What are my Options?

With lawsuits, garnishments, phone calls, all the symptoms of debt can be devastating! The good news: There are plenty of options. The even better news: An experienced attorney can evaluate your situation and determine which options are best for you!

What about Bankruptcy? How does it Work?

Consumer bankruptcy comes in two forms: Chapter 7 and Chapter 13.

Chapter 7 is a liquidation plan that evaluates your assets to determine if there is anything that you own that can be liquidated to pay back all or a portion of your debt.

Chapter 13 is a repayment plan that is set over the course of anywhere between three to five years. The payment plan is based on a number of factors, one being a comparison of your income and expenses.

Both options are viable and certainly in most cases, one may be better than the other, but it takes an experienced attorney to help you understand and execute your options.

What if I don't want to do bankruptcy?

Great news, you don't have to! Bankruptcy is a voluntary process and no one can be forced to file bankruptcy. And there are still options to help manage or maintain debts.

Do I have to Have a minimum amount of debt in order to file Bankruptcy?

There is no statutory minimum to file a bankruptcy. In most cases, a number is just a number. The real test of whether bankruptcy should be considered is its impact on one's life. If answering the phone causes you anxiety, then bankruptcy should be considered. If the Sheriff or Special Process Server is trying to serve you with paperwork, then bankruptcy should be considered. If the thought of debt is overwhelming and stifles your happiness, then bankruptcy should be considered. In any case, it's best to consult with an experienced attorney who can give you advice on your unique situation.

When Do I Have to File Bankruptcy?

Bankruptcy is generally a voluntary process. However, there are many practical dangers that a bankruptcy may be the best solutions:

Creditor Calls and Letters. Debt collection is big business and the debt collectors will start calling aggressively from the moment you fall behind. When that happens, the agent on the other line has very little authority to negotiate but for a few largely unfair deals, e.g., two month payment plans, a slight discount on a lump sum balance. Collections become a lawsuit quickly, so ignoring the calls will only make it worse, not to mention how it can affect your quality of life.

Money Judgments. If you have a money judgment against you, then bankruptcy should strongly be considered.

Repossessions. In Illinois, a repossession may be cured within twenty-one (21) days. Additionally, the filing of a Chapter 13 will also compel the Creditor financing company to return the vehicle. Filing a Chapter 13 can get you back behind the wheel in no time.

Foreclosure. A foreclosure is a judicial process to remove you from your home when you are behind on the mortgage. The end result will be the sale of the home in an auction, known as a sheriff sale. A Chapter 13 bankruptcy filed before the Sheriff Sale will stop the proceedings dead in its tracks, and create a plan that allows you to keep your house.

Am I Doing Something "Bad" When I File for Bankruptcy?

In a word, no. Bankruptcy is a right afforded to every consumer under the United States Bankruptcy Code. It is a constitutional right, contemplated by the Founding Fathers, who saw so many suffer in debtor jails and literally get bound by their debts.

Certainly, there are consequences. It will reflect on credit reports for ten years. You will have to be a more savvy shopper when seeking financing. These need to be weighed against the consequences of not filing. The latter may result in garnishments and liens. It may simply be that the money paid will never be paid back and effectively stealing from retirement potential. At the end of the day, the decision is a financial one over a moral one. Like any fiscal decision, weigh the pros and cons. Most of the time, the bankruptcy will just make "cents."

What Happens when I declare Bankruptcy?

At the moment that you file bankruptcy, your creditors are required to stop any collections acts. This includes phone calls, garnishments, lawsuits and repossession actions. This is due to what's called the "automatic stay," found under 11 U.S.C ยง 362. Essentially, it's a force field from all of your creditors and keeps you protected while you're in bankruptcy. At the end of the case, you'll receive your discharge and you will be from any further collection attempts.

Will filing for bankruptcy stop collections calls and creditor harassment?

Yes, once a bankruptcy is filed, calls and creditor harassment will be considered a violation of the automatic stay. These violations can result in either separate lawsuits against these creditors or motions within the bankruptcy court, either of which can result in monetary damages against the creditor and for you.

What are the different types of bankruptcy?

For consumers, there are two types of bankruptcies: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, a panel Trustee is assigned as a representative of the Creditors to liquidate any assets that you may have. A debtor is afforded exemptions to protect assets. These exemptions vary state-to-state. It's a good idea to consult an attorney to review your assets and exemptions.

A Chapter 13 bankruptcy on the other hand, is a payment plan. The payment plan is created by the Debtor (and their attorney, if retained) and proposed to the Creditors. The plan will be reviewed by the Trustee, Creditors, and presented to a judge. If approved, the plan will be confirmed and will dictate how much each creditor receives. Most debtors pay less than what they are owed and avoid interest and late fees. The remaining debt will be discharged at the end of the plan.

Do you need a lawyer to file for bankruptcy or can you file on your own?

You are not required by law to have an attorney for any consumer bankruptcy. With that said, even the simplest bankruptcy requires the drafting and filing of the bankruptcy petition, which is around 50 pages at the least. In addition, after filing, the case requires an amount of attention that may be perilous for the inexperienced. Guidance from an attorney can prove valuable and save time and money.

Do I have to go to court if I file for bankruptcy?

Depending on what kind of bankruptcy filed, there are certain court events. If you hire an attorney, your only duty will be to attend a 341 Meeting of Creditors. This is not held in a courtroom and you do not need to appear in front of a judge. It is an informal meeting (no suit or tie required!) in which you will answer questions if your creditors wish to ask them. An appointed Trustee, a representative for the creditors, will conduct the meeting and ask the majority of questions. You will need forms of identification to prove your identify. While there may be other court dates, your attorney will typically handle those issues to save you time and money.

Does bankruptcy eliminate all of my debts?

Congress outlined specifically that some debts are dischargeable in bankruptcy, while others are not. Child support, for instance, is not dischargeable in bankruptcy. More complicated still, some debts may be dischargeable in one type of bankruptcy but not the other. Even more complicated are debts likes federal and state income taxes, which may or may not be dischargeable, depending on the timing, in addition to other factors. A thorough review with an experienced bankruptcy attorney is recommended to determine what debts will be discharged in bankruptcy. Further, an experienced attorney may be able to recommend options for those non-dischargeable debts.

Can I wipe out medical bills by filing for bankruptcy?

Medical bills are dischargeable in both Chapter 13 and Chapter 7 bankruptcy. Generally, notice is given to the medical provider; however, if a collection agency has been retained, then that collection agency can be given notice of the bankruptcy.

Can I apply for a new credit card after bankruptcy?

In a word, yes. There is life after bankruptcy. Nothing in the law prevents you from opening credit cards, personal loans, car loans or home loans after filing a bankruptcy. While credit may be available, just like before, it's best to be a smart shopper and only take on credit that you can afford.

The best course of action after a bankruptcy is to turn to secured cards with a low limit. Use one card to pay a simple, monthly expense that you know can be paid off. Over time, this will start re-establishing your credit score.

What Other Things Can I do after bankruptcy to help improve my credit score?

The best recourse to help build your credit can be to use low limit cards with a revolving purchase. In addition, report any monthly payments that otherwise would not be reported, such as rent or utilities. On a quarterly or bi-yearly basis, provide the credit bureaus with letters that show payments have been timely on rent and utilities. You may want your landlord to draft a letter in support of this.