaction to the Vietnam protesters still lives with us. Unfortunately, this change came at a time when the world economy became more education dependant. The result has been that my generation (those born in the 40s and 50s) are on average better educated than our children. The education level of the average American has gone down while in the rest of the world it has gone up. This is probably not what we are looking for. But, thats just my opinion.

Taxes
Taxes in Bankruptcy are very complicated. Yes, sometimes it is possible to discharge some taxes. It is hard, for a variety to reasons to discharge Illinois state income taxes. Generally taxes must be over three years old and have been file for at least two years. Im not going to say much more about that as this is an area that gets confusing very quickly and is very fact dependant. The short answer is, pay the taxes.

Criminal Fines and Penalties
Not dischargeable, just pay them. This usually includes parking tickets but sometime you can get away with listing them. Illinois toll violations are being treated the same way (very dubious, I think but no one listens to me). However, toll violations can, right now I understand be paid off in a Chapter 13. Not paying Restitution as a part of probation in a criminal case can cause the probation to be revoked. Again, just pay it though sometimes a Chapter 13 Plan will work.

Bad Checks
There are two kinds of bad checks those written by people challenged by mathematics and those written by criminals. When you sign a check you are saying that there is on deposit sufficient funds to pay the check when presented. If you post date a check and note on the check that it is post dated, you are essentially saying there are not yet funds on deposit but are promising there will be on the post date. If your bad check is the result of bad math or other non-criminal reason, it is a simple debt and dischargeable. If you knew the check was bad and wrote it with criminal intent, you will have to pay it. This area is very fact sensitive and usually does not involve a large amount of money. Issues like this are often compromised for practical reasons.

Will Bankruptcy hurt my credit score?
Lets start with the idea that, if you are considering bankruptcy, your credit is probably already shot. As a general rule, people who need bankruptcy will usually improve their credit rating by filing.

Remember, a credit score is nothing but a computer generated opinion of what your financial status is. If you have a good score but still actually need a bankruptcy, it may be because the score is simply wrong. For example, gamblers are notorious for having good credit scores but too much credit. Gamblers often run up very high balances on their credit cards and then, from a good winning night, make a large payment. This often looks like, to the computer, they are a good risk. Actually, they just had a good night. (see gamblers)

What about those foreclosure rescue schemes I hear advertised on television?
I think Illinois Attorney General Lisa Madigan said it best. We have repeatedly found that these foreclosure rescue operations are swindling desperate homeowners out of money they cant afford to lose. Struggling homeowners need to know that free help is available. The 24 lawsuits I have filed prove foreclosure rescue operators dont help. They dont call your lender, they dont modify your loan, and they dont represent you in court if youre in foreclosure. All they do is take your money.

The best place to start getting free counseling and assistance in the downstate Illinois area is the website, makinghomeaffordable.org But, be careful! One of the scammers has been indicted for creating a web link where if you type that in you will be directed to their website.

The best place to start with legitimate credit counseling for home mortgages is http://www.nfcc.org, the National Federation of Credit Counselors. People in Kane or Kendall County, IL can and should contact Aurora Family Counseling Services at (630) 844-3327. If you have a Fannie Mae or Freddie Mac loan go www/makinghomeaffordable.gov.

What about debt rescue systems I hear about on TV ads?
The basic idea of these systems is this. They say they will contact your creditors and make repayment arrangements with them. Then you send the rescue company a certain amount of money each month to pay into the plan.

The ads can be very deceptive. There is one that says, We will tell you what the credit card companies what they dont want you to know. You have the RIGHT to pay less than you owe in full satisfaction of your debt. In a sense this is true. You do have the right to settle debts for less than a 100% payment IF THE CREDIT COMPANY AGREES. Will they agree? Sometimes yes! Sometimes no! This is like saying, every man has the right to kiss any girl he wants to! In the abstract, this is true. But, the man better have permission or hes in big trouble. Sometimes you get to kiss the girl and sometimes you cant. It all depends on the facts.

I can't say all these companies are crooked. It's just that I have never seen a legitimate one yet, (with one exception which I will get to in a moment.) Many of these companies just take the money and do nothing. Most of them will take several months worth of payments before one dime goes to the credit card companies. Ive seen too many people who tell me abut sending thousands of dollars to these guys and they still get sued. Often they dont seek legal counsel until their wages are being garnished.

These companies are successful because they can lie through their teeth and get away with it. They have nothing to lose and everything to gain. If you consult an attorney, he will not be able to tell you everything you want to hear. He cannot promise things he cannot deliver and cannot steal your money. If he does, he will lose his license. He would then have to get a job where he actually has to work for a living. Most of us have had jobs like that and dont want to go back. Im too old to go back to factory work. Unlicensed credit counselors will say anything they need to say to get your checking account number to start withdrawing those monthly payments.

It's really not all that hard to settle a credit card case for less than 100%. There are no hard and fast rules on this but, once a card has gone into collection or been turned over to a third party collector, 60 or 70 percent can look pretty good to them. However, they usually want the total amount all at once. They already have a promise of payments for 100%. Why should they trade that for a promise of payments for 60%?

