Lake County IL Bankruptcy Law Attorney Blog

How Chapter 13 bankrupcty can help

2013-05-17T18:17:02Z

Some Illinois residents who are struggling with large amounts of debt may wonder how the bankruptcy process works. There is a misconception with some Americans that filing for bankruptcy automatically wipes out all debts, and that is simply not the case. There are different types of bankruptcy that offer different benefits: Chapter 7 and Chapter 13.

In a Chapter 7 bankruptcy, the consumer's assets are sold and used to pay debts. This process is relatively quick and may allow persons who file to walk away from most debts. In 2012, approximately 70 percent of the 1.175 million consumer bankruptcies in the United States were filed under Chapter 7, and only 30 percent under Chapter 13.

]]> With Chapter 13, the process is very different. Chapter 13 is focused on reorganization of debts, and it can last between three and five years. Some portion of unsecured debts may be discharged. Filing for Chapter 13 can also delay foreclosure proceedings, which gives many homeowners a much needed opportunity to make up missed payments. The person will have to show sufficient income to continue making payments on secured debts. A court-appointed bankruptcy trustee oversees payments under a payment plan approved by the court. The trustee creates a very strict budget and collects wages each month to pay debts. However, if financial emergencies arise, the trustees will often work with people to make up missed bankruptcy payments and continue the plan.

Consumers who are struggling to pay their debts may receive some relief by filing for bankruptcy. A local attorney may be able to review a person's financial situation and advise on which type of bankruptcy will be more beneficial.

Source: Fox Business, "Chapter 13 Bankruptcy: How it Works", Susan Ladika, May 09, 2013

Credit reporting data crucial after bankruptcy

2013-05-10T07:22:04Z

Illinois residents who are facing large amounts of debt beyond what they can reasonably pay back often look to filing for bankruptcy to have their debts discharged. However, once someone's bankruptcy filing has gone through, it is important that their credit report accurately reflect their current status. If someone's credit report still shows numerous delinquent accounts and unpaid debts, it can severely hinder their ability to rebuild their credit.

Some people may not think that it is worth the bother to ensure that their credit report is updated following a bankruptcy because a bankruptcy stays on their credit report for 10 years. However, people are able to begin rebuilding their credit almost as soon as their debts are discharged. Many people have much higher credit scores within a few years of filing, even with a bankruptcy still on their report.

]]> Less than a decade ago, many top credit reporting agencies were not properly updating people's credit reports following a bankruptcy. Even if someone reported an account that had been discharged during bankruptcy as still showing up on their report, credit agencies would not always look into the error. This led to legal action against these agencies and within two or three years, agencies were much more proactive about updating people's reports following a bankruptcy filing.

Filing for bankruptcy can be very beneficial, but it is important that it is done correctly. To help ensure that a bankruptcy filing goes smoothly, people may want to consult with an attorney. An attorney could explain what is covered by bankruptcy, and if it is better to chose Chapter 7 or Chapter 13 bankruptcy.

Source: New York Times, "Credit Reports More Accurately Reflect Debts Discharged in Bankruptcy", ANN CARRNS, April 30, 2013

Robo-signed debt collection attempts scrutinized

2013-05-03T21:14:22Z

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.

]]> Attorneys have also found that some affidavits swearing consumers were notified of legal action taken against were false, and recently Illinois Attorney General Lisa Madigan announced the distribution of $3.3 million to county recorders following a settlement with a firm that engaged in robo-signing mortgage documents. In 2009, the Federal Trade Commission published a report stating consumers are not adequately protected in debt collection litigation procedures. This is encouraging, but millions of honest, hard-working consumers can still be at risk of this illegal action.

An erroneous robo-signed credit card collection case can damage a person's hard-earned credit rating. In a time when many employers take into account a job candidate's credit report before extending a job offer to them, some may see this as debt collection procedures that are out of control. For those who have been denied a loan or turned down for a job and feel this is the case, hiring an attorney to clear their name may be an option.

