Archive for the ‘Bankruptcy’ Category

How Do You Rebuild Credit After Bankruptcy?

This is probably one of the most common questions I get in my practice. People want to know whether or not a bankruptcy will permanently destroy your credit score and whether or not you’ll ever be able to get a credit card, a mortgage or a car loan after filing bankruptcy. The answer to that question is that you will be able to do all of these things as long as you take care to properly rebuild your credit.

Your Credit Score After Bankruptcy

For a large percentage of my clients (probably around 80%), their credit scores usually increase after they have received their bankruptcy discharge. To understand why, You first need to understand how credit scores work. A FICO Credit score is essentially an algorithm that takes into account multiple factors which determine your credit worthiness, and your ability to repay. Some of the factors that are taken into account are: payment history, lawsuits, accounts in collections, average payment amount, length of credit history, and other factors. Now, a large percentage of individuals who end up filing bankruptcy will usually already have late payments reporting on their credit as well as accounts in collections. This usually hurts your score. Now the reason that I say a large percentage of credit scores increase after bankruptcy discharge is because the discharge removes all of these items from your report. Your late payments are no longer reporting as late, and the collection accounts are removed. A bankruptcy will typically lower your credit score 100 points for a period of around 10 years, but that’s from the maximum score of 850. Once the late accounts are taken off after you have completed your bankruptcy this increases your score exponentially. I have had clients who had pre-negotiated the purchase of a car and were merely waiting on their discharge order to go and pick up the car. Lenders see you as less of a payment risk if you’ve discharged your credit card debt, they are happy to lend to someone with a stable income, and no debt.

Repairing Credit After Bankruptcy

The first thing I usually suggest is to get a credit card, and usually a secured credit card. You want something that will report on time payments to the credit bureaus. A secured credit card is basically a card where you put down a deposit to the card, and your credit limit is usually equivalent to the deposit. That way, if you miss a payment it is taken out of the deposit, its less of a risk for a lender. I have also read that if you are added as an authorized user on someone else’s credit card, then that can also report on time payments. Make sure that it will actually be reported, otherwise it won’t help. Another way to rebuild credit is to get a secured loan, usually a vehicle loan. As discussed above it is fairly easy to get a car loan these days, just make sure the interest rate is fair. And finally, a reaffirmed debt within your bankruptcy will also report on your credit, when on time payments are made. As I have said in other posts, reaffirmation is not usually a good idea, too much can go wrong, but this is the ONLY instance where it may make sense.

If you have questions about the bankruptcy process please contact Steven J. Grace at 312-493-6912 for a free phone consultation.

Can I Be Fired for Filing Bankruptcy?

I get this question very often. People want to know not only how a bankruptcy will affect their credit score, but also how it will affect their professional life. The key thing to keep in mind is that if you have a job, there is law in place that affect your employer from firing you solely for filing bankruptcy. That isn’t to say that they couldn’t fire you for cause for a variety of other reasons, but they cannot fire you just because you filed bankruptcy.

The Bankruptcy Code

11 U.S.C. 525 states:

(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt—

(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;

(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or

(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

This essentially means, that all employers both private and public (governmental employers) cannot discriminate against current employees solely based on bankruptcy status. Aka, they cannot make any adverse decisions against you because you have decided to file bankruptcy. This applies to all types of Bankruptcy, Chapter 7, Chapter 13 and Chapter 11.

If you would like to speak more about your bankruptcy options, call Chicago Bankruptcy Attorney Steven J. Grace for a free phone bankruptcy consultation.

Chapter 13 Debt Limits

As of April 1, 2017 the debt limits for a Chapter 13 Bankruptcy are $1,184,200 for secured debts, which includes mortgages and other liens secured by property, and $394,725 for unsecured debt, which typically includes credit cards and medical debt among others. If you are above these limits, you do not qualify for a Chapter 13 bankruptcy, which generally means you may have to explore your options under either Chapter 7 but more likely under Chapter 11.

Properly Categorizing Your Debts

If you are unsure as to how your debts should be treated, it is very important to hire an experienced attorney to properly analyze and schedule them on the Bankruptcy Petition. Debts may qualify as contingent or unliquidated, which means they must be listed on the bankruptcy but they do not count towards the debt limits mentioned above.