In my business, if there is only one debt or one problem debt, I would usually try to settle that debt before I would file a Bankruptcy. In some cases, very small settlements can be arranged. I had one recently where a young lady had co-signed for her ex-boyfriends car. (Aint love grand?) He left her with a $15,000 debt after the car was repossessed and a new baby. She had no other debt and was making $300 per week with a child to support. All these facts were known to the creditor. They agreed to accept $1,000 for a release of her liability. This was a bit more than I would have charged her for the Bankruptcy. This was a good settlement. It saved her from a Bankruptcy and taught her a valuable lesson. (We all pay for our education, dont we?)

I promised there was one exception to this rule about most of these companies being crooked. If you live near Aurora, IL (and if you dont live near Aurora you shouldnt even be reading this) there is Aurora Family Counseling Services telephone number 630-844-3327.

They are a unique organization. Basically, they are what the name implies, that is, they provide counseling services to local families. I remember about 30 years ago they started a financial counseling division when they noticed a lot of family stress in their clients was caused by financial issues. They felt that dealing with those financial issues directly would help fulfill their mission to help families in distress. They are a non-profit but they usually get some contribution from their clients on a sliding scale income related basis. However, you can be assured that of the first $100 they take from you, a good percentage of that actually goes to the creditors. More important, they will be honest and up front with you about what they can and cant do. There are no grand promises made or magic solutions proposed. If they cant help you they will say so. Also, they provide help in budgeting and genuine financial counseling.

Sometimes their plans look like informal Chapter 13s. So much so that many times, when I counsel someone who looks like they might need a Chapter 13, I send them over to Aurora Family Counseling Services first. When it works, they avoid the cost and problems of a Chapter 13. When it doesnt, they just come back with the knowledge they have tried everything.

What is a Judgment?
A judgment is a legal determination, made by a court, that you really do owe the money. For a creditor to get a judgment against you they must first actually file suit against you and show to a judge that the money is really owed. If you do not believe you owe the money, you are entitled to a trial where the creditor must prove the money is owed.

The creditor does not have to prove beyond any reasonable doubt that you owe the money like in a criminal trial. They just have to prove that it is more likely that you owe it than that you dont. One problems is that credit companies keep pretty good records and you probably dont. The judge knows that. They will have someone there that can swear on oath that you did not make your June payment. If you dont have a cancelled check showing you did make the payment, you lose.

Creditors do make bookkeeping mistakes. Their records are not perfect. But, lets face it; their records are probably better than yours.

What happens if someone gets a Judgment against me?
A judgment is simply a judicial determination that you owe the money. What the heck? You knew that before you got the Complaint. The judgment just confirms it. However now, the creditor can do a few things about it. They can file a citation to discover assets, garnish your paycheck and/or garnish your bank account.

In a Citation to Discover Assets the court can require you to disclose to the creditor where you work, how much you make, where your bank accounts are and what other assets you may have. If you are self employed, they can order you to disclose anyone that owes you money and who your customers are. A Citation is a pretty tough sanction. You must answer the questions truthfully and completely.

With the information they have gained at the Citation, the creditor can and will garnish you paycheck, seize money from you bank account and sometimes seize other assets.

Can I go to jail for not paying a debt?
No and Yes, a typical lawyers answer. There is no debtors prison as such. However, you CAN go to jail for Contempt of Court.

Contempt of Court is where you willfully and intentionally violate an order of a court. For example, if the court believes you can and should make a certain payment on a debt, and you refuse, that is contempt.

Also, if you refuse to go to court after an Order to do so (a Rule to Show Cause) has been issued that you go, that is also contempt. The court will then issue a Body Writ. A Body Writ is just what it sounds like. Its an Order for the Sheriff to come and pick up your body and take it in front of the judge.

This is not a pleasant experience. However, its not all bad news. If you spend the night in jail waiting for an audience with the judge, you will meet some new and interesting people.

What is the difference between a wage garnishment and a wage assignment?
Both are ways creditors can get money from your paycheck before you even see it. Both look the same coming out of your check as both amounts are based on the same formula.

A wage garnishment is done after the creditor gets a judgment. A wage assignment is done because you, when you took out the loan, gave them permission to do it. (It was one of the many forms you signed and didnt read just before they gave you the check.)

You can not stop a wage garnishment except by paying the debt, talking the creditor into withdrawing the garnishment (good luck) or filing a Bankruptcy. You can stop a wage assignment by the timely filing of an affidavit of defenses.

This information applies only to Illinois. Wage garnishments are illegal in many states. But, of course, as I have said before, if you dont live in Illinois, you shouldnt even be reading this.

Generally speaking, a Bankruptcy filing stops the wage assignment or garnishment in its tracks. However, any money already withheld goes to the creditor.

What about gamblers?
Legal gambling losses are generally dischargeable, in a regular bankruptcy. If you charged the money on a credit card or even with a legal house marker, you can discharge it. If you made an illegal bet with the mob or other criminal syndicate, the debt is still dischargeable but you may not like their collection techniques. If you made a bet with your father in law, just pay it.