Source: Fox Business, "Robo-Signed Collection Cases Under Fire," Fred O. Williams, April 26, 2013

Illinois Attorney General's office, "ATTORNEY GENERAL MADIGAN AWARDS $3.3 MILLION TO COUNTY RECORDERS FROM SETTLEMENT WITH 'ROBO-SIGNING' FIRM," April 24, 2013

High amounts of student debt may impact housing market

2013-04-26T21:40:20Z

Reduction in home values due to the housing collapse in 2008 is one of the reasons for more reliance on student loans cited in a recent study. This reduction in home value caused a "ripple effect," according to experts, where parents could not rely on a home's equity to help pay for college tuition. Their children, therefore, took out student loans to help pay for their education, and those former students sidled with all that debt now cannot get a mortgage of their own.

The reality of filing for personal bankruptcy is an additional repercussion of the financial crisis facing many under-40s in the workplace in Illinois and throughout the country. Data suggests that student debt has now surpassed the $1 trillion mark and two-thirds of those loans are held by those under the age of 40.

]]> Experts say this is a real problem for young professionals who want to take advantage of the current low-cost housing market and that financial challenges stemming from extensive student loan debt is one of the reasons that demand for rentals is the highest it's been in 10 years. The government has responded to concerns about debt stemming from student loans with the formation of the Consumer Financial Protection Bureau, and the Department of Education is reportedly considering refinancing options that could make loans more affordable.

Those who wish to eliminate debt or are considering filing for bankruptcy, whether due to an abundance of student loans or medical bills, may be uncertain about their options. An Illinois attorney can assist in the decision-making process no matter how complicated the financial questions are.

Source: Daily Herald, "American dream eludes under-40s saddled with student debt," April 21, 2013

Debt repayment plans and retirements savings

2013-04-19T14:55:56Z

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.

]]> About 70 percent of the population qualifies for Chapter 7 bankruptcy, a part of the Bankruptcy Code that allows individuals to instantly wipe away most unsecured debt. While a bankruptcy filing does have some short term inconvenience, it acts as a way to get a clean start. What people need to consider before they enter into a long-term repayment plan is the fact that retirement funding is uncertain and the stability of Social Security is increasingly in question. It makes sense to consider all the options, including bankruptcy, that will make retirement savings easier.

It's rarely easy to make the decision to declare bankruptcy. However, if one's debt is overwhelming, it may be possible to use Chapter 7 bankruptcy to eliminate most unsecured debt. There is also the option of Chapter 13, which allows a percentage of the debt to be paid off over a period of years with the oversight of a trustee. The amount the individual pays is based on his or her income and can be as little as pennies on the dollar. An Illinois bankruptcy attorney may help individuals evaluate which of these common forms of personal bankruptcy is the best choice for each person's situation as well as assist with the filing process.

Source: The Huffington Post, "Why Getting Out of Debt Can Cost You Your Future," Steve Rhode, April 2, 2013

Should paid medical debts remain on credit reports?

2013-04-10T05:33:52Z

Medical debt affects more than 75 million Americans. In addition to the problems associated with these debts, the debts continue to plague consumers even after they are paid off, as unpaid debts and collections show up on a person's credit report for several years. Recent efforts in the Senate to reduce the impact of medical debt on consumers after the debts are paid have not come to fruition.

One consumer reported that, following an unexpected trip to the emergency room in 2010, his credit score dropped to 492. Upon investigation, he learned that the hospital had reported 62 unpaid medical expense bills on his credit because they did not have the correct billing address. The hospital could have reported one unpaid bill but instead reported each individual expense as a separate, unpaid account. The man's credit report now shows 62 paid collections, despite the fact that it was the hospital's mistake that caused the overdue payments.

]]> This story, unfortunately, is not that uncommon. Other consumers reported having overdue payments reported on their credit in similar situations when medical providers had incorrect addresses and did not attempt to call the consumers. Now these people, and many others like them, have to wait years for their credit to improve.