Contingent Debts

A contingent debt are debts you have no obligation to pay until a certain event or “contingency” occurs. Personal guarantees are usually considered contingent debts, because until a default has occurred, you have no obligation to pay. Cosigned debts are not considered contingent debts, the legal responsibility to pay is considered joint and several by the lender, thus cosigned debts count towards the limit.

Unliquidated Debts

These are the types of debts where your legal obligation to pay has not been determined, typically by a judge or other legal tribunal or arbitrator. Debts such as these typically include personal injury lawsuits, or other suits both civil and even criminal in nature, which typically involve restitution. Until a judge or fact finder has made a determination as to liability or guilt, these debts remain unliquidated, mostly because there’s a chance you could not be found liable.

Undersecured Mortgages and Lien Stripping Issues

The problem that I’m running into lately, especially with people with lingering real estate issues (dilapidated properties still in their name, lawsuits on very old mortgages) is that although you may think a debt is a mortgage and thus secured, that if the value of the property is worth less than what you owe, the remaining portion is considered unsecured debt for Chapter 13 debt limit purposes. So if you have a lot of mortgage debt, and the properties aren’t worth anything, it is very easy to push yourself over the $394,725 debt limit.

In addition, any amounts that are to be lien stripped in Chapter 13 are also to count towards the unsecured debt limit. Which generally means that if you own multiple properties and have an above median income, you are probably going to end up in Chapter 11 where there are no debt limits. But if you have recieved a denial of discharge under 727 then your only option for discharge is the Chapter 13, so keep that in mind.

If you would like to speak with a Chapter 13 bankruptcy attorney in the Chicago area please call Steven J. Grace at 312-493-6912 for a free debt consultation today.

My Chapter 7 Has Been Denied, Now What?

I recently had a client come to me who had his previous Chapter 7 denied under 727(a)(3), 727(a)(5) and 727(a)(6)(c). Evidently a creditor had started to request documents and since he was unemployed at the time, he could not afford the additional fees required to defend this separate adversary action. So the creditor ended up filing a complaint to deny discharge and the Client had to defend it pro se. Needless to say, he eventually lost at the hearing and his Chapter 7 bankruptcy was denied.

You Cannot File A Subsequent Chapter 7 to Discharge Previously Denied Debts

11 USC 523(a)(10) lays out all of the debts that cannot be discharged in a subsequent Chapter 7 case.

The statute states:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt…

(10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act;

So essentially any debt that “was or could have been listed or scheduled” in the previous case in which the bankruptcy was denied under 727 is automatically non-dischargeable under any subsequent Chapter 7 case. And there is no expiration on this, these debts cannot be discharge in any Chapter 7 case, ever.

There is Hope, the Chapter 13 Super Discharge

You may think you will never be able to get on your feet again, that you will die paying off these debts, but there is hope.

11 USC 1328 states:

(a) Subject to subsection (d), as soon as practicable after completion by the debtor of all payments under the plan, and in the case of a debtor who is required by a judicial or administrative order, or by statute, to pay a domestic support obligation, after such debtor certifies that all amounts payable under such order or such statute that are due on or before the date of the certification (including amounts due before the petition was filed, but only to the extent provided for by the plan) have been paid, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt-

(1) provided for under section 1322(b)(5);
(2) of the kind specified in section 507(a)(8)(C) or in paragraph (1)(B), (1)(C), (2), (3), (4), (5), (8), or (9) of section 523(a);
(3) for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime; or
(4) for restitution, or damages, awarded in a civil action against the debtor as a result of willful or malicious injury by the debtor that caused personal injury to an individual or the death of an individual.

As you can see, 11 USC 523(a)(10) is not listed above. Most courts have read this to mean that debts that were denied discharge under 727 in previous Chapter 7 cases can be discharged under Chapter 13, as long as all of the requirements are met under 1328. This means you pay as much as you can afford to pay under a Chapter 13 plan for a period between 3 and 5 years depending on you income and you can be debt free, even if you have received a denial of discharge.

If you are in the Chicago area and would like to speak further about your options in regards to Bankruptcy, both Chapter 7 and 13 please call Steven J. Grace at 312-493-6912 for a free phone consultation.

Can I Get A Job After I File Bankruptcy?

This is one of the most common questions I get in regards to people who are considering filing bankruptcy, especially for people who work in finance or other high profile positions. If you are worried that a future employer will notice your bankruptcy on a credit check or other background check and turn you down for the job, there is some hope.

