Bankruptcy

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Chapter 7 Bankruptcy FAQs

DISCLAIMER: The following constitutes only general information about Bankruptcy Law. Do not use this website to seek "legal advice" about your situation. Legal advice involves applying the law to facts of your specific situation. By reading below, user acknowledges that she/he does not form an attorney-client relationship with Ms. Adams. If reader wishes to discuss representation with Ms. Adams, she/he should contact her. Representation commences only when a written contract is signed
by both parties.

The Law Offices of Amanda T. Adams LLC is a Debt Relief Agency. This office helps consumers find relief from debts through bankruptcy protection.
1. What is a Chapter 7 bankruptcy case?

Chapter 7 is used when someone lacks the ability to pay their debts, and a Federal Court may enter an Order permanently barring creditors, the people to whom someone owes money, even legitimately, from collecting or attempting in any way to collect. This is to give someone a fresh start. However, to file Chapter 7, you must not have been granted a discharge under Chapter 7 previously in the last 8 years.

Anyone who resides in, has a domicile, a place of business, property in the United States, or a municipality (a city) may be a debtor under Chapter 7 pursuant to §§ 109 (a) and (b).
Bankruptcy
2. Can I get rid of all my debts under Chapter 7?

No, under Section 523 of the Bankruptcy Code, you cannot receive a discharge for several things, including, but not limited to:
  1. Taxes owed
  2. Money, property, or services obtained as the result of fraud or false pretenses
  3. To a spouse, former spouse, or child for alimony or child support
  4. Fines, payments related to crimes to governmental units
  5. Damages someone owes for willful and malicious injury
  6. Student loans
  7. For death or personal injury
  8. Criminal Restitution Orders
  9. Financial obligations incurred in the course of a dissolution or separation
Bankruptcy calculation
3. What are some alternatives to a Chapter 7 or Chapter 13 bankruptcy?

Debt Relief Agencies
- You stop paying your debts and send monthly payments to them. Consumers 
should be careful as they must rely on and trust someone to be properly handling their money. The debt relief agency then negotiates with your creditors to see if they will accept less than the amount you owe.

There are some disadvantages to this approach, however. Untrustworthy debt relief agencies have scammed the consumers out of money. Debt relief agencies cannot force your creditors to settle your debt for less than the full amount. If they fail to negotiate a settlement with your creditors, you could be subjected to lawsuits and harassing telephone calls. Furthermore, you could end up owing money to the I.R.S. as forgiven debts are considered income, unlike debts discharged in Bankruptcy. 

Settling a debt for less than the full amount also has a negative impact on your credit score and could take longer than the bankruptcy court process.

Credit Counseling - You sign a Power of Attorney for Property (giving authority to pay bills and make financial decisions) to an agency such as American Consumer Credit Counseling, which negotiates with your credit card companies to pay your bills in full at a monthly amount you can afford. You also receive debt education through this. 

It does not affect your credit as negatively as debt negotiation or bankruptcy. However, many people in over their heads end up dropping out of credit counseling programs.

Loan Modification - If you are considering bankruptcy because you cannot afford your mortgage payments, you may wish to consider applying to refinance your mortgage.

Short Sales - In a short sale, someone who is behind on their mortgage and cannot catch up may enter into an agreement with their mortgage lender to accept less than the mortgage when selling the house. The buyer, however, may end up paying more than the traditional closing costs.
Foreclosure notice
4. If I file bankruptcy, will I lose my car or my house?

No, not necessarily. In Chapter 7, you could sign a "reaffirmation agreement" or a new agreement with your car or home lender (or other lender) promising to pay the debt on possible new terms notwithstanding the bankruptcy discharge if everyone agrees to it.

In a Chapter 13, you can potentially stop a foreclosure by a three- to five-year structured repayment plan to all of your creditors where you may pay back all or a fraction of the debt as long as you comply with that payment plan.

While in an "Asset" Chapter 7 case, any nonexempt asset you have may be sold to partially satisfy your debt to your creditors before the discharge.

Furthermore, while the Bankruptcy Court can tell your car loan or home loan creditors you no longer owe them money, they have a security interest in your house or car and can "foreclose" against that property without seeking money from you. They could get relief from the bankruptcy stay by Court Order and seize your car or foreclose on your home.