Mistakes in credit reporting can cause lasting damage in the form of high interest rates, higher down payments or being denied credit. The Fair Credit Reporting Act requires that creditors report accurate information. Consumers in Illinois may benefit from contacting attorneys about the possibility of having erroneous items removed from their credit reports.

Source: Consumerist, "Consumerist Readers Make The Case For Wiping Paid Medical Debt From Credit Reports," Mary Beth Quirk, March 28, 2013

When does credit card debt expire?

2013-04-05T21:46:06Z

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.

]]> Due to the difficulty nailing down a specific statute of limitations, many lenders have begun to only go to court for debt that is less than five years old. With that in mind, there is nothing to stop a lender from suing someone after that period if the debt is within the acceptable time frame.

If someone is concerned about being taken to court over old debt, it may be beneficial to them to speak with an Illinois attorney who could explain their options and how these court cases are normally handled within their state. Attorneys may also be able to help people mount a defense and represent an individual in court.

Source: Fox Business, "Expiration Dates Fuzzy on old Card Debt," Fred O. Williams, March 25, 2013

The truth behind bankruptcy misconceptions

2013-03-28T17:50:45Z

Many Lake County, Illinois residents carry a number of preconceived notions regarding how a bankruptcy might affect them. The truth is that personal bankruptcy may not be as harmful as many people believe it is.

Some persons contemplating bankruptcy fear that doing so will harm job prospects in the future. However, many employers will not refuse to hire an employee because of a bankruptcy. Some employers would not even request this information if it is not relevant to the job requested. What is important is that every job applicant provide truthful information when answering questions. A prior bankruptcy may not prevent a potential employee from getting a job, but lying about it on a job application will.

]]> Another common myth is that filing for bankruptcy will require consumers to close their bank accounts or lose their homes or vehicles. This is not the case for most people. Most banks do not run an existing customer's credit. The bank could refuse to open a new account. However, in that case, the consumer could obtain a prepaid debit card and use it to make purchases. Similarly, most persons who file for bankruptcy are able to retain their residences and cars as long as they make on-going monthly payments. A Chapter 13 bankruptcy can actually delay foreclosure.

Bankruptcy can often offer relief to consumers who find themselves in debt due to unexpected medical bills, job loss, the loss of a spouse's income or financial mismanagement. Bankruptcy offers a clean slate to these consumers to allow them to make a fresh start. Any person who believes that bankruptcy may offer relief may benefit from speaking with an experienced bankruptcy attorney.

Source: Global Grind, "Wisdom Wednesdays With Lynn Richardson: Bankruptcy Myths 2," Kelsey Paine, March 13, 2013

Pros and cons of filing Chapter 7 or 13

2013-03-22T21:40:43Z

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.

]]> Chapter 13 is usually reserved for individuals who have larger incomes or who could sell assets to pay off their creditors, which is why homeowners with large amounts of equity often end up filing for this type of bankruptcy. It allows people an additional three to five years to pay off their debt. Usually, they are also able to keep their homes, vehicles and bank accounts.

Filing for bankruptcy can be incredibly tricky, especially since certain financial situations can affect the type of bankruptcy that someone is allowed to file. Individuals who are considering filling for bankruptcy could find it helpful to speak to a bankruptcy attorney who can explain their options.

Source: Fox Business, "Can You File Ch. 13 if You Own a Home?," Justin Harelik, Mar. 5, 2013

How to get out from under payday loans

2013-03-11T21:57:27Z

Many Illinois residents can fall victim to the seemingly endless cycle of taking out payday loans. While these quick and accessible loans can provide people money they need in an emergency, if they are not paid off quickly, they can lead to enormous debt due to fees and often astronomical interest. One option that people have when they become weighed down by large amounts of debt is to file for bankruptcy.

While bankruptcy is an option, there are other solutions that people should try before filing. Payday loans can be hard to get out from under because they continue to get bigger, often in the form of rapidly mounting interest, until they are paid off. This is why someone might consider a personal loan or taking out a cash advance on a credit card. Another option individuals have if their credit rating is too low is to get a co-signer for a credit card. This allows them access to credit, even if they do not have a solid credit rating.