Gamblers can be very creative with credit. I once had a client who had a job grossing $25,000 per year and had over $50,000 in credit card debt. He had a credit rating in the 700s! How? He was good at taking cash advances to pay off current balances and then, with his occasional winning, he made large payments on the balances. The companies kept raising his card limits and he kept taking and gambling with the cash. Eventually, of course, the limits became too high and the card companies cut him off. His house of cards came tumbling down.

It seems to me that if a credit card company puts a cash machine in a gambling house, they shouldnt complain that the money is wasted on gambling. If they put an ATM in a crack house, they shouldnt be able to complain about it being used by crack addicts, would they? (Yes, they would complain and, no doubt, many Congressmen would listen.) Even a dim witted computer seeing a series of cash advance Joes Casino should be tipped off there might be a problem here.

If you have large gambling debts (and, if you cant pay them, that means they are large) you must get control of your gambling problem BEFORE you file a bankruptcy. The debts are not the problem. They are only a symptom of the problem. The problem is compulsive gambling. If you file a bankruptcy before you solve the compulsive gambling addiction, I guarantee you will be back in the same boat within a few years. The first problem is gambling not the debt!

Who am I?
Any biography on the internet should contain a glowing account of the writers accomplishments and exploits. Unfortunately, I am stuck with the fact that I have committed this blurb to telling the truth as I understand it. So, I will simply say that I am a lawyer who has been around a long time, having been licensed in this business since 1974. Being old is not, in itself, a virtue. I have met many old people who are quite foolish. It just means one has seen a lot of things, made a lot of mistakes and perhaps has learned something from them all at the expense of others, of course.

Good timing has been a key element in my success in life. I was in the air force (US) I was stationed in Germany. I was discharged from the military about the time French Indo China changed its name to Vietnam. I then spent a year as a beatnik and hitch-hiked across North Africa and central Europe before running out of money. I was forced to get a job as a waiter in a German restaurant. By this time I could speak a half way decent but curious central German dialect.

My linguistic interest did not begin with German. Like many things in my life, German was an accident. In high school I studied French and Russian. Then I studied German. Much later, at the age of 35, I figured out the only language I would make any money in besides English (which I flunked in high school) was Spanish. So, having mastered rolling rs in Russian and German, I started studying Spanish. I dont know how my Spanish is except that, having learned it all in my law office, I know I can help a woman get a divorce but would not know how to ask her to dance. (My wife, understanding woman though she is, will not let me get an Hispanic girlfriend to teach me social Spanish. I assure her it would be useful for business but, well, she doesnt understand.)

Back to the story. After running out of money in Germany and working as a waiter for a few months, the idea of going to college seemed easier than waiting tables. So, I came home and went to college. For money to get through college I worked in several factories. That really taught me what work was! I studied history and sociology and, on graduation, got a job as an insurance adjuster. (The insurance company was the only one hiring historians and, by this time, I was really out of money.) I liked insurance adjusting but soon realized there was a group of people in the world who were half as smart as I was and they all made twice as much money as I did. Every one of them was a lawyer. So, I inquired about how one becomes a lawyer. I discovered it was only three more years of college. Pretty cool! Going to college was a lot easier than waiting table and even easier than insurance adjusting! A few years later I was a lawyer.

That is why I count laziness as being my primary career motivator. Today when someone says, Gee, seven years of college, that was pretty hard! I have to tell them, No! Seven years working in a factory or waiting table, thats hard! Going to college is a snap! Ive done both. Take my word for it. As I said, good timing and laziness are two of the major factors in my success. However, the third and most important factor is simple luck. My good luck began when I was born. Of course, I could have been born to wealthy parents but, my fortune was inheriting only good looks. (Its always good luck to be born cute.) Also, I was born in 1943, a bad year to be born in much of the world. But I was born in Kalamazoo, Michigan. In 1943, it was much luckier to be born in Kalamazoo, Michigan than in places like Dresden, Germany or Hiroshima, Japan. By 1945, when I was two, Dresden and Hiroshima had been leveled by the U. S. Army Air Corp and most of its two year olds were dead. Kalamazoo was doing just fine and so was I cute as ever.

But, I digress! (Dont complain. No one is forcing you to read this.) On getting out of law school, I opened a law office. (What else was I going to do?) For some reason I never did very much insurance claims work. I did some, of course, but never very much of it. It seems I just did a smattering of everything else. At that time, most lawyers in downstate Illinois did a little bit of everything. At that time no one specialized in anything. Being young and innocent (and still cute) I did everything. It did not matter whether I knew how or not. I gathered a lot of experience at the expense of others, of course. Most of it I remember. Some I regret. Some memories have been intentionally suppressed. Some still await therapy.

Bankruptcy practice touches on virtually every other area of the law - Especially in the area of Bankruptcy, it is a good idea to have an understanding of real estate, insurance, divorce, estates and even criminal law.

I did my first Bankruptcy case over 30 years ago before electronic filing and even before the advent of the 1979 Bankruptcy Code which revolutionized Chapter 13. I have done over a thousand bankruptcies and impeded commerce involving millions of dollars of commercial debt. Whether that is good or bad I dont know. But, it has been fun and profitable.

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