The Federal Bankruptcy Code

11 U.S. Code § 525 breaks down discriminatory treatment based on bankruptcy status into two separate categories, private employers and public employers such as the federal government.

Public Employer Bankruptcy Discrimination

The good news is that public employers, besides some tiny exceptions, cannot discriminate, fire or punish based on bankruptcy status. For the most part, almost all public employers are covered by this statute which states:

“(a) … a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act…”

The law surrounding public employers is much more broad than private employers which we discuss below. This also includes your interaction with multiple government benefits and functions. The government cannot deny these public services based on a bankruptcy filing:

– Public Benefits, such as welfare, foodstamps and unemployment
– Public Housing such as HUD’s Section 8 Program
– Licenses such as Driver’s Licenses and Liquor Licenses
– Government Guaranteed Student Loan Programs or Mortgage Finance Programs

Bankruptcy Discrimination by Private Employers

Private Employers cannot punish or fire an employee because of a bankruptcy filing. The statute states:

“(b) No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt”

However, this doesn’t prevent a future employer from refusing to hire you based on your bankruptcy status. Also, it must be noted that when applying for rental housing your bankruptcy status will also be considered, and can be used as a reason for denial.

Should I file Bankruptcy?

The decision is ultimately up to you. However, it must be noted that although a bankruptcy does stay on your credit report for up to 10 years, it is fairly easy to earn a credit score in the 600s within 2 years of filing your case. The other issue to take into consideration, is how much you will be paying in interest if you choose not to file bankrputcy, including the impending lawsuits, wage garnishments, repossessions and other legal issues you will face outside of bankruptcy. Sometimes, the risks simply outweigh the rewards.

To speak with an experienced Chicago Chapter 7 and Chapter 13 Bankruptcy Attorney call Steven J. Grace for a free phone consultation today at 312-493-6912.

Should I Sign A Reaffirmation Agreement in a Chapter 7?

The answer to this question is generally no. In order to understand why, you need to understand the underlying reasons. A Chapter 7 bankruptcy is called a “Fresh Start” bankruptcy because 120 days after filing a debtor will get their discharge if all goes as planned. This means creditors can no longer garnish wages, or freeze bank accounts. Thus, the personal liability you had to your creditors has been discharged. This doesn’t mean that a creditor can’t take collection activities against collateral, such as vehicles and real estate.

What is a Reaffirmation Agreement?

A reaffirmation agreement is simply a replacement contract that is executed during a bankruptcy. As mentioned above, a Chapter 7 will basically void all of the contracts you have in place with creditors. This could mean credit card agreements, mortgage notes, car notes, etc. Thus, you no longer have to personally pay on these debts, but as I mentioned above the creditor can still repossess the security or collateral. What a reaffirmation agreement does, is it replaces the contract that was voided by the Chapter 7 discharge and puts you back on the hook personally for all the debts you owed prior to the bankruptcy. This means that a creditor can now take money from you personally, either from a wage garnishment or a bank account levy, instead of just repossessing certain collateral.

So Does it Ever Make Sense to Sign a Reaffirmation Agreement?

I have seen only a few instances where it made sense to sign a reaffirmation agreement. In one instance a Mortgage Company, Wells Fargo actually, offered to bring my client current on his mortgage in a Reaffirmation Agreement. My Client was already behind on his mortgage by a few years and within the bankruptcy we were able to bring him current. This bypassed the loan modification process and we were able to essentially modify the loan simply and inexpensively. Another instance is where the lender lowers the interest rate in the Reaffirmation Agreement. If a lender is giving you a better rate in the agreement, and you intend to keep the asset (home or car) then this might make sense because it will save you money. But I’d also make sure that there are no expensive repairs that are foreseeable, because if you reaffirm, the minute you do you’re back on the hook even if the car breaks down or the house sinks into the ground. So as a rule of thumb, reaffirmation agreements are a bad deal for debtors, UNLESS you are getting something back in return. Never reaffirm at the exact same terms you had prior to bankruptcy, it makes no sense. I had one instance where a Client wished to take her vehicle to Puerto Rico from the US and the lender refused to let her because she didn’t reaffirm. Thats the one instance where I’ve seen it come back to bite someone, once! Even if you wish to keep property, don’t reaffirm and just keep paying the bills as agreed, you will still get title upon completion, and won’t incur any additional personal risk. Be smart!

