Lake County IL Bankruptcy Law Blog

Illinois consumers' credit card payments may be handled by a robot instead of a live human being, opening the door to a potential lawsuit. According to Fox Business, millions of debt collection cases may be handled by "robo-signing," similar to the flawed method of filing paperwork on foreclosed homes. In the case of foreclosed houses, many homeowners had their residences seized illegally even though they were current on their mortgage payments, because overeager financial institutions followed directions from a computer. Lawsuits filed to collect on old debts are legally required to be based on affidavits, but some court cases have found that debt buyers have cranked out affidavits without first checking the records.

Because of the sheer number of payments made on credit card bills every year, the recording of these transactions is automated. But when there is no human supervision, there is no safety net in case of a glitch. When a computer takes over the task, consumers can be sued for the same debt more than once. They can also face a lawsuit if they are the victim of identity theft, or if they have already paid the debt and the payment records were not properly stored in the computer. 

Illinois residents who are wrestling with debt may deal with the issue emotionally, and some may feel that they must do everything in their power to pay back every penny they owe. Often, personal bankruptcy is seen as a stigma, and paying back debt feels like the honorable thing to do.

What many people don't consider, however, is the long-term cost of giving up every penny earned to repaying one's debt. For example, an extended payment plan may cost an individual a substantial amount in retirement savings. In theory, a repayment plan of $600 a month over five years will cost just over $45,000, but that same money in a retirement savings plan over a 40-year period could generate well over a million dollars in savings.

Residents of Illinois who have old credit card debt may be wondering how long it will take before they can no longer be sued for the debt. The answer, unfortunately, is murky. This is because state law may disagree with what a credit card contract says, and that may also differ from the laws regarding credit card debt in the state the lender operates out of. Furthermore, all three of these limitations may be interpreted in a different manner by a judge.

When it comes to credit card debt, the statue of limitations is the amount of time a lender has to sue someone for unpaid debt. After this time has past, the lender can still attempt to collect using standard collection tactics, but they are no longer able to garnish an individual's wages. The statute of limitations for debt in Illinois is five years, and a 2009 ruling found that the 10-year statute of limitations for contracts does not apply to credit card debt.

As a result of the recent mortgage crisis, many homeowners in Illinois who were ineligible for Chapter 7 bankruptcy are now able to file for this type of debt relief. People who own homes with high equity are usually only able to file for Chapter 13 personal bankruptcy. However, since many individual's homes have lost value, equity is no longer a barrier for many of them.

While losing value in a home is clearly not beneficial to everyone, the advantage of being able to file for Chapter 7 bankruptcy is that it completely eliminates most unsecured debt. Someone who files for Chapter 7 is generally able to keep their home, automobiles and retirement accounts while owing little to nothing to creditors. On the other hand, Chapter 13 reorganizes an individual's debt and gives them more time to pay it off, but money is still owed.