You also have a right to declare certain statutory exemptions either in Bankruptcy Court or in a state court lawsuit to prevent such property to be used to satisfy creditors. Under 735 ILCS 5/12-1001 of the Illinois Code of Civil Procedure, you can exempt from seizure for a judgment or satisfaction of creditors in bankruptcy court if proper procedure is followed:

(a) $15,000 equity in your home
(b) Wearing apparel, bible, school books, and family pictures
(c) Up to $4,000 "wild card" exemption
(d) $2,400 equity in your motor vehicle
(e) $1,500 in trade tools
(f) All value in health aids prescribed by a doctor
(g) All proceeds payable because of death of insured
(h) Social Security, unemployment compensation, public assistance benefit, veteran's benefit, disability, alimony, support, and maintenance
(i) Up to $15,000 value in a personal injury lawsuit

With anything at risk for being sold in a Chapter 7 case, you can "buy" the item back from the Bankruptcy Trustee, so the money used to buy back the item can be used to satisfy your creditors before the discharge.
Bankruptcy petition
5. I have credit card companies constantly calling and my bank account was seized after a judgment which I can no longer access. How can bankruptcy help this situation?

Once you file bankruptcy, all of your creditors, even those to whom you legitimately owe money or to whom you may even have "nondischargeable" debts, are prohibited from doing anything to collect from you. This is called an "automatic stay." That is assuming it is the first bankruptcy you have filed within a year. If you have filed more than one bankruptcy, the stay is shorter or may not apply at all. But you can still get the court's permission to have a stay.

So if your creditors call demanding money after you have filed bankruptcy and they have been given notice, the Bankruptcy Court may order them to pay punitive damages far in excess of what you owe them.

However, the Bankruptcy Code, under Section 362(b), itemizes a number of exceptions from the protection of the automatic stay, such as:
(a) Injunctive relief
(b) Certain governmental proceedings
(c) Criminal proceedings
(d) Consensual security interests
(e) Statutory liens
(f) Alimony
(g) Child support

Furthermore, anyone required to abide by the stay may get the court's permission for an exception to still enforce its debt against you.
6. Will Amanda T. Adams represent me in my bankruptcy case or will she delegate it to another attorney in her firm?

I am your attorney and I will represent you. I will tell you what financial management classes to take before and after filing, accompany you to the 341 meeting with Creditors and the Trustee, help you prepare all of the standard paperwork, and attend all court appearances on your behalf.
7. What is the means test, and how does it determine whether I can file Chapter 7 or Chapter 13?

In 2005, Congress passed a new version of the Bankruptcy Law to prevent people from repeatedly running up credit cards they could afford to pay but preferred to not. The new law had a "means test."

A means test determines whether your annual income is more or less than the median (middle) income level in Illinois, based on your gross (pretax and other deduction) income over the previous six months not counting the month of filing.

In Illinois, the median income for a one earner household according to the U.S. Department of Justice is $47,355.00. Then the Court looks at your monthly expenses to determine how much income at the same rate you'll have left over.

If you have some money (though cannot necessarily afford) to pay your bills, the Court may dismiss your Chapter 7 and require you instead to file a Chapter 13.
8. What are the reasons someone may wish to file a Chapter 13?

You can keep more assets if you are on a 3-5 year repayment plan to your creditors rather than having to give them to the bankruptcy court to satisfy a discharge. You can stop a foreclosure if you put your house loan into the 3-5 year repayment plan without having to sell it (if it all works out). You can eliminate the full amount you owe on some loans and pay only the value or something like a vehicle rather than what is already owed. 

If you make too much money to get a short Chapter 7 discharge that takes a few weeks because you have still got more credit card debt than you can afford, you can get a longer 3-5 year repayment plan and may still owe less.
9. Is there a cost to come in for a Bankruptcy Consultation?

No, but if you wish to retain me, I suggest you bring a cashier's check or money order for $1,000 to start. There is no obligation to retain me and I will meet with you for up to 90 minutes free of charge.

For more information or to schedule your appointment, call us at 815-793-6300 or contact us by email or by using our form.
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