If you or someone you know is considering a Chapter 7 Bankruptcy in Chicago or even Illinois, call 312-493-6912 for a free confidential phone consultation with experienced bankruptcy attorney Steven J. Grace.

Tenancy by the Entirety Deed in Bankruptcy

Illinois has opted out of the Federal Bankruptcy Exemptions, so we have our own set of exemptions that were passed by the Illinois Legislature. By default, we have a homestead exemption of $15,000 per debtor for occupied residential real estate in Illinois. This means, that in a bankruptcy, a debtor would only be able to protect $15,000 of equity per filer, so if there are two debtors that amount increases to $30,000.

Recently I had a case where a house was jointly owned by husband and wife, and the deed was titled in the form of Tenancy by the Entirety. This is a very interesting quirk in the Illinois Bankruptcy Exemption Law because if the spouse if not a filer in the current bankruptcy then her assets are not under the jurisdiction of the Bankruptcy Court and cannot be distributed to creditors by the trustee. In order for a title to be held in Tenancy by the Entirety the parties owning the property must be married when they originally took title to the home. In addition, this adds extra protection from creditors. Creditors may typically only come after the house if both spouses are indebted to the creditor in collections, not just one or the other spouse.

How it Works in Bankruptcy

In bankruptcy, the application is similar. If just one party files for the bankrputcy, as a married individual. 100% of the value of the property is exempted in the bankruptcy. That means, that no matter the value of the home, the trustee will be unable to liquidate a property that is held by tenancy in the entirety. This is very important for married couples that are contemplating purchasing real estate. The difference between a Tenancy by the Entirety Deed and a Tenancy in Common Deed is immense from a collection standpoint and could be the reason one loses their home later in life.

Chicago Bankruptcy Attorney Steven J. Grace

The intricacies of filing for bankruptcy are immense, especially in cases where there are assets that are subject to liquidation and a good bankruptcy Attorney may be the difference between losing your home (it really does happen). If you would like to speak more about your bankruptcy options, call Attorney Steven J. Grace at 312-493-6912 today.

Cook County Foreclosure Rate Slows

Cook County Foreclosure Sale Rate Lower by 75%



Although Foreclosure rates in Cook County and the surrounding counties has decreased I have recently seen a few cases that have been in the courts for years hoping for a conclusion. Many times, the homeowner has been struggling with the bank to work out a modification and may have even gone through a Chapter 13 or even a Chapter 7 bankruptcy already in hopes of saving the home. I have even in cases of high mortgage balances, seen Chapter 11 bankruptcies to save a home.

To complicate the foreclosure picture further, many people are now facing increases on their Making Home Affordable (HAMP) Loan modification interest rates which increases the monthly payment amount. For many people even a small increase could mean losing a home. The question as to whether the foreclosure rate will remain low remains to be seen.

Furthermore, real estate values haven’t rebounded in many areas. The affluent neighborhoods have seen increases, but there are many areas around Chicago that have built zero equity since the Great Recession. As a result, many homeowners are still making the decision to stop paying their mortgage payment or to make a strategic default on their mortgage. Dealing with a losing investment such as an underwater home could potentially be the best decision of your life. There are substantial legal risks associated with such a default and you need a competent legal advisor to guide you through.

Chicago Strategic Default, Loan Modification and Foreclosure Defense Attorney

If you would like to speak further about your issues affecting you and you mortgage call The Law Offices of Steven J Grace at (312) 493-6912 today for a free 15 minute phone consultation.

Always File Your Personal Taxes, Even If You Owe

Most people don’t know that they can discharge Federal Income Taxes in Bankruptcy, but it’s true. I have a case right now where I’m going to be able to discharge almost $40,000 in IRS debt in a Chapter 7 Bankruptcy. The first step to this process is to determine whether or not the tax debts are unsecured priority claims or general unsecured claims. In many instances you can just call the IRS and they will tell you what they consider these debts to be.