]]> It is important to note that one should try to avoid using credit as much as possible and aim instead to set aside extra money for savings if possible. This will allow him or her to have money on hand when an emergency arises instead of being stuck taking out payday loans.

Filing for bankruptcy can allow individuals to achieve a clean slate and get rid of most, if not all, of their debt. However, filing for bankruptcy does not eliminate all types of debt, and there are certain requirements that must be met. Therefore, those who are mired in large amounts of debt may benefit from consulting a bankruptcy attorney who could help them understand what is involved in filing.

Source: Fox Business, "Is Bankruptcy the way out of Payday Loan?," Steve Bucci, March 1, 2013

Boomer generation credit card debt has grown significantly

2013-03-08T03:05:13Z

The average rate of credit card debt for individuals in Illinois and across the nation who are over 50 has grown rapidly in the last few years. According to a study by Demos, a policy research organization, boomers of low and middle incomes who have owed credit card companies for more than three months have an average of $8,278 in credit card debt. In comparison, people under the age of 50 have an average of $6,258 in debt.

As recently as 2008, people who were under the age of 50 had a larger amount of credit card debt. The new statistics are rather troubling as many Illinois residents over 50 are beginning to look forward to their retirement and may consequently have to delay their golden years in order to pay off unsecured debt. However, perhaps the most troubling aspect of this growing trend of debt buildup among the boomer generation is that extravagance does not appear to be the cause.

]]> Half of the households surveyed in the Demos study stated that credit cards were used to pay for basic expenses such as utilities, groceries and medical expenses. This is likely related to the fact that a quarter of the individuals surveyed blamed their credit card use on being laid off and having problems finding other work.

When people face insurmountable debt, especially if they are later in life, it can make them feel like there is no solution. However, bankruptcy may be able to help them get out of a financial situation that they cannot manage, regardless of their age. Individuals who are in such a situation might benefit from consulting a knowledgeable bankruptcy attorney who can help them understand what their options are and which type of bankruptcy may be right for them.

Source: CNBC, "Boomers' Credit-Card Profile Resembles Gen Y's," Feb. 19, 2013

Those struggling with debt unable to put money in savings

2013-02-26T20:29:19Z

In a perfect world, we would all have hefty savings accounts. However, chunking away a lot of money isn't a realistic possibility for many people in Lake County and beyond. In fact, many people have accumulated more debt than they have in their savings account.

According to a survey by Bankrate.com, only slightly more than half of the country has more money in savings compared to credit card debt. It is recommended that people set aside about three month's worth of income to use in an emergency. However, many people choose not to or are simply unable to.

]]> Even top earners aren't putting a lot of money in savings. According to the survey, just two out of three people making $75,000 or more have more money in savings than credit card debt.

Parents with children under the age of 18 appear to be struggling the most. Close to 30 percent of those surveyed say they have more credit card debt than money in an emergency account.

Stagnant income levels and high unemployment have had a profound effect on a lot of people. While some people aren't able to put any money towards an emergency fund, others may be struggling to pay their bills each month.

Dealing with credit card debt and other forms of debt can be overwhelming, especially for people who have been laid off or suffered setbacks as a result of a serious medical condition. When debt becomes too much to handle, Illinois residents and others elsewhere would be wise to consider bankruptcy as a solution to their problem.

Source: ABC News, "Nearly Half of Americans Have More Credit Card Debt Than Savings," Susanna Kim, Feb. 25, 2013

Foreclosures increase during the month of January

2013-02-19T22:11:44Z

Despite the decline in foreclosures across the country, Illinois experienced a 22.6 percent increase in the number of foreclosure filings during the month of January. In Lake County, one out of every 256 homes is in foreclosure.

The new numbers put Illinois in third place when it comes to the number of homes in foreclosure. Florida saw the most foreclosure activity last month with California coming in second place.

]]> A home is a special place. It often takes people years to save up enough money to buy a home. People in Lake County and beyond may feel prideful when they can finally call themselves a homeowner.