Formula for Determining Whether IRS Debt is Dischargeable in Bankruptcy

But there is also a fairly simple formula. Generally speaking, if the tax debt was due and owing more than three years ago, the IRS should consider this debt to be a general unsecured claim, and it will be dischargeable in either Chapter 7 or Chapter 13 Bankruptcy. BUT, this is only if the tax return was filed on time for the year it was due, and that includes prior to the extension date of October 15th as long as it was requested. That’s the importance of filing your taxes on time, even if you owe. If you have substantial 1099 Income, or other untaxed income that you haven’t planned for, you should always file with the IRS on time. That is, because even if you’re unable to pay for these debts there’s a good chance you will be able to deal with them in Bankruptcy three years later. I suspect we will be facing a large influx of overdue 1099 income from the invention of ridesharing companies like Uber and Lyft, which pays their employees on a 1099 basis. Plenty of people are not planning to pay taxes on this income. File your taxes!

Chicago Bankruptcy Attorney Dealing with IRS Debt

If you have issues with the IRS and would like a free consultation regarding these debts call Bankruptcy Attorney Steven J. Grace at 312-493-6912 to see learn your options.

Chicago Chapter 7 Bankruptcy Process

I get a lot of questions about the process of a Chapter 7 Bankruptcy and what is needed. The steps below are very similar for a Chapter 13 bankruptcy but we will stick with Chapter 7 for now. This is a fairly general description of the process and is by no means the entire process. To help explain this article, you should know that “debtor” is a legal term to describe someone who is going through a bankruptcy.

Step 1: Gathering Bankruptcy Documents and Meeting With Your Bankruptcy Attorney

Before you meet with your Bankruptcy Attorney its best to gather some of the essential documents that will be needed to prepare your bankruptcy petition. These documents include: bank statements, pay stubs, tax returns, legal documents (including lawsuits and foreclsosures) and other bills and letters from collection agencies. In regards to bills, I usually tell my Clients, “If you don’t think it will be on your credit report, bring it.” This is because it is very important that all of your debts are listed properly on our bankruptcy petition in order to ensure that your creditors receive notice and the debt is discharged. Once you have all of these documents assembled you can now meet with your Chicago Bankruptcy Attorney. In this meeting the attorney will ask you questions about your finances, assets and income. Based on this information, and your documentation the attorney will prepare your Chapter 7 Bankruptcy petition.
The debtor will also have to complete a credit counseling class before a bankruptcy can be filed.

Step 2: The Court Process

Once your Attorney has completed your petition and you have verified all of its contents, it will be filed with the court. You will be assigned a case number, a judge, and a creditor’s meeting time. Many people ask whether or not their assigned judge is “tough”, when in fact for most Chapter 7 bankruptcies, debtors rarely see the inside of a courtroom. In actuality one of the most important steps in a Chapter 7 Bankruptcy is the creditors meeting. In a creditors meeting there are typically three people in the room, your Bankruptcy Attorney, the Client, and the Trustee. The trustee is a representative employed by the government to oversee the bankruptcy. In rare instances, some creditors may show up to ask questions about the finances and debts of the debtor. Creditors meeting last around 15 minutes. Here the trustee asks questions about assets, and the specific financial situation of a debtor. In most instances, the Trustee files a No Asset report, which means that a debtor has no assets to distribute to creditors and the meeting is concluded.

Step 3: The Waiting Game

After this meeting is over, the debtor must complete one more credit counseling course, and wait. The waiting period from creditors meeting to discharge is around 70 days. Once this 70 days has completed, the debtor will receive a letter in the mail that states, “Order of Discharge”. This means that the bankruptcy is complete and that your debts have been eliminated (with exceptions of course).

Chicago Chapter 7 Bankruptcy Attorney

Steven J. Grace has filed hundreds of Chapter 7 Bankruptcies in Chicago and the surrounding counties of Lake, Dupage, Kane and McHenry. He offers free phone consultations to explore your personal situation and to find the best solution for any specific situation. If your are facing foreclosure, a credit card lawsuit, wage garnishment, repossession or other financial troubles please call 312-493-6912.

Phone:
(312) 493-6912

Fax:
(888) 462-6649




Contact Us:

Name

Email

Phone (Required)

Describe Your Legal Issue

At The Law Offices of Steven J. Grace, based in Chicago, Illinois, we represent clients throughout Chicagoland, including the cities of Deerfield, Jefferson Park, Lisle, Northbrook, Oak Brook, Park Ridge, Schaumburg, St. Charles and Warrenville; and other communities in Cook County, Dupage County, Will County, Grundy County, Kendall County, Kane County, LaSalle County and Lake County.