However, a serious medical condition or the loss of a job can derail people's plans and put them in danger of losing their home. Although people may try to manage their mortgage payments, it may quickly spiral out of control.

People who are facing foreclosure may feel helpless. However, they have legal options to consider. Homeowners who are struggling to pay their mortgage may wish to consider Chapter 13 bankruptcy. Chapter 13 bankruptcy allows people to set up a repayment plan. People typically have between three and five years to get caught up on their payments. Any remaining debt is discharged.

Chapter 13 effectively stops the foreclosure process. However, homeowners must have a source of income to quality.

Homeowners interested in learning more about Chapter 13 bankruptcy would be wise to consider speaking with an experienced attorney. An attorney can explain the bankruptcy process to homeowners and help them obtain financial security once and for all.

Source: WBEZ, "Illinois foreclosure activity jumps," Niala Boodhoo, Feb. 14, 2013

•· Our firm works with homeowners who are facing foreclosure. Please visit our Lake County Chapter 13 bankruptcy page to learn more.

Consumer debt rises despite decline in credit card debt

2013-02-11T22:28:42Z

Dealing with large amounts of debt can be difficult, but it is something that millions of Americans struggle with. In December, consumer borrowing increased to $2.78 trillion. Although people have been using their credit cards less, it appears more people are taking out student loans and car loans.

Credit card debt declined in December and now sits at $850 billion. Credit card debt has been on the decline in recent years. Since 2008, credit card debt has gone down 17 percent.

]]> High unemployment appears to be a driving factor for more people returning to school. Student loan debt has risen 63 percent in the last five years or so.

Low interest rates have helped the auto industry. Auto loans have increased by a little more than 9 percent since 2010.

Unfortunately, tax increases mean that people who are already struggling with debt have begun taking home less in their paychecks. Social Security taxes increased by 2 percentage points at the beginning of the year. Although that may not seem like a lot, someone who makes around $50,000 will end up with about $1,000 less throughout the year.

Many people in recent years have faced high amounts of debt as a result of unemployment. Others may have suffered setbacks as a result of an unexpected illness. In any case, trying to tackle high amounts of debt may seem impossible.

People in Lake County who are faced with debt may wish to consider bankruptcy as an option. Although student loan debt is rarely discharged through bankruptcy, other forms of debt can be eliminated. To get a better understanding of the process, people would likely find meeting with an experienced attorney to be beneficial.

Source: ABC News, "US Consumer Debt up in Dec. on Student, Auto Loans," Martin Crutsinger, Feb. 8, 2013

Tackling debt once and for all

2013-02-05T14:57:08Z

Lake County residents who have struggled with their finances know how difficult it can be to manage high amounts of debt. In addition, they know how overwhelming it can feel.

A couple in another state was dealing with high amounts of debt. They were about to be married when they discovered they had $52,000 in combined debt. They had car loans, student loans and credit card debt.

]]> Fortunately, they were able to pay off that debt in 18 months. One way they tackled the debt was by listing it in amounts smallest to largest. They said they felt empowered when they were able to pay off small amounts of debt. It helped push them forward to pay off larger debts.

In addition, the couple scaled back on certain things. For instance, they started going out to eat less. When they did go out to eat they wouldn't order drinks. Those small adjustments made a big difference.

The couple has eliminated their consumer debt. Now they hope to tackle their mortgage debt and be free from debt by the time they are in their mid-thirties.

Things worked out well for this couple. However, that isn't always the case. People may face insurmountable debt even when they begin changing their spending habits. That is when people should consider bankruptcy as an option. Through bankruptcy, people can finally move forward with their lives debt-free.

The decision to file for bankruptcy is not one that should be made lightly. Speaking with a legal professional who specializes in bankruptcy is a good idea.

Source: U.S. News and World Report, "How Newlyweds Paid Off $52,000 in Debt in 18 Months," Susan Johnston, Feb. 4, 2013

Our firm works with people throughout the bankruptcy process. Please visit our Lake County bankruptcy page to learn more.